Managing your money is a very important way to have the things you want and need in life. But money management isn’t just about how much you’re making. It’s also about the ways you’re spending what’s coming in, and if you’re saving for a rainy day. Here are five tips to help you manage your money more effectively, so you can enjoy more, even if your income remains the same.
1. Have a Good Understanding of Necessary Fixed Expenses
The first thing you need to know when managing your money, is how much of it has to go out for fixed expenses that are necessary. Those are things like rent, insurance, and bills. When you have a good list of those items, you know what income you need in order to survive. You may have other expenses you want, like cable TV and a gym membership, but those aren’t necessities. Focus only the fixed expenses that are truly fixed, so you can get a proper gauge of the money that’s needed to live. That is a key piece of strong money management.
2. The Answer Isn’t Always Earning More
Earning more money is nice, but it’s not always the answer. Sometimes, it’s not even an option. Spending wisely can be just as important as bringing in more. One of the ways you can spend wisely is through prioritizing large expenses. If your car keeps leaving you stranded, or your refrigerator isn’t keeping your food cold enough anymore, those are the kinds of things you should be focused on. That vacation or new wardrobe may have to wait, so you can take care of more important aspects of your life.
3. Shopping Smart Saves Money
When you shop for the best prices and value, you can help save yourself a lot of money in the long run. Sometimes, you can get higher quality at a great price, which means what you buy may last a lot longer. Additionally, consider finding deals, using coupons, and looking for rebates for little everyday purchases, as well as the bigger purchases you’ll make in life. You don’t have to overanalyze everything, but take a few minutes to check and see whether you could get a better deal. It’s often worth the time.
4. Investing Money Can Earn Passive Income
When you invest money in a CD, money market account, IRA, or 401k, you can start building up more money for the future. You can also put it into savings, if you have a savings account that gives you a good rate of return. Some people also put their extra money into things like micro-loans or real estate, so they’re able to get back some return more quickly. When you want to have that passive income available to you is important to consider, when choosing an investment option.
5. Make Sure Your Emergency Fund is Established (But Pretend It Isn’t There)
Everyone should have an emergency fund. Most experts advise that you want to put three to six months of required expenses into it. You don’t need extra saved for gym memberships, expensive coffee, cable, or dinners out, unless you want to add to your fund for those things. The goal is to handle the expenses you’ll have no matter what, and to make sure you can cover those necessities if you lose your job or otherwise don’t have income for a while.
Here’s the thing about proper money management with your emergency fund, though. You have to pretend it doesn’t exist. It’s truly for emergencies only, and won’t be used for anything else. If you can keep from using it for anything else, and otherwise find ways to save, you can have more financial peace of mind.
About the Author: Michelle Dakota Beck has worked as a professional freelance writer since the 1990s. During that time she has written everything from product descriptions to full-length books. Her areas of specialization include real estate, home services, legal topics, relationships, family life, and mental health issues. You can find her on WriterAccess.