A Beginner's Guide To Managing Your Finances
We all handle financial responsibility in various ways, some of us take it well, and some don't. Nevertheless, money is a part of our lives, and it helps us in our day-to-day living. We spend money on many things, like necessary resources such as water, food, clothes, and the like. But the question is, how do we stop spending money on something that we don't need?
Simple. We need to learn the basics of money management. Money management helps us track, invest, budget, bank, and evaluate taxes of our money; it is also called investment management. Money Management is a strategic and effective technique that makes our money yield the highest interest value for any amount spent.
There are many ways to track your expenses that will guarantee an improvement in your finances, but first, we have to make sure that we can handle that kind of commitment. We have to make sure that we know the basics of money management and financial responsibility to succeed in improving our finances.
We don't need high-paying jobs to make us financially secure; knowing how much we will spend can give us confidence in future emergencies because of how we build up our savings. So be slow but sure with how much you spend and save.
MONEY MANAGEMENT TIPS:
- Tracking your expenses
Tracking your expenses can help you know what you need the most and other things such as what you spend your money most on. Create a list and remember to ask for a receipt whenever you buy something; you can keep your receipts inside a small envelope or take pictures of them and then create a file or album where you can keep these pictures in and never forget about it
- Create a simple and realistic monthly budget.
Creating a simple and realistic monthly budget is essential to your money management journey. Creating a budget is straightforward; you can make a book full of envelopes with labels on them as to where you would like to spend a specific amount of money. For example, you can create envelopes with names like Bills, Groceries, Wants, Miscellaneous, etc.
- Avoid asking for loans.
When focusing on money management, the last thing you would like to be is in debt. So you have to avoid asking for loans whenever you don't have money and want something so badly. Loans are hard to settle, especially when you get one without being sure if you can pay on time or not.
There are four principles of money management: consistency, timeliness, justification, and documentation.
Consistency in managing money is when you can be consistent with how you apply your financial way of being responsible for your expenses. Being consistent in money management means staying true to handling the money we receive. When we are compatible with these ways, we can save significant amounts of cash and pair them with what we need to prioritize in paying.
As mentioned in the text above, we should avoid paying our bills late to keep a smooth routine in our expenses. However, if we choose to pay late, we cannot keep up with how much we can save in the given time. In addition, paying late will make us have a hard time organizing the things that we prioritized, thus breaking the consistency we have built over time.
We must have an objective for everything that we organize involving money. Goals make money management fun and beneficial; this helps us learn things that can help with finances' future decisions.
When managing money, we need to document our expenses to help with future decision-making. In addition, documentation helps us be more aware of what we should spend our money on; Money Management helps us be careful with what we do with our cash, thus making us consistently financially responsible.
How do we become financially responsible?
The answer is simple; we should keep in mind the qualities and values of a financially responsible individual. Being aware of these things will help us be good at managing our money and improving our finances. We can ask for assistance from people we trust to guide us through being good at managing our money. Once we get the hang of the various techniques, we can now trust ourselves to manage our cash.
Set Financial Goals
Financial Goals involve challenging yourself to stabilize your spending (especially if you are a materialistic person and spend it all on unnecessary things). Setting goals will help in teaching yourself how to save for the items you want. An example of this tip is to determine how much it costs to buy your needs; then, set aside that amount to save up for future expenses such as your wants.
Like talent, we are not born with it but learn how to be good at it; this is the same way with money management. We are not born with the knowledge of how to be financially responsible because as we grow up, we learn how to handle money in many ways. Look for ways to help lessen your expense, know what you are comfortable with, and don't force yourself to get into what is trending or because it worked for a random person.
Save your money
Now, saving your money is the most common way of being financially responsible. However, saving up is also effective despite it being simple. Whenever you ask business owners what helped launch their business, they will share the technique of saving money. It may be simple, but it is also helpful; saving money helps you prepare for what the future holds, especially for emergencies like being short on cash for groceries, bills, and more. Saving is a precaution; it is what you should always start with whenever you are learning financial savvy.
We can never avoid debt, even though we are careful enough. Debt can be beneficial and a burden; debt can help as long as we don't drown ourselves in it. Continually expand your choices, think outside the box, never consider debt as a 'second option' to money shortage.
Spend your money wisely; be savvy when shopping. Take advantage of sales, coupons, discounts, etc. Avoid purchasing products that cannot fit your budget. Instead, focus on your needs and save up for your wants. Prioritize your needs, especially those that help your shelter keep itself together.
Avoid lending money
Lending money is fine, but only when you're sure you have enough extra to keep you going through your daily life. Avoid lending money when you need it; lending money will become a habit. It is a charitable act, but it can also destroy one's financial responsibility. As mentioned in the other tips, be savvy, and think about how your decisions affect your financial standing.
Be smart whenever you are investing. Make sure that you weigh the levels of risk and return and how these will affect you. Study the different types of savings and have enough money for each type of savings.
Being financially responsible includes being patient; when we apply the tips of improving our finances, be thorough. Taking things slow and sure is better than risking everything for nothing.
Build up your savings
No matter how slow, build up your savings. Building up your savings will help with future occurrences, especially emergencies. In addition, conserving will help strengthen your financial security; being financially secure prepares us for various setbacks, which will harm our financial standing, especially if we lose our jobs, or financial providers.
Avoid committing to any new recurring monthly bill.
Avoid being naïve; just because you have enough money for something doesn't mean that you will have that type of cash in the future for many occurrences.
Contribute to your savings regularly
Deposit money to every savings account whenever you have extras. Depositing money will help you make savvy decisions for future emergencies, which will get you out of financial problems and contribute to your financial stability.
Take it slow and practice as much as you can
As mentioned before, money management and financial responsibility take a lot of practice and patience. Start small with saving, and then build it up until you can make risky and monumental decisions that benefit your financial standing. Always make sure that you are ready for the next step instead of jumping right into it. Asking for help from those you trust can also benefit you in various ways, such as being able to save your money and believing in yourself.
Always look for alternatives and avoid impulsive buying.
If you need something, there will always be another thing similar to what you want, but cheaper. So please think of how much you need that specific thing and be savvier. Impulsive buying can happen to us; we have to avoid it to save up for something more substantial.
And that's it! Now that you have followed the guide to being financially responsible, you are ready to improve your finances!