For the month of April, we will be bringing you daily posts centered on our personal finances – saving, making and managing our money.
Money management is essential for a balanced, happy life. Financial stress resulting from poor money management skills can affect our capacity to make good decisions, harm our relationships, affect physical and mental health, and ultimately to function well in life. It is no exaggeration to say that poor money management breaks up marriages and breaks down hope. Yet, money management is a skill which can be learned. Even if financial problems are largely the result of just not earning enough income, good money management skills can reduce the stress of these circumstances and provide a bit more mental room to focus on solutions.
Here are six tips for managing your money wisely, which, if applied, will improve the overall quality of your life:
1 – Know where your money is going. It is important to stop the financial leakage. We all know what it is like to have our money dribbling away one coin or one note at a time. It is important to pay attention to our spending. It can be very helpful to record all expenditure for a set period of time just so you know where your money is going. Prepare to be shocked; most people have no idea how much money is being lost to unnecessary expenses. Once you know where your money is going, you can curtail unnecessary expenses.
3 – Pay yourself first. Treat yourself as your most important creditor. Determine an amount that can be saved weekly, fortnightly or monthly for long term purposes and emergencies and save it regardless. Somehow we manage to find the money for the phone bill, the rent etc so much decide to find the money for savings. This money management decision is life changing as over time it leads to financial independence.
4 – Automate your payments and savings. Many companies offer discounts or rebates for automating your payments. This, also, ensures that your most important bills are paid on time – saving you additional fees and headaches. You can do the same with your savings – even if it’s a small percentage or dollar amount to ensure you save something.
5 – Consolidate your debts. If you are able to consolidate a number of debts into one loan at the lowest possible interest rate, your monthly expenditure will decrease, sometimes by a lot. If you own your own home, you will be able to get a home equity loan at comparatively low interest, which is a better option than a personal loan.
6 – Use money for things of lasting value. So much money is spent on items that have no lasting value and give no lasting pleasure. Many of this spending is at the expense of those things that actually do matter and will really benefit us in the long run such as owning property, funding retirement and paying for education.
These money management tips can improve the quality of your life by helping you take back control of your finances, reduce stress, increase savings and make better long term decisions regarding your spending.