Everything in life is simple: you only need to put your mind to it and master the basics.
The same goes for money.
Money management is not rocket science. However, it is one of those things that people struggle with and often end up on the losing end. Managing your finances doesn’t have to be a nightmare or something that seems unachievable.
In this post, you will learn one of the fundamentals of money management, which, when applied, will set you on the path to financial freedom.
Fundamental Money Management Tip: Budgeting
No one likes making a budget. You would rather go out and spend like you own an Express Spending card, than plan your expenses and savings and live within your means.
Well, the most basic tips for money management is budgeting. To master your money, you need to master the budget.
What are the basic rules of budgeting?
A principle of budgeting is saving. When you get your pay at the end of the month, sit down, get some paper or create an Excel sheet, and start writing. What are your savings goals? Put that down, then start checking your expenses. How much do you spend on food every month? How about utilities? Eating out? Shopping? Netflix? How much do you currently save?
Now you know where to cut down, what to switch out, and what to stop doing entirely, to reach your saving goals.
You will have to track everything you spend money on. Doesn’t sound fun, does it?
The point of tracking your expenses is to make sure that you know what you’re spending money on. This keeps you accountable to yourself concerning your financial management goals. When you track your expenses, you always know where your money goes, so you know how to adjust your budget accordingly.
Practice makes perfect: try and see.
In a few months, you will be a pro at budgeting.
When it comes to budgeting, saving, tracking, and practicing are necessary. And as you work on your budgeting skills, bear in mind that:
- Your saving goals should be realistic. Don’t start with saving 50% of your income if you can’t afford to.
- Save first, spend later. You can set up an automatic savings account, which deducts your savings at a specific time every month.
- You will need an emergency fund sometime in the future. This is not the same as your savings. An emergency fund handles unforeseen circumstances, leaving your savings for the goal you have for them.
- You will have to restrict yourself to your budget. Splurging and overspending are a big no-no.
- Your budget has to flexible. Don’t starve because you only budgeted for 3 weeks’ worth of food.
- Have long term and short term saving goals. Long term saving goals include marriage, children, school fees, owning a house, going on a dream vacation. Short term saving goals could include a weekend getaway, clearing your debts, or getting a new laptop.
And there you have it, money management 101 – mastering the budget. It may all seem like a lot to take in, but it is doable and very rewarding in the end.
Don’t worry, you can do this.