Manage Your Money The Smart Way
Knowing how to manage your money is an incredibly important life skill that, if mastered, can provide a lifetime of comfortable living. Here are ten ways to ensure this by getting smarter with your money.
1. Know the difference between wants and needs
Justifying any new purchase is relatively easy – especially if you’re trying to convince yourself. The hard part comes in when you start thinking about whether the purchase is necessary. For example, you have a working phone, but a new model just came out. Chances are that buying the new phone will result in a larger monthly installment – so you will need to consider carefully whether you need or want a new phone.
2. Get educated on personal finance
There are a ton of resources about how to manage your money and personal finances out there properly. Start reading books or watching videos and get the advice of people that have learned how to make the most of their money.
3. Think carefully before you follow the crowd
Once again – the newest cell phone model has just been released, and most of your friends have bought one. Your current model is probably working fine and should last a few more years. Settling yourself deeper into debt to please others is not a smart idea.
Also read: 5 Tax Saving Tips (2023)
4. Have a budget
Usually, when people hear about a budget, they are already discouraged because they think it will take them hours to pore over their statements trying to figure out how much to spend on each category. A much easier way is to cash your paycheck (after your monthly debts have been paid AND you’ve put some money away) and then distribute the money between a few envelopes. Each envelope will represent a category, such as fuel, groceries, eating out, etc. Estimate how much you need, allocate the cash to the envelope, and then only work from that for the month. Ensure that your most important categories are covered to manage your money sufficiently.
5. Do proper research about market trends
Something that tends to happen when an item that makes money is trending is that so many people get involved, only to have that item decrease in value. You shouldn’t simply jump on the bandwagon to buy stocks from every company trending on the stock market. This will most likely end up in you losing money.
6. Pay yourself first
This tip is super helpful for managing your money. After you have figured out your deductions and general living expenses, you should know what will be left. Make a conscious effort to pay that amount into a different account every month. The odds are that if it’s in your account or readily accessible, you will end up using it.
Also read: Year End Tax Planning for Self Employed Individuals (2023)
7. Think about money as time
Manage your money in terms of time. Before buying something, think about how many hours of work it took to make up the cost of the item. This might deter you from simply giving out your money on unnecessary items.
8. Shop around
This is true for both small and large purchases. It might take a little extra effort, but by checking the prices of different items, even on groceries, you are sure to save some money. When it comes to larger items, do enough research about them to ensure that you are buying the best possible item for the least amount of money.
9. Know the difference between investing and saving
Think about this scenario – you’re saving up for a new laptop. You put away money diligently each month, and by the time you have saved up enough, the laptop you saved for has had a price increase due to inflation. At the same time, this might not be true for all purchases. At the end of the day, you want your money to work for you. Options like compound interest accounts and stock investments are usually the way to go.
Also read: Should I lease or buy a car?
10. Be smart about credit
Unfortunately, not having any credit is just as bad as having bad credit. It’s a good idea to have a credit account to ensure that you are approved for larger loans at decreased interest rates should you ever need it. The trick is to buy on your credit card and then pay it off immediately at the end of the month.
It doesn’t have to be a struggle to manage your money. Learn better money management skills by reading the above ten tips, or contact us to help you in your money management process.