Humans are provided with various kinds of resources which they are supposed to manage. Money on the other hand is such a resource that you earn through various means and hence needs special care for managing it. Money management is a skill that is very much needed by every individual irrespective of their line of work.Money management is the process of budgeting, investing, saving, and managing your expenses. It is a skill that is often overlooked.
Importance Of Money Management
Do you want to be that person who wonders where his money flew within a few days after his pay? That is what happens when money is not well managed. Money management gives you a clear idea of your financial situation so that you can take the necessary action. It gives you a clear vision of what you want to achieve, to set financial goals. Through money management, you can track your money which will keep a check on every small and big expense that you make.
Steps To Manage Your Money Efficiently
1.Calculate your income
Start money management by calculating your monthly or yearly income through all sources. I would suggest that you should map your income on the 1st of every month. Your monthly income will include your salary and other incomes if any.
2.Set up an emergency fund
2020 has taught us an important lesson which is, "You never know what tomorrow holds for you". To build a better future you must be ready to face unexpected events and nothing more than a financially secured life can save you from unexpected worst times. A portion of your income should be set aside for an emergency fund. You can allot 10% to 30% of your income to the emergency fund every month.
3.Plan your expenses
Plan your monthly expenses at the start of every month. There are two kinds of expenses - necessary expenses and extravagant expenses. Try to cut down your extravagant expenses. Make a monthly budget to plan your expenses well in advance.
4.Increase your savings
Someone rightly said, "Save money and money will save you". Don't spend money just because you have money, the more you save money the better. Take a portion of your income and keep it in another bank account or in cash. Once you have removed a specified amount of money as savings from income, forget about it. Consider it as an amount that is not to be spent.
5.Prepare a month-end finance report
A report is made to have a conclusive look at a performance, situation, or event. Preparing a finance report will give you an overview of your monthly financial performance. You will get to know your spending patterns, total expenses, and savings. A report will help you find out your mistakes and improvements.
Tips For Money Management
1.Use budgeting/money management apps
If you are not sure of your financial skills, use money management apps to help you out with budgeting and getting detailed monthly financial reports. I would suggest apps such as, Mint, Money Manager, Wally which are some of the best personal finance apps.
2.Plan every expense
Avoid unplanned expenses as much as possible. Plan every expense well in advance, do budgeting for expenses. If you are planning to spend on physical things or services, visit various shops to get the best possible deals. Compare prices and buy at the best price.
3.Always be ready for emergency situations
Having a good financial backup will take you a long way. Having an emergency fund will make you self-reliant at times of difficulties.
4.Don't make big commitments in a hurry
Don't make any financial commitments unless and until you have done your research. There are so many people who do not understand the terms of debts and they commit to it and end up losing lots of money. Take the help of professionals if possible.
If you are under an impression that money doesn't need to be managed then you are wrong. Everything that measures needs to be managed. Money management is a skill that everyone needs to acquire. You can start now! It's never too late to learn management.