Managing finances for many people is difficult and for some can be overwhelming. This is not because people are incapable of managing their finances, but rather they have never been shown how to do so. Basic finance like paying bills and understanding taxes is not taught in schools and most of us did not learn from our parents (or were taught bad habits instead). Below are some tips to help you effectively manage your finances:
1. Keep it simple
Life is complex enough and often the best strategies in life are the simplest. Managing your finances should be the same way. Try and automate as much of your finances as possible. For example, have direct deposit set up and on payday have your bills be paid electronically on the same day. Automate some form of savings as well on each payday to build your wealth as well. In this process, the rest of the money left over can be for you to spend.
2. Pay yourself first
It is important to make sure you save money into a savings account each payday. You want to have at least 3 – 6 months of living expenses so when something happens like a job layoff you do not have to take on debt to manage the situation.
3. Use technology
There are many great tools out there for free to help you manage your finances. For example, your bank should provide a tool to help you track your budget. Your credit card carrier should provide a free resource to track your credit. If these tools are not available use 3rd party tools like www.creditkarma.com for monitoring your credit.
4. Be honest with yourself
Take a close look at your spending habits and understand what bills are necessary like rent and utilities. It is important to identify bills that are non-essential items like eating out, buying expensive items, etc. and work on reducing those expenses. The idea here is to not say you can’t have fun but work on making sure you enjoy life while still focusing on long term goals. Your $3 latte each day is not what is keeping you from being a millionaire. Just focus on spending less than you bring home and monitor your progress over time to help ensure you stay on track.
5. Be kind to yourself
Managing finances is hard and there are a lot of emotions mixed with our money. If you make a mistake do not beat yourself up but acknowledge it and move on. The only mistake in life is not learning from our mistakes.
Also, you do not have to do this alone and there are professionals out there (like us) that are happy to help you!
If you missed our Money Mastery webinar series, we discussed strategies to pay down debt and tips to create healthy financial habits. Check out the series by clicking here.
