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Budgeting

The Ultimate Guide to Money Management

We’ve been helping people be more financially responsible for over 40 years now. We’ve boiled some of our most common advice down to some essential rules that will be your ultimate guide to money management.

PLAN YOUR FUTURE 

Planning for the future is key to money management because major purchases and periodic expenses come up along the way, and when they do you want to be prepared. If you are spending all of your extra money after each paycheck on nonessentials rather than saving, when an emergency happens you likely will not be ready to financially address it. Instead, saving a little from each paycheck to plan for the future allows you to handle these emergency situations as they come without having to go into debt. It’s best to assume that you will always need savings for emergency situations, even if you end up not actually needing it. You might have a year where your car needs a lot of maintenance, new tires, and you had to take a pay cut. While all of these situations are unpredictable, saving for them will prevent you from turning to credit cards. Saving for the future and what might be to come is a great first step to arrive at financial freedom. It will teach you to budget and save each month and to secure your financial standing in the present and future. 

SET FINANCIAL GOALS 

Setting financial goals is another great way to manage your money properly. Determine short, mid and long range financial goals for yourself or your family. Continue to nurture and adjust your goals monthly. Writing your goals down and how you are working on reaching them will allow you to evaluate your shortcomings. Being able to visually see what methods are working and which are not in regards to reaching the financial goal you have set will teach you self discipline and will give you motivation to further reach your goals. Try setting financial goals for you to achieve each month, for the end of the year, and in 5 years. Then, celebrate your achievements! Reward yourself after each milestone–you are learning how to manage your money!

SAVE YOUR MONEY

This goes without saying, but saving your money is a surefire way to help you manage your money. Save for periodic expenses, such as a car and home maintenance. Save 5%-10% of your net income each month. Accumulate at least 3 to 6 months salary in an emergency fund. Saving for the unpredictable and inevitable will ensure you don’t go into debt or rely on credit cards when you need extra money for emergencies or larger expenses. 

Check out our 10 Week Money Saving Challenge to help you cut some expenses each month to help you save for your future. 

KNOW YOUR FINANCIAL SITUATION 

Determine your monthly living expenses, periodic expenses and monthly debt payments. Compare outgo to monthly net income. Be aware of your total indebtedness. Living outside of your means indicates that you are not managing your money properly. Make adjustments in your day to day life to fit your financial situation to ensure that you are not spending more than you make each month. Being more aware of where your money goes and how it is spent is key in money management.

DEVELOP A REALISTIC BUDGET

Learn to budget, and follow your spending plan as closely as possible. Evaluate your budget and make adjustments in your spending habits accordingly. Compare actual expenses to planned expenses. Allocate where your money is going and leave room to save. By planning out a monthly budget for yourself according to your income and needs, you are protecting your money and yourself. Hold yourself accountable and budgeting will be a great way to achieve financial freedom and manage your money.

KEEP A RECORD OF DAILY EXPENDITURES 

Be aware of where your money is going. Use a spending diary to assist you in identifying where adjustments need to be made. If you find that you are short on cash at the end of each month or don’t have enough to cover your expenses–it’s time to sit down and evaluate exactly where the money is going.

DISTINGUISHING THE DIFFERENCE BETWEEN WANTS AND NEEDS 

Take care of your needs first. Money should be spent for wants only after needs have been met. 

DON’T ALLOW EXPENSES TO EXCEED INCOME 

Avoid paying only the minimum on your charge cards. Don’t charge more every month than you are paying to your creditors. Try to only use credit cards if you can pay the balance off each month. Getting yourself into debt means you are not managing your money properly.

USE CREDIT WISELY 

Use credit for safety, convenience and planned purchases. Determine the amount that you can comfortably afford to purchase on credit. Don’t allow your credit payments to exceed 20% of your net income. Avoid borrowing from one creditor to pay another.

PAY YOUR BILLS ON TIME 

Maintain a good credit rating. If you are unable to pay your bills as agreed, contact your creditors and explain the situation. Contact credit.org for professional credit and debt advice, and inquire about our credit counseling service. It’s easy to set sensible rules like these, but sometimes living by them is harder than it sounds. We’ve got counselors standing by to help you make sense of your budget, plan to pay off your debts, and answer any questions you have about your credit or personal finances. Call us today for free counseling or get started online. Look for more free tips and budgeting advice in our FIT Academy.

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