Mastering Your Finances With Better Money Management
If even thinking about money management gives you a headache, you’re far from alone. Many people get stressed out thinking about their finances, whether they have a lot of money, or not so much. The reality is that better money management can help you achieve your financial goals, regardless of what your bank account looks like. It can help you invest and save.
If you feel all over the place with your finances, or sort of stuck in the mud, here’s what you should know about mastering your finances with better money management.
Know the State of Your Finances
First, you must take a clear-eyed look at your spending. You must know how much is going out each month, and where your money’s going. Ask yourself whether you’re regularly overspending, and whether you have enough to cover an emergency. Can you handle a car repair, for instance, without pulling out the plastic? Do you know what you should be doing, in terms of financial objectives, or do you honestly need advice?
Put Together a Plan
Budget. There’s no way around it, the first thing you must do is establish a budget, a realistic budget that you can stick to. One strategy that’s highly recommended is the 50/30/20 plan, which first came to prominence in a book by Sen. Elizabeth Warren called “All Your Worth: The Ultimate Lifetime Money Plan.” The plan earmarks half your income for needs, 30 percent for wants, and 20 percent for debt repayment and savings.
Track expenses. As we say, you need to know precisely where your cash is going. Taking a good look at it can motivate you to cut back in certain areas or tweak your spending habits so that they line up with your aims.
Save. As you focus more on your finances, you’ll uncover more ways to save. Whether it’s modifying daily habits, negotiating with company representatives for payment reductions, or making long-term adjustments, looking for ways to save will become second nature. If possible, have funds go directly from your employer to your savings account.
Separate savings and emergency accounts. Once you have established an emergency fund of at $1,000, the last thing you want to do is pinch off it for bills and budgeted expenses. So, keep them separate, even if you don’t think you’ll dip into it. Keeping the two categories in separate accounts will also allow you to see how much your money’s growing.
Handle your obligations. Consider going at debts with the highest interest rates first. After that, tackle your debt in descending order until all your debt is cleared.
Get Your Credit Together. When was the last time you checked it? Many moves we make in life, from securing an apartment to lining up car insurance, are contingent upon our credit standing. When you’re examining your credit report, pay special attention to how much of your available credit you’re using (credit utilization), since that weighs significantly on your score. The goal is to stay within 30 percent of your credit limits on your cards.
Look at what’s happening with debt relief in Texas. Among residents seeking debt relief, the average credit card utilization rate is 76 percent. That’s compared to an average of 25 percent nationally. In general, high credit card utilization suggests a heightened need of debt relief services.
Put money aside for retirement. It’s never too early to put money in an IRA or 401(k) account – and watch it grow. The goal is to have freedom and stability when your working days have ended.
Ultimately, mastering your finances with better money management is a matter of knowing where you stand, making moves in alignment with your goals, and staying on top of things. If your situation is dire and you need to get out from under serious debt, such as from credit cards, we recommend leading debt settlement company Freedom Debt Relief.