11 money management tips to improve your finances
Spending money is not an activity that affects your emotional state, so spending does not make you happy. If you think about it, the purchase involves little emotional gratification that doesn’t last long. Likewise, not spending could create a sense of frustration if your financial resources are insufficient to meet your spending needs.
Money management: 10 practical tips
1. Have an overview of your financial situation
You don’t realize what you’re doing with your money until you sit down at your desk or sofa and carefully record everything that happens to you throughout the day, including expenses. So what you need is just a little time, pen and paper, or if you prefer digital support and your willingness to write down all the income and expenses that occur monthly. To help you, you may want to keep invoices for the essential expenses. This will help you to always have all the movements in your portfolio at hand and avoid the surprise effect like: “where is all the money you earned? “
2. Set smart financial goals
Once you have defined what you want to do with your money, you must set smart financial goals: specific, measurable, achievable, relevant, and time-oriented. Here is an example of a smart goal: you have to pay off a debt of 5,000 by December 2022. As you can easily see, this approach will always be a winner because it gives you all the necessary elements to act precisely in a specific direction.
3. Create an emergency fund
The future scares everyone, especially since the pandemic has reminded us that really anything can happen, and you cannot be caught unprepared. One tool that helps you feel safe is an emergency fund. First of all, you need to have a clear idea of how much money you want to allocate to the fund. In this regard, this money must cover a maximum period of 6 months for all the main expenses you incur daily (an example is rent and bills).
To save money, you must first identify unnecessary expenses and consult experts before borrowing money (lån penge). A last but fundamental trick is to avoid falling into the temptation to get involved quickly. It is highly recommended to deposit that money in an emergency fund used exclusively for this purpose.
4. Diversify your income, i.e., create extra streams of income
A rule that allows you to manage your money better is diversifying your income. But why should you do this? Simply because you can’t just rely on your full-time salary, especially with uncertain times. Being able to count on extra income will help you overcome future uncertainty.
5. Create an effective debt repayment strategy
The debt? A cumbersome obstacle to achieving your savings goals and effective management of your money. As a result, you will need a strategy that will help you steer clear of commission costs that could aggravate your debt situation and pay them off quickly. You can check Ikano regarding this.
The first practical piece of advice is to set up automatic payment methods to make sure you don’t fulfill your obligations on time. Secondly, you should decide how to manage the repayment of debts properly: do you prefer to pay off the highest debts first and then move on to more obligations with a lower amount or vice versa? When determining the amount per month, consider that the sooner you pay off your debt, the less interest you will pay.
6. Willingness is not enough to manage your money well
You all want to save money. The will and motivation are essential for achieving any goal, but unfortunately, they are not enough. It happens very often that there is nothing left to set aside after paying rent, bills, and groceries. This is precisely one of the reasons why you need to put your savings aside before making your expenses. How? It would be best if you automated the provision of 20% of your salary for various savings purposes.
Also, you don’t have to worry about not allocating precisely 20% of your salary, as the percentage is indicative and what matters is that you make savings an established habit.
7. Pay in cash whenever you can
This may sound cliché, but any finance specialist will tell you that one of the most effective ways to manage money is to buy something only when you have the money to do so.
This is why paying in one payment (or using a debit card) is an excellent strategy to save money since you avoid spending money that you don’t have.
Many stores around the world offer special offers and discounts for cash payments. This means that you can save money and pay less for a product or service.
8. Avoid using your credit card.
Another important tip for managing money is closely related to the previous point.
Does that mean you should never use your credit card? Of course not! Credit cards represent an excellent convenience for the consumer and are the most common online payment method.
Although our advice is that you try to avoid using it when you have the cash to pay for something, in many parts of the world, when you make payments on credit (or in installments), you end up paying interest, thus spending more than you would if you made it in cash.
9. Set limits on a variable spending
Managing money is closely related to limits on spending.
Anything that is not a fixed expense is a variable expense. In other words, a type of expense that, in principle, can be left for later. But we know that, in practice, people do not want to stop depriving themselves of small pleasures, such as going out with friends, taking a trip, or buying something that is not essential.
We recommend you set a limit for these cases—Reserve a small amount of money for your leisure activities. We know your goal is to save money, but if you end up sacrificing yourself too harshly, you may as well end up forgoing saving altogether.
For example, managing variable expenses in a balanced way can help you establish small rewards for when you achieve a goal or make a list of five elements that you consider redundant, trying to include at least one of them in your monthly budget.
10. Define an average budget
It is difficult for self-employed professionals to plan a budget since they do not have fixed incomes or benefits. 10 money management tips to improve your finances
Our advice to avoid unpleasant surprises is to take an average of the income of the last months and identify the periods in which you earn more and less and the effects of seasonality on your sales, such as commemorative dates and events, periods of high season and low, etc.
The idea here is that your minimum income is enough to pay your fixed expenses. When you are in those months of high billing in which you earn more than the annual average, invest the surplus or save it from being able to face the months in which the billing is naturally low.
11. Bonus tip: Look for alternative sources of income
When managing your budget, it might be a good idea to think about ways to get additional streams of income. There are plenty of options to choose from, but probably the easiest one would be passive income applications. This is perfect because it won’t require your time and attention but will add additional money to your current monthly income.
For example, the passive income app Honeygain will pay you cash in exchange for your unused bandwidth, meaning you can leave the app running in the background of your computer or mobile device while you go about your daily activities. This way, you can earn up to an additional $150 every month.
Conclusion: Money management tips to improve your finances 2023
You can’t help but think about investing if you want to learn how to manage your borrowing money habit consciously. Also, if you make your investment activities frequent, you can take advantage of extra income that will only benefit your portfolio. Many investment tools allow you to make extra gains: rely on traditional investments such as stocks and bonds or focus on alternative investments such as real estate crowdfunding.
10 money management tips to improve your finances 2023