BASICALLY there are but three ways to manage money: (1) spend it, (2) save it, or (3) give it away. These are general steps that can be used to better manage your money, and of course what works for one person may need to be tweaked for another.
What is a budget? A simple definition is that it is an estimate of how income will be used, whether by an individual, a family, a business, or a government. If the Great Recession during the late 2000s and 2010s has highlighted nothing else, it has shown the wisdom of living on a well-planned budget.
Examine Your Cash Inflow
The first step to good money management is understanding the amount of money you have. Your goal is to attain a positive cash flow — that is, you are taking home more money than you are spending. Create a list of your fixed monthly expenses, such as housing costs (rent, mortgage, utilities, and so on), any insurance premiums and any debt payments that are paid out-of-pocket.
Be aware of Your Expenses
In addition to If you don’t understand your expenses then it will be challenging to manage it. The solution to this problem is: for one month, take note of all your expenses. Collect all your receipts (groceries, petrol, restaurant bills, entertainment, etc.) and look at your bank including credit card statements and get the total of all your expenses. It is also vital to keep track of expenses paid for in cash. These expenses are not as fixed and may vary overtime and as such may need to be monitored.
Consolidate Your Debts
Further, an important way to control your money is by combining your debts where possible. This will help you to get it under control and in time get rid of them. Some financial institution offer options which allow you to combine several unsecured debts such as credit cards, personal loans, and payday loans, into one bill rather than pay them individually.
Cut or Eliminate Unnecessary Expenses
Another step to good money management is to learn how to control your finances better by taking everything and every penny into account. Are you paying for gym membership monthly and it’s not going to good use or spontaneous buying things on sale online? As you honestly examine this area take the opportunity to slash expenses wherever you see necessary and especially if it’s something that doesn’t affect your life to a great extent.
Save aka Emergency Fund
Unexpected events can occur any and any time. It is therefore financially prudent to prepare as best as we can for them. This savings or emergency found should not be touched, it should be allowed to accrue interest and be available when it is needed the most. If you lose your job or an unfortunate or unexpected expense arises—for example your automobile is in urgent need of repairs or a tree falling on your roof—this is the best time to tap into the fund.
Periodically, you should reassess how your budget is working and make adjustments where necessary. Creating a successful budget can become a rewarding experience.