Money has a peculiar way of making everyone think that a little more of it will solve all their problems however if we know how to manage money we can lead a lot happier and content lives. If you are trying to reduce your credit card bills, buy a house, pay off the debts, build up savings or plan for that dream trip all you need is not more money but fine tuning your current spending habits and managing your money more efficiently.
Some primary aspects of money management are:
Budgeting: This is a primary step and a very powerful and helpful tool. Plan on a monthly/weekly or daily budget required taking into consideration the income sources, commitments, spending money and buffer money required. A budget is a reality check on your financial situation that helps you understand what you have and how to play it.
Tracking: Always track spending and this helps in not only cutting corners but in understanding where your money is going. Every cent spent should be accounted for. Use a spending app or a basic excel sheet that gives you an account of all the money spent.
Saving: It is imperative to save on a periodic basis. Ideally 20% of what you earn should be saved and kept aside untouched no matter of how trying your circumstances or needs be. This will lead to building substantial savings which after a certain time can be invested and reaped benefits. This should be made into a compulsive habit and is the reason why it should be taught from an early age.
Banking/Investing: As is the case with savings, investments are another way of streamlining your money on a regular basis so that it multiplies and you have an investment source and that can be used as a backup on a rainy day.
Managing debts: If you already have a credit card payment due or some loan repayment firstly plan out a timeframe and get rid of the debt. Plan out and play smart. It is a good habit to not take money on debt where interest has to be paid and in cant but situations borrow only so much that can be comfortably managed taking into consideration all the aspects of your life.
Insurance: A very good management tool that is often neglected be it life, accident, hospital or vehicle insurance it is extremely important to manage things that are beyond us. It is a good option to safely prepare for situations that are beyond our control and hence an imperative investment
Income tax: Paying timely taxes not only saves money in terms of fines but also helps in maintaining a healthy financial environment. Income tax payments on time leads to a good credit file and easier approval to loans and other financial arrangements.
Planning for the future: Always allot some percentage of your savings to future needs. Ideally at least some savings and investments should be done on a small scale consistently to realise your bigger plans of the future.
Backup/Unforeseen circumstances: Uncertainty is the norm and we should have some back up no matter what the circumstances may be. It could be an accident, natural disaster, death in family or something else however you need to bounce back to normal living with the savings you made for the rainy day!