How to Manage Your Financial Life

For some strange reason, money is often equated with evilness and that may be why many people do not even discuss how to manage money with their kids. However, it is a necessary evil to deal with it. It is also necessary to master your finances as it can often mean a success family and business life, so do put in the effort into mastering it.

Make managing your finances a mental habit. In the back of your mind, always try to think to yourself whether you have saved money by doing this. Also ask yourself whether there may be a cheaper way of doing something. If you ask yourself these questions each time you want to spend money or spend time (as time equates to money since you can use your time to make money), then you will get into a good habit of saving and spending only what you need. Just think of yourself as a poor person, and you probably won't likely spend so much money. Of course, once you do get rich, remember to donate some of your money to others for worthy causes, detailed in the article Philanthropy:  Where and How to Donate Your Money to Charity.

Keep track. Find a simple way for yourself to keep track of how much money you make and how much you spend. There are probably lots of software these days that will help you do this quite handily. You can also do it the old-fashioned way of paper, pencil, and calculator. Just find a way that works and that you will maintain for at least one to three months every day - writing how much you spend and on what you spend it, as well as how much money you make. Once you see the numbers, and endeavor to save, you will become addicted. Most people get addicted to numbers, and once you see how much you have accomplished by saving on certain costs, you will be inspired to do even better next time. Of course, try not to deprive yourself or your family of necessary expenses such as required food to get the nutrition that you need. However, you could probably eat out less and save much more money and eat healthier by cooking your favorite foods at home.

Get out and stay out of debt. One of the first ways to get out of debt is to stay out of it in the first place. Do not overspend on your credit card, and remember to pay your card all the time. Just remember to budget those items in. Make a budget table for yourself if you have to. For some areas of your life, it may not be possible to immediately get out of debt, such as the mortgage on your house. However, try to buy a house that is within your budget, and try to return as much as you can possibly without hurting your lifestyle drastically. If it takes 25 years for you to return your mortgage, then let that be. Also schedule for problems, such as if you lose your job, how will you manage with your mortgage. Will you sell your house, will you need to rent out part of it? Just allot for certain problems that prop up in life every now and then.

Save money. Most books recommend saving 10% of what you earn. That's definitely quite reasonable. The more you save, the better, so if you can save even more than 10%, please go ahead. On the other hand, if your wage is quite meager, and you can only save less, try to see if there are innovative ways where you can save that 10%. Remember to put your money safely somewhere after you have saved it, such as probably some form of locked term deposit in the bank where you will earn a reasonable interest rate. Use your money to make additional money, as that probably requires the least effort on your part. It may not make you rich, but why not let your money make additional money when there is almost no additional charges. Be wise, though, when choosing your financial institution and how you lock your money. Get all the details, as well as what would happen to your money if that financial institution went bankrupt. Therefore, it is probably safer to place your money at least in a few big financial institutions so that at least you will know it will be useful. It might not hurt to also have some gold or some foreign currency in case anything happens to your country's currency.  You may also want to read the article on Saving Money.

Do not lend money unless you do not want to see the money again. If you do not want losing the money that you lend, then do not lend it. If you are thinking of it as a donation, then that would be a good idea to lend it. However, if you intend on seeing the money back later, then do not lend it. Not that the friend or relative or whoever you lend it to will not return it, but it is better to be on the safe side. It might not be their fault that they cannot return it, but the circumstances.

Hang around other frugal people. If you spend some time with frugal people, you will probably most naturally pick up their frugal habits effortlessly. They may even talk about money quite often. Just relax and take in the information and their actions. Then you, too, will become a frugal person and other people will want to hang around you.

Many people have poor financial management skills.  However, if you are able to master financial managements, you will become one of the gurus who can actually say that you are able to control how much you spend instead being controlled by the money that you earn.

In summary, to manage your finances,

A. Make managing your finances a mental habit.

B. Keep track.

C. Get out and stay out of debt.

D. Save money.

E. Do not lend money unless you do not want to see the money again.

F. Hang around other frugal people.

Life Skills > Money Management Skills > How to Manage Your Financial Life


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Last Checked 2015