Intro: Best Money Management Tips

Good money management habits and effective money management skills are vital for your well-being and financial security. For many people, meeting their financial goals is not really a matter of making enough but, instead, a matter of not saving and budgeting enough.

In fact, many people are unaware of money management basics.

With so many details of our finances handled electronically, an increasing number of us are becoming unaware of what exactly is going on with our money.

Direct deposits and till-tapping technology has made our money “easy come, easy go,” making it that much more difficult to figure out where exactly all the money we made the previous year went.

Money Management Tips: Why Money Management Is Important

The image that immediately comes to mind when people think of money management tips is that of an island vacation or a car. Why? Oftentimes, we tend to think of discipline regarding our money habits as a means to an end as opposed to a lifestyle that we create through good habits.

money management tips

Money Management Tips

Tips for money management are not meant to serve as part of articles we occasionally read when there is something glamorous we want to save up for. Rather, money management is essential for ensuring our financial security, our health, and our peace of mind.

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Money Management Helps You Save for Retirement

When you are in your later years, you probably do not want to work as hard as you do now. In fact, you may be unable to! However, if you do not put in the time to absorb some tips on money management, you may find yourself with no other choice but to take on a job in your old age.

While there are safety nets in place from the government, it’s important to remember that these safety nets are meant to serve as supplementary income to help out retirees as opposed to a comfortable amount that will allow you to maintain your current lifestyle in retirement.

Financial advisors (if you have the funds) or simple online money management tools, like Betterment, can help you figure out how much you should be setting aside for retirement. Taking a step as simple as opting into your company’s 401(k) plan could mean the difference between a head start on your retirement savings and scrambling to catch up in your forties.

In fact, those who start saving for retirement in their twenties are positioned to make much more than those who start later in life. The earlier you start, the softer the hit each paycheck will need to take in order for you to reach your retirement savings goals.

If your company does not offer a 401(k) plan or you are not interested in one, the best money management advice is to put aside some money every month into any retirement account through your financial institution, like an IRA, which can help you build a comfortable nest egg for later in life. Moreover, retirement accounts are usually tax-advantaged, providing you with tax perks either now or later when you withdraw the funds in retirement.

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Diligent Money Management Helps Detect Fraud

Being a victim of fraud can be a devastating experience – both financially and emotionally. One of the best ways to avoid fraud or detect it early is to practice better money management by monitoring your accounts and always knowing how much money you should have. If a discrepancy is detected earlier, it is much easier to address it.

Mastering Money Management Basics Can Protect Your Credit Score

Mastering money management basics will help you develop the responsible financial skills you need to be viewed as a creditworthy individual. Failing to make or stick to a budget and regular overspending leads to an unhealthy reliance on credit. This is an unsustainable solution and one that quickly turns into overwhelming amounts of debt that are difficult to pay off. Unpaid balances or late payments are surefire ways to do some serious damage to your credit score.

What starts off as poor money management leads to a poor credit score, which in turn leads to an inability to be approved for a credit card or mortgage, qualify for competitive interest rates or pass a credit check to rent an apartment. A poor credit score can have a serious impact on what you are financially capable of doing.

Money Management and Monitoring Helps Skim Mistaken or Unwanted Expenses

We have become so used to electronic statements and online banking that we tend to forget computers and people can make mistakes. Whether it’s a fee that’s been charged by accident or a vendor who charged you twice for one purchase, mistakes happen; however, they can be remedied if they are caught promptly. Once upon a time, balancing a checkbook manually and keeping a personal record of all transactions was considered money management basics, but now these practices are largely forgotten.

Sometimes, proactive money management does not just catch mistaken expenses – it helps you catch unnecessary expenses too. Subscriptions you no longer use or services you no longer bother with may still be getting charged to your account through automatic renewals. And although you may not notice that $6.99 that gets taken out of your account each month, you’d better believe it can add up. Monitoring your statements can help you cut these out of your spending sooner rather than later.

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Best Money Management Advice: Tips on Money Management to Improve Your Financial Security

Implementing a few money management tips can help improve your financial situation, your health, and your day-to-day life.

Figure out How Much You Should Spend in a Month

If you can only afford to spend $2000 each month for all of your expenses (both mandatory and discretionary), keep tabs on how much you go over or under each month. This is a great money management tip and monitoring strategy for those who have never made a budget and are not entirely sure what exactly their spending habits are. Once you see that you go 25% or 50% over your affordable spending, you can start to take a closer look at where this money is going.

online money management

Online Money Management 

The great thing about money management tips like this one is that they do not demand that money management newbies start creating a budget from the jump. Budgets sound simple, but deciding how much to spend and ultimately sticking to it are two of the most daunting parts of creating a budget. This way, you can see where you are overspending and organically make adjustments.

Start Planning for Retirement as Soon as You Can

There are a number of options for putting money aside for retirement, and doing this is one of the smartest money management tips. In essence, money management is all about thinking about your future self while still in the present. Companies are largely moving away from cushy pensions towards 401(k) accounts, but this does not mean that saving for retirement needs to be a burden. Many companies offer matching programs for their 401(k) accounts, so by opting out of your 401(k), you may be missing out on free money.

The traditional money management strategy for saving for retirement is to put a larger portion of it towards stocks. Since you should not be touching the money for another forty or so years, you have ample time to weather the ups and downs of the market and allow your money to grow. Over time, as you near retirement age, you can start putting more money towards fixed-income assets, like bonds, to protect your savings.

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Prioritize Paying Off Your Debt with the Highest Interest

Credit cards typically carry the highest debt. If you have a fair amount of money in savings, dedicate as much of your additional income as possible towards paying this debt down. While it may be tempting to add it to your savings, the interest earned in your savings account will not make up for the interest accrued on your credit card debt.

If you have multiple credit cards with debt, the best money management advice would be to first make sure you make the minimum payment on all of the cards and, second, pick the card with the highest interest and start chipping away at that card’s outstanding balance.

Do some research to see if there are promotions at your bank for transferring a balance. If you can transfer your credit card balance to another card with a lower interest rate or even a line of credit, you can save on the amount of interest you owe while you slowly pay back your debt.

Set up Automatic Transfers to Your Savings Account

Sometimes it’s not a matter of deciding to save – it’s an issue of remembering to save. Setting up automatic transfers to your savings every two weeks or even every month can help automate the money management best practice of putting aside a little money regularly.

For even better money management, try coordinating your automatic withdrawals with your direct deposits. This way, money can be taken out of your account before you even know it is there. If you only set up an affordable amount to be withdrawn, you will likely forget about it until it has grown into a nice sum. By that point, you will be more motivated to keep saving so that you can see your money grow.

Reserve All Commissions, Windfalls, and Bonuses for Your Savings

Various jobs have different kinds of compensation. If you receive bonuses or commissions in addition to your regular salary, use your salary for your necessary and discretionary expenses and then put all of that additional money into savings. People often make the money management mistake of treating this kind of money as the money they can blow. The best money management advice, in these situations, is to look at unexpected income as money you never received and quickly stow it away in your savings.

Money Management Programs for Those Who Can’t Be Bothered

For those who absolutely positively cannot be bothered to handle their finances but are eager to practice better money management, there are a number of cost-effective money management programs to use. Individuals can either turn to books with step-by-step programs or use the several online money management tools that are widely available. A few popular options include Betterment for saving and investing, YNAB for budgeting, and Mint for overall money management.

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Effective Money Management Makes for Better Living

Money management programs encourage you to think about your future, work towards your goals, and improve your daily life. Spending within your means and making the best use of your money can improve your relationships, reduce stress, and help you gain more fulfillment in pursuing the things that are important to you.

While money management tips are great for working towards specific goals, like saving a house or going on vacation, they are also excellent for establishing long-term habits for a more financially secure and happy lifestyle.

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