In this day and age, everything seems to cost more than it should. Housing is expensive, rent is going up across the country, college tuition is through the roof, and let’s not even talk about how much it costs to own and maintain a car.
These things aren’t luxuries; for most, they’re necessities. Inevitably, the question of how to pay for these things pops into people’s minds. While you could find a higher paying job or purchase a winning lottery ticket, the more immediate action you can take is to start managing your money better.
Whether you’re inexperienced with finances, have had credit issues in the past or have never been good at maintaining a budget, these are five steps to take to get your finances in order and successfully manage your money.
- Understand your financial situation.
Money is all about numbers, and managing your money means coming to understand, in actual, numerical terms, your exact financial situation. So instead of the vague “I don’t have enough money,” or “I don’t know if I can afford it,” you want to come to a precise understanding of where you stand. To do this, write out your major expenses for the month: rent, car insurance, student loan payments, and so forth. You want to have a full account of what you absolutely must pay. Then, write down your monthly income. Hopefully your income exceeds your expenses. The next question is what to do with the money you have left over.
- Budget your money.
Budgeting can be a chore. Writing down all of your expenses and limiting what you spend or how much you can go out can seem like a real burden. There are many techniques people use to track their expenses, but at its core, budgeting is all about being conscious of how you are spending your money. Many people who start budgeting are shocked to see how much they spend on seemingly small expenses like a morning coffee or lunch. The point is, when you budget you can better see where you can save money and which expenses are eating up your pocketbook.
- Seek help from the digital world.
Just like everything else, budgeting has been greatly transformed by the digital revolution. You don’t need to walk around with a pen and a pad of paper anymore, as apps like Mint and Good Budget link directly to your bank accounts and track how you spend to give you a clear picture of your financial situation and spending habits.
- Pay down your debt.
For many, it can seem impossible to ever get out of debt. Despite the difficulties, make a concerted effort to pay more than just the minimum amount. Skip a night out with friends and put the $50 or $60 you would have spent to paying down that debt. In the long run this will save you hundreds, if not thousands, of dollars. It will also increase your credit score, which will lead to further financial opportunities.
- Save, save, save.
Many people don’t save because they mistakenly think you need to have a good-size chunk of money to put aside. This just isn’t true! A healthy savings account grows over time, and the sooner you start saving, the better. Even if all you can do is $10 or $15 a month, this will add up and eventually create a sizable amount that can help you make that next step in your life.
A big part of successfully managing your finances is having the right attitude. If you want your money to go further, and if you want more opportunities and greater financial freedom, then you need to get in the habit of managing your money. It may seem daunting, but following these five steps will help you get to where you want to be.