3 Ways to Manage Your Money Well

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3 Ways to Manage Your Money Well
3 Ways to Manage Your Money Well

Video: 3 Ways to Manage Your Money Well

Video: 3 Ways to Manage Your Money Well
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Managing money may seem like an impossible task, but if you think that way, it's because you haven't taken the time to manage it yet. Keeping accounts in order these days is easier than ever. By budgeting carefully, saving smart, and paying a little attention to your income and expenses, you can manage your money wisely, without needing an MBA.

Steps

Method 1 of 3: Budgeting

Manage Your Money Wisely Step 1
Manage Your Money Wisely Step 1

Step 1. Make a list of your monthly income

Calculate all fixed monthly earnings. Do not include variable pay, such as overtime, tip, commission or anything else you are not guaranteed to receive. Include only those recipes that will undoubtedly be received that month. This way it will be clear how much money is available to spend per month, allowing you to create an accurate budget.

Any additional money (tip, overtime, etc.) should be considered as "extra". By using only fixed income in planning, there is a greater guarantee that you will have enough money to cover your day-to-day expenses if you do not receive the extra income. Besides, it will be a nice "surprise" to get the extra money

Manage Your Money Wisely Step 2
Manage Your Money Wisely Step 2

Step 2. Identify all monthly expenses

Keep all purchase receipts to create a faithful list of spending habits. Fortunately, technology has made this easier than ever, as you can view checking account and card activity online. Some cards even help by separating expenses by categories, such as "Restaurants", "Gaso Station" or "Online Stores".

  • Keep the receipt and write down what you bought if you pay in cash.
  • There are a few smartphone apps that sync credit cards, bank accounts, and investments all in one place, providing category-based spending charts. This is a great way to manage finances without a lot of work.
Manage Your Money Wisely Step 3
Manage Your Money Wisely Step 3

Step 3. Divide the expenses between “fixed”, “essential” and “non-essential”

Doing so is the best way to see where you can save and start spending wisely.

  • Fixed expenses:

    expenses that do not change from month to month but need to be paid, including rent, loan or mortgage payments, etc.

  • Essential expenses:

    including food, transportation and bills for energy, water, etc -- whatever is needed to live, but the value changes from one month to the next.

  • Non-essential expenses:

    here comes everything else, like movie tickets, trips to the bar with friends and hobbies. This is often the item where people realize they can save the most money.

Manage Your Money Wisely Step 4
Manage Your Money Wisely Step 4

Step 4. Follow up every month

Don't expect to get a perfect budget by following these Steps in just one month. The best way to see how your money is spent is to keep tabs at all times, checking at least once a month how well you are doing. In general, your income will remain the same, so you only need to adjust your expenses if you feel you are running out of money at the end of the month.

Put monthly income and expenses side by side in a spreadsheet or notebook. Placing the numbers side by side allows you to see how much money is left to use

Manage Your Money Wisely Step 5
Manage Your Money Wisely Step 5

Step 5. Calculate how much is left after paying fixed and essential expenses

How much would be left of your income if only enough to live on were spent? Take fixed income and subtract fixed and essential expenses to find out how much is left to spend each month. You need to know this number to be able to manage your money well, as it is your "allowance" to have fun and save.

Manage Your Money Wisely Step 6
Manage Your Money Wisely Step 6

Step 6. Divide the remaining amount between savings (or investments) and leisure activities

There are many currents of thought about how much should be being saved each month, and they all have their pros and cons.

  • 10% it is the minimum that should be saved monthly. Savings will grow quickly and generally won't be detrimental in the short term. This money should also be used to pay off some debt, if it is large and interest rates are high.
  • 20% is considered a good amount to save. That way every five or six months you'll have enough to survive for a month if something happens. It is possible to save a lot of money without drastically affecting the quality of life.
  • 30% is the amount that everyone should aim for. This way, it will be possible to add more expensive activities for retirement, such as vacations and big shopping (cars, college, etc.). However, their purchasing power in the short term may be affected.

Method 2 of 3: Spending Smartly

Manage Your Money Wisely Step 7
Manage Your Money Wisely Step 7

Step 1. Set a personal budget and follow it

Once you know how much money you have left each month, you need to make a commitment not to spend more than you have. If you have a passion for fashion and your problem is spending too much on clothes, you need to learn to ask yourself: "Do I really need this?". Don't waste money on designer labels and buy from used clothing stores. Shop during sales, but only if you really need the items on sale.

  • What are your priorities in life -- eating well, a memorable vacation, or just spending time with the family? Knowing your own interests can help you avoid buying expensive things on impulse.
  • What is it possible to cut that would hardly be noticed -- a hot mix to accompany breakfast in the morning, cable TV with over 200 channels that no one watches, bottled water, etc?
Manage Your Money Wisely Step 8
Manage Your Money Wisely Step 8

Step 2. Only use credit card for budget purchases

Credit cards are not free money. Interest rates are exorbitant, even if they don't force you to pay off the debt right away. Good money management means using cards wisely as part of the budget rather than as a separate budget. In addition, responsible use of the card helps improve credit analysis, which can help with larger loans, such as for a house or car. Some crucial credit card tips:

  • Read all clauses in the contract before signing. What is the monthly interest rate? How is the minimum payout calculated? Are there annual fees or emergency assessment fee?
  • Always try to pay more than the minimum amount. You don't need to pay interest if you pay the total bill each month.
  • Just one credit card is enough - keeping track of multiple bills is a common way to get bogged down in card debt.
  • Decrease card spending to keep it within 30-40% of the limit. Never use the entire limit, as it will often be difficult to pay off debt without paying exorbitant interest.
Manage Your Money Wisely Step 9
Manage Your Money Wisely Step 9

Step 3. When shopping, have a list of needed products on hand

Impulse purchases cannot be a part of the lives of smart shoppers and good money stewards. Ask yourself before buying anything: “do I need this to live?”. Will the item be useful for a long time, or is it just a momentary pleasure? Don't shop as a recreational activity, buy only the essentials instead.

  • Making grocery shopping lists will help you avoid impulse buying, helping you to save and plan meals effectively so that nothing gets thrown away.
  • Never buy something just because it's on sale, you'll still be wasting money no matter how big a discount you're offering.
Manage Your Money Wisely Step 10
Manage Your Money Wisely Step 10

Step 4. Research before making big purchases

When buying a car, for example, don't become an impulsive buyer. It's also not the time to get carried away by the salesperson's conversation, no matter what gimmicks he's using to convince you. It is possible to save thousands of reais by spending two to three hours to search for cars, houses, home theater systems, etc., before going shopping, avoiding paying more and buying only what you want and nothing else.

  • Search online and set a limit, the maximum amount you will spend on a car, house, etc. Be strict with this limit, no matter what the seller says.
  • See how much the item costs and memorize the value.
  • Check prices from two or three different vendors to compare. If you feel comfortable negotiating, let the seller know that you found the product at a better price elsewhere and ask for a discount.
  • Wait for promotions if you're not in a hurry. For example, car dealerships typically run promotions at the beginning of the year.
Manage Your Money Wisely Step 11
Manage Your Money Wisely Step 11

Step 5. Buy wholesale whenever possible

It is difficult to reduce essential expenses, such as food, but it is not impossible. Buying wholesale is more expensive at first, but in the long run it will save money. You can buy personal care products, food and cleaning supplies online or at wholesale stores, such as Makro or Atacadão, to reduce expenses.

  • In the case of food, the savings only happen if you don't throw anything away, or else you will be paying more money to consume the same amount.
  • Look for the unit value on the price tags, it usually says "price per pound" or "price per gram". Wholesale items have a lower unit price, which means more product quantity for less money.
Manage Your Money Wisely Step 12
Manage Your Money Wisely Step 12

Step 6. Set aside the money available to use in advance if you are having difficulty saving

If you're on a tight budget, one of the best ways to avoid overspending is to set aside the total available, in cash, at the beginning of the month. Separate money into envelopes: food, fuel, rent, etc. That way, it is possible to know exactly how much is available. Leave your debit or credit card at home. It's much easier to simply swipe a credit card without thinking about the purchase amount. If you have to deliver the value in cash every time you buy a non-essential item, the chances of your spending decrease is much greater.

Method 3 of 3: Saving for the Future

Manage Your Money Wisely Step 13
Manage Your Money Wisely Step 13

Step 1. Always try to keep the equivalent of three or six months of expenses at a minimum

Many financial advisers suggest going further, saving between 10 and 12 months, but three is the minimum you should be saving in case of an emergency. This money should only be spent if absolutely necessary, for example if you have lost your job or if you need to pay for medical expenses.

How much do your fixed and essential one-month expenses cost? Multiply this number by three or six months to get the minimum that should be saved for emergencies

Manage Your Money Wisely Step 14
Manage Your Money Wisely Step 14

Step 2. Make a list of your goals

Are you saving money for when you retire or to take a vacation to Cancun next year? Depending on your goal, the amount you'll need to save each month will change drastically. Make a list of the events you would like to save for, the amount, and then the number of months left until the event. For example, if you need to buy a motorcycle for a new job and you are thinking of buying a R$5,000 used motorcycle, and the job starts in six months, you will need to save approximately R$834 a month to buy it.

  • Start gathering for the holidays five to six months in advance. Even $50.00 a month in six months will provide $300.00 to buy gifts at the end of the year.
  • To pay for your children's college, you need to start collecting early. Create separate savings accounts when they are born and make it a priority.
Manage Your Money Wisely Step 15
Manage Your Money Wisely Step 15

Step 3. Invest in the future early and often

Saving $5,000 a year for retirement when you're in your 20s will save you twice as much money as someone who saves $20,000 a year in your early 40s. This is because the money saved will earn interest. And this interest earned will also yield more interest (compound interest), making the money grow quickly. In short, starting to save now will pay off later.

Manage Your Money Wisely Step 16
Manage Your Money Wisely Step 16

Step 4. Collect money to pay off debts simultaneously whenever possible

Don't try to prioritize one debt by leaving another one aside, as this way it is possible, in fact, to be losing money because of the interest charged. Be strict with your budget and pay all bills on time to avoid late fees and interest.

The exception is credit card debt, because of the very high interest rates. If you're sinking into credit card debt, or if you're only managing to pay the minimum, it may be more advantageous to skip paying other bills in order to get rid of the interest on the card

Manage Your Money Wisely Step 17
Manage Your Money Wisely Step 17

Step 5. Save bonuses and raises received in a savings or investment

Whenever possible, take the extra money and invest. It can be tempting to buy a new car or spend it on your hobbies, but saving the money now will make a huge difference later.

When you receive a raise, keep the amount of the raise monthly. Quality of life will be maintained and long-term savings will be much greater

Manage Your Money Wisely Step 18
Manage Your Money Wisely Step 18

Step 6. See if your employer offers Incentive Private Pension options

Many companies offer as a benefit to make contributions corresponding to the amount paid in the private pension, meaning that they will double the amount paid monthly. The benefits couldn't be better, it's literally free money being saved for your retirement. Check with the company's HR department to see if there are any options available, some companies offer other benefits that can also be beneficial.

Never withdraw the amount from the pension plan ahead of time, it may be necessary to pay a fee or waive all contributions from the employer

Tips

Managing money well is, above all, about moderation. Many of the benefits of careful financial planning aren't visible until 20 or 30 years later, making it look like it's better to spend the money now. Think of saving as a way to invest in yourself and the future

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