If you find yourself always short of funds, it doesn’t necessarily mean you’re not making enough money. The real cause might be poor money management skills, such as living without a budget or not tracking your spending closely enough, or paying too many penalties and late fees. With discipline and proper money habits, it’s possible to turn your finances around and never deal with penalty fees again.
Create a Budget
The first step in proper money management is having a budget. There are many apps that will aid in tracking spending, savings and financial goals, but the keys to any budget should include an accurate accounting of your “after tax” income and expenses. Expenses include a complete list of all purchases plus contributions to your savings and emergency fund.
Build an Emergency Fund
Sudden expenses are the most common culprit when it comes to not having money. If your car breaks down, you have no choice but to fix it, even if it means using your entire allotment of disposable income for the month or maxing out several credit cards. According to a report by CNBC, only 38 percent of Americans have an emergency fund while nearly a third said they would resort to borrowing from family or using a credit card in an emergency.
Automatic Payments
Late fees can take a big bite out of your budget. With a budget in place and money available for scheduled bill payments, utilize the automatic payment feature if you’re prone to late fees. According to a survey by the National Foundation for Credit Counseling, nearly 25 percent of Americans admit to making late payments. Even if you’re just paying the minimum, setting up automatic payments is smarter than increasing your balance with late fees every month.
Save
You should be saving a minimum of 10 percent of your income, but ideally that number should be closer to 30 percent when you include your emergency fund, saving for long term purchases and retirement savings. Incremental increases are the best way to maximize your savings amount, whenever you get a raise you should allocate as much of it as possible toward increasing your savings rather than increasing your discretionary spending. After-all you were living on the pre-raise salary so you won’t even notice the increase is missing.
Utilize Coupons and Shop Clearance
Groceries and clothing are a necessary expense, but it doesn’t mean you have to pay the full price for everything. Signing up for store rewards programs provides access to coupons and other discounts. Peruse weekly flyers for manufacturer’s coupons as well. The Internet is another great source for coupons. Discounttrue.com is one source for retailer deals including things like Target coupons and promo codes.
Another option is to shop for used clothing at places like Good Will, Salvation Army or your local consignment shop. Often you can find gently used name brand clothing for pennies on the dollar compared to what it would have cost you new.
Setting Financial Goals
A part of your budget should be financial goals, whether it’s something small like paying off a credit card or large like a down payment for a home. Money management isn’t just about being responsible with your money, it’s about financial security and being able to afford the things you want. Setting financial goals create an incentive for sticking to a budget and offers a reward if you succeed.
Improving money management skills has a lot to do with changing your money habits, and it all starts with a budget. Following and expanding on these six tips will grow your money and lead to financial prosperity. More money is always good, but better control of what you already have can be enough.
Image compliments of Stuart Miles and FreeDigitalPhotos.net