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How to Manage Your Money?

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8 Simple Steps to Managing Your Money - Infographics

Steps to manage your money are as follows

  1. Record your Balance Sheet

    List and calculate your assets such as bank accounts, homes, vehicles, stocks, etc.
    List and calculate all your debts such as home loans, car loans, other loans, credit cards, etc.

  2. Calculate your Net Worth

    Assets - Debts = Net Worth

  3. Record your Income Statement

    List any income such as salary, your income from stocks/bonds, etc.
    List expenses such as monthly expenditure (calculate average spending of at least three months).

  4. Calculate your Cash Flow

    Income - Expenses = Monthly Cash Flow
    Once the monthly income and expenses are listed and calculated from step 3, calculate the money that came in and went out. *Do not forget to include your credit card payments.

  5. Know your Credit Score

    Credit reports are free, and you can know your credit score by paying a nominal fee to credit reporting agencies. It is to determine your creditworthiness.

  6. Analyze Step #2, #4 and #5
    Compare these standards to yours, and find out where you stand financially.

    Manage your money

  7. Setup Budgets

    Once you know your spending history, you must budget how much you allocate to each category every month. There is also an online budget planner available.

  8. Keep Track of your Budgets

    It is important to know where you stand financially. Again, keeping track of your budget gives you an accurate idea of where you spent your money during a month/year.

Infographics

8 Simple Steps to Managing Your Money - Infographics

If you are good at managing your money, it can help you stay in control of your finances. It can help you reach your targets and pay off any debts. There are several ways you can do this.

  • You can use a good online budget planner to work out your budget in minutes. With that, you can see how much spare cash you have left after paying off your most important bills.
  • You can maintain a spending diary to help you keep a closer eye on your spending. That would be a good way to track where you spend your money.
  • Aim to pay off your debts first, especially those with the highest interest rates.
  • Watch out for non-essential expenses that one can avoid in your budget. First, ask yourself whether a particular expenditure is a “want” or a “need.” Then, of course, you need to cut down on what you want.
  • The balance number in your checkbook is critical as it would tell you exactly how much money you have currently. Ensure you keep an accurate checkbook that includes all the records, including ATM/Visa check card transactions, checks, and deposits. It will help you review where exactly you spend and save.
  • Credit card debts are the easiest of traps to fall into. So, try to minimize credit card usage as much as possible.
  • Acquaint yourself with diverse investment options. The more knowledge you have about financial instruments and possibilities, the better off you will be when it comes to investing your money. You will need to find out which would be the correct one for you and your needs.
  • You never know when you will need a huge sum of money in an emergency. For such situations having good insurance coverage can help overcome those crises.
  • Though we mention it last, it is one of the most important points; you need to organize funds towards financial goals such as debt reduction, saving for a down payment, and investing for retirement. Therefore, it is most important to start doing it, whichever method you choose.

All this may seem complicated and boring, but you must take the first step and start this process. After which, you need to take care and pay attention to what you are doing with your money.

Frequently Asked Questions (FAQs)

1. How to manage your money like the rich?

One must follow the following tips to manage money: save a significant part of income, pay to utilize cash, pay off the debt, not waste anything, invest in mutual funds, get a good deal on regular expenditures, bargain wherever it matters, practice financial hygiene, travel smartly, and fixing the budget.

2. How to manage your money when you don't have any?

Firstly one must open an emergency cash account even if one cannot fund. As soon as the account is open, make a savings plan according to the budget; then, one can start with whatever one has and stay focused on building habits and consistency. Once the financial situation improves, incline towards saving more emergency money.

3. How to manage your money when you get paid weekly?

If the payment is weekly, one must first know the paydays and each day's payment amount. Then, add the bills along with the paydays and list all other expenditures. Next, assign the paychecks to cover the bills and expenses. Lastly, since the pay is received weekly, it is also essential to write the weekly budget.

4. How to manage your money when you retire?

When planning retirement, it is crucial to prepare the budget to manage the money. One must also prioritize spending based on long-term and short-term money use. Moreover, one must also keep health concerns in mind; hence one must ensure financial security with health insurance. Finally, when planning retirement, one must also be tax efficient and regularly analyze the retirement plan effectively.