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How To Manage Your Money the Right Way

If you often feel like you don’t know the first thing about managing money wisely, you’re far from alone. According to a recent survey, close to half of all Americans struggle to define even common financial terms like bankruptcy or interest. More than half admit to feeling completely lost when it comes to one day achieving financial stability or coming up with a long-term action plan. Around a third admit to not being able to picture a future for themselves that doesn’t involve being in debt to one degree or another.

People are only human, so it’s understandable that so many find financial literacy tough to grasp. However, it’s important to keep in mind that money management is a skill, and like any skill, it can be learned. Here’s how to get started in the right direction.

Know Your Expenses

While a lot of people may have a vague idea how much money they spend each month, most wouldn’t be able to come up with an exact dollar amount if asked. If that’s the case for you too, you’re not going to be able to see the bigger picture until you’ve accounted for every dollar and cent. Thankfully, there’s an easy solution.

Pay close attention to your expenses over the coming month or two. Itemize everything, including any expenses you normally cover in cash or put on credit cards. Money savvy people have all of their spending accounted for at all times so they’re better equipped to make smarter financial decisions in the future.

Come Up With a Budget

You don’t need to be supporting a family or otherwise juggling lots of different expenses to benefit from a budget. Everyone should have one and stick to it religiously at all times. Like having a clear understanding of what you spend in the first place, budgeting helps you get a handle on the reality of your financial situation and get it under control.

Once you’ve itemized your expenses, do the same with your income streams if your household has more than one. Then factor in any additional financial goals you may have for your immediate or future financial situation. Are you looking to pay down the balances on your credit cards? Have you been wanting to start a college fund for your child? Are you determined to travel as a family this summer, or fly home to spend the holidays with your family next year? A budget can help you come up with action plans for all of those things.

Keep a Close Eye on Your Credit

Establishing and maintaining good credit is every bit as important as careful budgeting when it comes to managing your money, so if you’re not already keeping an eye on your FICA score, it’s officially time to start. Your credit can (and will) affect your ability to live your best life in a number of ways. In fact, it can make or break your ability to secure housing, get approved for future loans, or even land a job you really want.

One of the easiest ways to get in the know and stay that way when it comes to your credit is to get a credit report card that tells you everything you need to know. Not only will it inform you as to your current score, but you can sign up for automatic credit monitoring as well. That way you’ll be the first to know if anything in particular either improves or lowers your score so you can plan your next move.

Always monitor your report closely for mistakes or signs of identity theft in particular. If you ever see anything that doesn’t add up, dispute it and be diligent about making sure it’s removed in a timely manner. 

Cut Expenses Where You Can

Once you start budgeting and really paying attention to what you spend, you’ll likely start seeing some ways you can easily cut back. Maybe you pay for an expensive gym membership every month despite rarely going. Perhaps you’re one of the millions who compulsively buy a five-dollar designer coffee at Starbucks every morning despite not really seeing it as a necessity. Sure, one morning coffee is only five dollars, but that adds up to $150 over the course of a month and $1800 over the course of a year. 

This is exactly why it’s important to consider every dollar when learning how to better manage your money. Even a seemingly insignificant expense can add up to big bucks over time, so it’s time to get in the habit of asking yourself whether what you’re getting for your money is really worth it.

Establish a Savings Plan

Saving what you can isn’t just important when it comes to planning your long-term future. You want to be prepared in case of an emergency as well. Having money in the bank to cover expenses while you plan your next move makes a stressful event like a medical emergency or a job layoff a lot easier to deal with. Get in the habit of depositing a portion of each paycheck into your savings account. Let the money accumulate interest, and don’t tap into it unless something truly dire happens.

As you can see, becoming someone who’s smart about money management isn’t impossible. It just takes some planning, patience, and dedication on your part. Get started today! The sooner you begin, the sooner you can become one of the elite who can easily picture a future that finds them financially secure at last.

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