Good money management skills are not something we are born with. In fact, most people learn money management through trial and a lot of error. Some of us might have been lucky enough to have parents who were financially responsible and passed this gene on to us; however, most of us were not so lucky and have to learn the art of smart budgeting and saving on our own.
The first step to managing your money well is to make a budget. When making your budget, you will want to make two lists, one list will be all your expenses and the other list will show how much income you have available for paying these expenses. If the income is less than your expenses, you have a big problem. You are living above your means and you need to either increase your income, or decrease your expenses. Whichever it is you decide to do, you must get the income column to a positive amount in order to be living within your means.
When you are planning your budget don’t forget to plan for the seasonal items. Birthdays, anniversaries, and holidays all require special budgeting and if you do not include them in your budget you will appear like a poor money manager.
Next thing you need to work on is to set up an emergency fund by saving 10% of your paycheck until you have six to eight months worth of expenses saved in case of an emergency; an emergency such as a job loss, health crisis, or anything that can set you back financially.
When you go shopping, always make a list and never stray from the list to buy impulse items. When you plan to go grocery shopping, never do so on an empty stomach! Grocery shopping when you are hungry is the surest way to impulse shop. You will end up buying a lot of snack foods which costs more money and won’t go very far.
Another good way to manage your money wisely is having a solid plan to pay back debt. Make a list of everything you owe, and start from smallest to largest in re-paying the debt. Some might argue that it’s wiser to pay off the larger, high interest debt first; however, by paying off smaller debt it gives you incentive to keep going once you have paid a few small ones off.
As a final note, when trying to improve your money management skills ensure that whatever you purchase, or whatever service you are paying for makes sense for your financial needs. Do you really need to pay a gardener to cut your grass? Are a weekly massage, manicure and pedicure really within your budgets guidelines? These little extras need to be evaluated and perhaps cut back to once a month (if you absolutely cannot live without it). We must make sure all our basic needs are met before indulging in the little luxuries of life; by doing so we will become much better money managers.