Proper money management has become a critical issue for most business owners based on the current economy. Here are some suggestions for better money management.
The Importance of Money Management
Money management is a key concern of most people today because of the instability of the economy over the past three or four years. This has made it necessary for many individuals to become a lot more disciplined with how they budget their money. Improper money management and not living within your means in the current economy may result in some dire financial consequences later on in life.
5 Steps to Better Money Management
There are numerous ways for an individual to manage their money wisely in order to prepare themselves for the future. Here are 5 steps to better money management that you should consider:
Create and develop a budget – preparing a budget is easy. Sticking to it is oftentimes another story and that is the most vital part of money management. The basis for creating and developing a budget is knowing exactly how much money is coming in and being spent each month. To start living within your means, this step is a must before going any further.
Make a thorough list of regular monthly expenses – start by accounting for every dollar that is spent on autos, food, maintenance, wages and utilities. Next, include related expenses such as dry cleaning, credit card payments, entertainment, insurance, loan payments, savings, and taxes.
List all monthly income – this includes investment income, income tax refunds and any other source of income or revenue that is earned.
Subtract the total expenses from the total income – this creates an overall picture of income versus outgo and helps the consumer improve on the ability to live within their financial means.
Are all the expenses covered? This is the first question to answer after budgets have been prepared and the four prior steps above have been followed to the letter. If all expenses have been covered, then the budget is working. If not, additional money management steps have to be taken to either earn more or spend less.
Additional Precautions and Suggestions
Preparing a budget is an essential component of proper money management and requires being realistic while the goal is to live within one’s means while at the same time preparing for the future. Once that budget is set in stone, stick to it without wavering.
Balance all bank and financial statements down to the last cent. Clean out all unused items in the storage and have a sale. Pay a bill or two with the money that is earned or just save it and put it in an account at the bank. Finally, start saving change by just throwing it in an empty coffee can or jar. It’s amazing how much will have accumulated once that can or jar is filled.