Managing your money is an important skill for your future. How you manage your spending habits today will help you build wealth for your future and steward your money well. Here are 5 tips you can start practicing today to manage your money better.
1. Evaluate your current financials
Evaluate your current income and analyze your spending habits for a period of time. Track your current monthly spending habits to see your spending trends and categorize your expenses. Monitor your spending for a few months to be able to get an accurate average to be able to set a benchmark. Notice what categories you are spending more in.
2. Break poor spending habits
After analyzing your spending habits and patterns, you may be able to identify poor spending habits. I don’t know about you but shopping is my form of therapy. It’s my pick-me-up. Retail therapy is often my remedy for when I have a hard day, when I’m stressed but also my reward when I’m feeling accomplished or celebrating a win. It’s unrealistic to cut off all your spending and its nice to treat yourself once in a while. However, after identifying your spending habits, it’s important to set boundaries to manage them and align your spending with your financial goals. If impulse shopping is a common habit of yours, before making a significant purchase, implement a cooling period to reflect and consider if you do in fact need or want this purchase. Online shopping is another easy way to fall into overspending. With a click of a few buttons, you can quickly spend hundreds of dollars easily without immediately feeling the impacts on your wallet. Again, find ways to manage this habit by limiting your screen time on weekends where you may have more time to scroll and add items to your shopping bag. You may also want to remove your saved credit card on your phone to reduce the ease of online shopping. Treating yourself is important, but it’s essential to strike a balance and prioritize your financial health.
3. Create a monthly budget
Create a monthly budget for yourself based on your monthly income. Decide what percentage of your monthly income will be allocated to different spending categories. Read this article to learn more about financial goal setting and an example guide to allocate percentages of your monthly income for each category, although this may change depending on your situation and lifestyle.
Keep a close eye on your budget by reviewing it frequently, ideally bi-weekly. Monitor each transaction and track your actual spending in each category. This will give you a clear picture of where your money is going and whether you are staying within your budget. At the end of each month, review your budget to evaluate your progress. Compare your actual spending against the allocated percentages and identify any discrepancies. If you find yourself consistently exceeding the budget in certain categories, consider whether changes are needed in your spending habits or if adjustments to your budget percentages are necessary. Budgeting is an ongoing process that may need to adapt depending on your changing circumstances. Regularly reviewing your spending will help you adjust as needed and be more aligned with your financial goals.
4. Save and invest
Saving is important to build financial wealth for your future. However, your money doesn’t need to sit stagnant in your savings account but can be growing with smart investment choices. Investing doesn’t have to be a risky concept but depending on your financial plans, can simply be a long-term strategy to grow your money. This can be done through savings accounts depending on your country (ie. TFSA in Canada). Consider contributing to your retirement funds monthly as well. This can be done through employer-sponsored plans or on your own. By consistently setting aside a portion of your income for retirement, you can take advantage of compounding growth and build financial wealth for your future. To determine what plan suits your needs, seek professional advice from a Financial Planner from your banking institution.
5. Build your credit
Using your credit card is a smart way to pay for your expenses while building credit and reaping benefits and perks, depending on your credit card such as cash back and exclusive points. Opt to use your credit card when you can as opposed to debit or cash, especially for large purposes.
However, the use of credit cards can remove the significance of the amount of money you are spending as opposed to cash or debit where the loss of money is immediate, serving as a tangible reminder. Payments with credit delay the impact of spending and accumulates, possibly leading to the tendency of overspending and substantial credit card balances. To manage this effectively, it’s essential to maintain awareness of your spending habits and exercise discipline when using credit cards.
Manage your money well by being more intentional and aware of your spending. By taking control of your finances, you can pave the way for a more comfortable and secure future.
