Money management is one of the simplest yet most underestimated tools that financially savvy consumers can learn.
By learning how to watch your spending and keep track of your current lifestyle, income, bills and other financial habits, you will begin to notice patterns that predict your potential path to financial freedom.
How to start controlling your money rather than letting it control you:
Keep Track of Your Spending Patterns
If you have previously learnt how to budget properly, keeping track of what you spend is a lot easier. If your spending habits have gotten out of control however, making changes and breaking these habits is a bit trickier. Your first step in the right direction is to stop and look at your current spending patterns. Are you wasting money on things you don’t really need? Are you saving and planning for the future?
The only way that you can change these habits and replace them with better habits is to formulate a plan of action on how you will begin striving for financial freedom.
You may be able to make the required changes on your own or with your partner, or perhaps you will find it easier to get help from a financial advisor or reliable expert in the financial education field. Whichever option gets you on track, the time to put these changes into action is right this moment.
Creating An Action Plan
Like any other bad habit, careless spending is hard to break. You could even see it as an addiction of sorts. Much like you would approach any new changes in your life such as diet, exercise or work goals with a clear plan, you need to first decide how you are going to change your spending habits for good.
Your action plan will act as a guide and a solid foundation, helping you stay motivated and work towards your goal of achieving a better financial status. Simply put, your plan will help you control your finances rather than the other way around.
Putting Your Plan into Action
The first step on your plan is to take control over your spending. This doesn’t mean that you have to give up things you need or become a miser – the goal here is to be realistic about spending on things that you need rather than things you want. Your new and improved habits should help you and your family rather than leave you struggling to maintain your everyday lifestyle. Learn to differentiate between what you require to keep up this lifestyle, and what you will be able to manage without.
Make a monthly budget and keep records of your income and the amount you are able to spend without putting your finances at risk. Your income is essential in order to survive (and eventually thrive). As a general rule of thumb, you should never spend more than you make. If you can get this balance right, you are halfway on the road to financial freedom.
Prioritize Your Wants versus Needs
To give you an example of how to avoid over-spending, think about how many times you eat out at your favorite restaurant each month. A few drinks here, a fancy meal there, takeaways on your way home from the office… it all starts to add up. Now consider how much you would save if you ate at home instead.
Perhaps you are longing for a holiday with the family, or a brand new car that has the latest German engineering and smooth driving features. Once you have managed to control your finances, you will be able to afford these luxuries far more easily than you can at present.
Making a strict budget and sticking to it allows you to set realistic goals, tracking your income compared to the amount you spend each month. This is quite simply the most important money management strategy you could ever learn. Following this strategy will enable you to make better spending decisions for the rest of your life, helping you achieve your goals of financial freedom in the process.
Make Your Finances Work for You
Once you have managed to set budgets and track your spending, the next step is to start looking at ways to make your finances work for you. There are a number of opportunities that may come about, which could offer you better jobs and even an increased income. Make the effort to look out for potential opportunities, and keep working to secure and grow your finances. Your hard work will begin to pay off, and the results will be worth the effort.
Think about changing jobs for a better chance of income growth. Look into investment options for the money you save from savvy spending. There are many options you could consider for investment, from gold all the way through to Forex stocks. You could even set up your own private bank, and improve your taxes by legally freeing yourself from the IRA.
If you are tired of struggling to get by – let alone actually managing to meet your financial goals, managing your money provides the single most effective way to start improving your financial life for good. Sure it takes hard work, discipline, motivation and effort. But by setting goals, tracking your spending and looking into effective money habits, you will be well on your way towards financial freedom.