by David B Hitchcock

Created on: May 18, 2009

5 tips for managing your money

You want more money and the things in life that it can bring you - nicer vacations, better education for your children, a house in a better neighborhood, or even earlier retirement. You can have these things, but you need to manage your money better. Here are 5 tips that will help you achieve your financial goals faster.

1 - Track your spending

Studies have asked people who don't track their spending to guess how much they spend in a month, and 85% of them underestimate their spending by a significant amount, sometimes by as much as 50%! Avoid this problem by tracking your spending each month. This is easily done using electronic banking and a spreadsheet on your computer, or if you are old school you can use your checkbook and a notebook to track how much you spend and on what. Once you know what you spend, you can make decisions on how to change it - such as brown bagging your lunch once in a while, or buying that new computer.

2 - Budget for the important things, instead of letting them be impulse items

If you know you will need to re-shingle your roof and it will cost $3000, set up a plan to save some money each month until you have enough to do the roof when it needs to be done. Even if you don't have as much time as you planned, you will still have more money saved up than if you did nothing. Often people do just that - nothing. Without a general emergency fund, or a specific savings fund for items like that new roof, you will put things like this on a credit card or a loan and end up paying interest on it that you might not be able to afford. By saving up before you need the money; you are actually earning interest which will help you reach your goal sooner. And paying cash for your next car will make you feel on top of the world!

3 - Pay off your credit cards in full each month

Credit cards charge more interest than almost anything else you will see in your life. If your investments had the kind of return your plastic has for the credit card company, you would be able to retire at age 45! Credit cards should be used for emergencies when you are on a trip or as short term loans until payday. In both cases, if you can't afford to pay it off then you don't use it in the first place. Likely you have a balance on your cards right now you can't pay off by the end of the month - that's not the end of the world. But it could be if you don't stop spending, and start paying off as much as you possibly can to get those cards

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