by Philip Melton

Created on: June 16, 2010

Managing your money properly can greatly impact every aspect of your life.  Knowing where your money goes puts you in a position of being able to handle life’s surprises as they come.  But, what’s the best way to manage your finances properly?  Here are a few tips on how to keep the financial portion of your life in order.

TRACK CURRENT SPENDING AND CREATE A BUDGET

If you are unsure of why you’re barely making if from paycheck to paycheck, try keeping track of where you’re spending your money for a month.  Take note of every purchase, every minor loan (like giving your kids money), and every bill paid.  When you have your record of spending in front of you, take a close look at where your money goes.  Look for areas where you can cut back, such as turning off lights to help lower the electric bill or using coupons to save when grocery shopping.

After finding areas in your spending where you can cut back, now you can focus on setting limits on your outflow of cash by creating a budget.  When creating your budget, you can use the spending record as a guideline for limits.  Determine what amounts you can reasonably adhere to regularly, so that the concept of living on your budget does not cause you any more undue stress.

KEEP DEBT AT A MINIMUM

Have credit card bills along with other monthly expenses? Make more than the minimum payment to get those balances down.  Make sure that you figure in this extra payment into your budget.  Also, keep those credit card balances at least 30 percent of your credit limit so it doesn’t adversely affect your credit score if you decide to pay only the minimum balances.

As far as making future purchases, try to avoid using your credit card.  Adopt a mantra of “if I can’t pay for it today, then I don’t need it today.”  What’s the point of paying down your debt if you keep adding to it? 

INVEST IN FUTURE

If you haven’t already, and your employer offers it, start saving a portion of your income in a 401K account.  Not only will you be saving for retirement, but if you’re employer matches a portion of your contribution, it’s almost like getting free money.

In addition to saving for retirement, save for other life decisions as well.  Set aside money to further educate your children or even yourself.  Save so that you can purchase your first, second, or third home.  Save money to start that business you’ve wanted to do for years.  Lastly, but definitely not least, you should save money just for the sake of saving.  Life brings about many unexpected possibilities, many of which can change a stable household into a household of disarray.  It’s better to be prepared than unprepared.

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