Money management skills don’t come naturally for everyone. The good news is, there are ways to improve. If you’re struggling to understand how you can improve your personal finance skills or even what basic financial skills are, here are seven personal money management tips.
1. Track Your Spending
To manage your money well, you need to know where it’s coming from and how it’s being spent. The best approach is to take some time every month to sit down and focus on your money. Identify the exact amount of money you made, then list all your expenses for the month.
Try not to be too hard on yourself when tracking your spending. At this stage, just focus on listing exactly how much money you have coming, then identifying how much you’re spending and on what things.
2. Make a Budget and Stick With It
If there’s one basic money management skill that everyone has heard of, it’s probably the importance of making a budget. The first and only rule of budgeting is if something is not in your budget, you’re not allowed to spend money on it. While there are many personal budgeting methods, all of them stick by this one rule.
When you build your budget, make categories that fit your life. Of course, you’re going to have categories like food, rent, and utilities, but the rest of your budget is up to you. If you want to set up part of your budget to pay for nachos from your favorite restaurant, there is no shame in doing that.
Your budget is not a one-and-done deal. You should look at your budget and verify you’re on track at least once a month. Be willing to change your budget as your needs change. During the summer, your budget might look radically different from during the winter, and that is okay.
3. Say No to Impulse Buys
You might think about impulse buys as picking up a candy bar or magazine when you’re checking out from a store. While those do count as impulse buys, there’s more out there you should keep an eye out for.
An impulse buy is anything extra you didn’t include in your budget. Impulse buys can be small purchases of only a few dollars—the candy bars and magazines—but over time if you continually make them, they can add up and ruin your budget.
But it’s not just small stuff. Impulse buys include sales and deals. If you see a sale for 70% off and you can’t help but go into the store and buy it, you’ve made an impulse buy. Even if something is on sale, you still have to spend money that is not in your budget to buy it.
A new version of impulse buys come in online shopping and advertising. While ads can introduce new products and companies to you, they still count as impulse buys if you didn’t budget for them. Online shopping can quickly add up and catch you by surprise if you’re not paying close attention to it in your budget.
4. Save for Big Purchases
If you have to make a big purchase, it is always better to save up and pay it in one lump sum than to put it on a credit card. Credit cards come with steep compounding interest rates. While they can help you get something you want right now, it will cost you in the long run.
Having a goal in your budgeting can make managing your money go a bit smoother. It’s easier to restrict how you spend your money if you know that in a few months you’ll be able to afford that 65-inch TV you’ve been eyeing.
5. Compare Prices
Shop around any time you spend money. Slowing down and looking at the cost of a product, waiting for a sale, or using a coupon or deal can add up to help you save more money. If you’re struggling to find a better deal or a sale on a purchase, don’t hesitate to ask around. A store associate might know when a sale is coming or know of a better alternative for what you’re shopping for.
You worked hard for your money, so get the most you can from it by paying the best prices.
6. Limit Credit Card Purchases
Credit cards are your worst enemy if you’re trying to manage your money. They give you the benefit of instant gratification, but they will cost you in the long run. Unless you have the discipline to pay yours off each month, credit cards should be an absolute last option if nothing else is available for you.
If you do not need it, don’t use your credit card.
7. Know the Difference Between Need and Want
Needs and wants are two very different categories, and knowing the difference between them can help you better manage your money. The things you need are things that you can’t live without. If you didn’t have the things you need you wouldn’t be able to do your job or live. This can include things like food, rent, and utilities. The things you want are extra purchases that might be very important for you, but they aren’t necessary.
When you’re deciding whether something is a need or a want, be honest—and don’t make excuses. You might need a car to get to work, but do you really need a brand new sports car when you already have the family van? It’s true that you need a computer so you can work from home, but do you really need a top-of-the-line gaming computer?
Power Finance Texas Can Help
Improving your budgeting and basic financial skills works great when life is going smoothly, but we all know that unexpected emergencies can complicate even the best plans. Power Finance Texas can help when you need a quick short-term loan in Texas. Apply for your loan today.