Managing money is the hardest task. Well, it’s not true! With these top 10 money management tips for beginners, you can manage money with ease.
Money Management is a vast and convoluted subject, which is very crucial for beginners. No matter if you want to save money for your future or you might want to put aside a part of your income for your retirement, or maybe you want to keep yourself and your family secure for preparing yourself for an emergency. The bottom line is that financial savings are imperative to be able to handle your present and future situations fastidiously.
Are you facing money management issues at the end of the month or the financial year? Now, you need not worry as we have scribbled down practical tips to manage money, whether you are doing a job or a business.
You might be thinking personal finance and money management are sensitive subjects to handle. However, it is effortless, and once you go through the full guide, you will not face the problem of having smart money management. Before we proceed further, let’s have a look at what exactly is money management, and what are its benefits?
Table of Content
- What is Money Management?
- Why Budgeting Your Money Plays a Significant Role in Our Lives?
- How To Make The Most Of Your Money?
- 1) Create a Budget
- 2) Consolidating Your Debt
- 3) Diversify Your Income
- 4) Track The Expenditures
- 5) Plan for Emergencies
- 6) Create a Retirement Fund
- 7) Follow Money Management Tools
- 8) Grab Opportunities Offering Free Money
- 9) Scrutinize Your Taxes
- 10) Invest Smartly
What is Money Management?
Money management is finance management, which basically means managing your money adroitly. There are some factors on which money management of an individual may depend such as how much income you are earning, or what portion of your income you want to put into your savings.
If you would know how to manage your money wisely, you will be able to manage your expenses and savings for each month in such a way that you will be facing money constraints neither in the present nor in the future.
Why Budgeting Your Money Plays a Significant Role in Our Lives?
Knowing how to manage your money efficiently will pay-off life-enhancing benefits-
- Keeps you focused on your money goals
- Gives you full control over your money
- Facilitates in organizing your spendings and savings
- Helps in evaluating your debts and how much you can afford to opt for it further
- It enables you to save for expected and unexpected costs
- Lets you pay lower interest rates facilitating money management
- Reduce stress and Conflict
- Boosts the possibility of increasing your earnings and the overall income by investing your income in the best possible manner
- Keeps you financially secured by providing you with an early warning for potential problems
To help you profoundly understand let’s take a look at a situation below-
For instance, famous bountiful food and other small vendors in cities or towns may be earning handsomely, but the biggest problem with them is they do not know how to manage their money to be prepared for crippling situations. It makes them helpless in the worst scenarios, and those situations compel them to borrow the cash to get out of the problem they are facing. This is why mostly these people spend their entire lives living in the same lifestyle and are not able to grow.
If one does not pay heed towards the savings or managing their money, then you will not be able to live a fulfilling life. No matter how much you are earning, if you do not know how to manage your income wisely, the problem will persist.
How To Make The Most Of Your Money?
You might be aware of the imperative money management levers that are Making money, Investing money, and saving money. One has to pony up and then allocate their income to the respective areas where they desire and need to. Following this approach, you will not be able to manage your money efficiently but make the most of your income. Of course, it is vital to know how to allocate your income as well.
You will find numerous suggestions over the internet, but we have gathered the most effective and valuable tips that will give you a mind-boggling understanding of money management. Mentioned below are the 10 fundamental tips that will help you live a fulfilling and affluent lifestyle:
1) Create a Budget
It is essential to create a budget and start allocating your money accordingly. The best part about creating a budget is that you get to know and analyze your money priorities. Skipping this crucial step will not let you align your money goals with your money habits.
You should need to know that budgeting helps us see with lucidity our entire financial situation. It could be tricky for you to stick on your budget, but if you do, it pays off in the end. And it is one of the best money management tips for beginners.
If you have a credit card debt, your first priority should be clearing off that debt and then spend or save the rest of the money you have earned. Always remember, money priorities align with your personal values, and one should abide by it. It is the first step that will help bring balance to your financial life and let you live a peaceful life by enabling you to live to save for your future expenses such as a mortgage, buying a home, a car, and for your retirement.
Creating a budget will also determine the avoidable expenses. For instance, if you are traveling abroad and if that trip is solely for leisure purposes and it is impairing your budget, you can avoid it. Instead, you can plan a domestic trip, which will also not disrupt your budget. This would only be possible if you have made a full-fledged budget at the beginning of the month. Otherwise, you will remain unaware of the avoidable expenses, that can lead to the money constraints at the end of the month.
Furthermore, it will also help in evaluating your matter of concern and encourage you to start saving for that subject. You may want to save for your wedding, or your child’s education, or want to keep spare emergency funds.
2) Consolidating Your Debt
Getting out of debt is imperative, whether it is your credit card loan, personal loan, mortgage debt, or any other. In short, being in debt is stressful. It is not that difficult to consolidate and get out of your debt as numerous people enter and effortlessly come out of this debt situation. The first priority of almost all of us should be to try to get the lowest interest rate on your debt, if possible. You can do this by exploring a couple of options.
It is entirely acceptable that if you opt for debt as most of the people do the same to meet their necessary or luxurious needs, however, one should always know the basics before applying for any loan. It includes one should have a brief knowledge about managing their debts by paying it down with the highest interest rate first.
Considering all loan options, credit card loans carry the highest interest rate, followed by mortgages, education loans, and personal loans.
If you have a credit card and have taken a loan against it, try to clear it off first because of the interest rate. The other loans you may have could be cleared once the credit card is fully paid off. In this scenario, if you are running on a shortage of funds, you can pay the minimum balance of your credit card bill, and a few weeks later, when your financial situation gets stable, you can pay off your remaining bill. It will neither vandalize your financial stability nor it will affect your credit score.
3) Diversify Your Income
It is always better to start a side hustle and invest your income into something fruitful or valuable. Just like you diversify your investment portfolio, it is equally important to diversify your income.
The question is how to diversify your income? It is very simple and effective if one is willing to do it. You can do it by exploring other money-making options apart from your full-time job. You can search for these options easily as there are plenty these days.
You can earn money while you are at home, even when you are sleeping. Yes, you have heard it right! To know more about these ways, you can check out the passive income options. Some of the ideas include online surveys, affiliate marketing, selling an e-book at Amazon, creating an app, blogging, becoming a virtual assistant, and many others.
Investing your hard-earned money into passive money making ideas will help to boost your income. For instance, you have profound knowledge about the share market; you can start buying some shares of the companies that are reliable. It will not only help you grow but also help you diversify and hence manage your income efficiently. As when you start expanding your income on pragmatic things, that means you are making full and the best utilization of your income, which will help you in money management in the long run.
4) Track The Expenditures
It is requisite to make a note of all the expenditures incurred in the past. It is easy to track the expenses for a month. This way, you will get the idea extensively about your spending habits. In order to track your expenditures, you can pull out bank statements, housing and utility bills, credit card statement, digital payment records, etc. Just total up your expenses and make a note of it.
You may think, what will be the benefit of knowing about your own spending habits and consolidating your expenses? The truth is, till the time you are unaware of your expenditure pattern, you will not be able to control it and give it the right direction if the model does not seem overwhelming.
It will help to categorize as you construe your spending. Not only this but once you compile the expenses of each category into one spot, you will notice where your income goes substantially.
As it is always said, “Money saved is money earned’. You can slash your necessary expenditures enormously. The idea is to take into consideration your entire expenses on everything you are doing at present that may be avoidable
For instance, you may be paying for the gym membership, but you can do yoga at your home; you can summon its cancellation. Or you could be paying for some other subscription, which in case gets canceled, you can comfortably live without. So, why not go for the cancellation and save the money which was being spent on these extravagant things.
5) Plan for Emergencies
You should be fully prepared for all emergencies; whether it is a medical emergency, emergency caused due to natural calamities such as a tree falling on your roof, breaking down of your vehicle, sudden house repairs such as fixing up of your electrical appliances or other deemed household necessities. Whatever may the concern be, to cope up with any kind of unexpected event, the emergency fund is vital and one should be our top priority for money management.
Not expecting any emergency does not mean that you need not plan for them. Regardless of your priority, you should accumulate some accessible liquid funds each month. If you have money to deal with the nerve-racking situations will make you feel secure.
It is totally up to you how you find it feasible to manage money for these unexpected events. You can funnel all your side gig money or proportion of your income to an account where you are keeping all your savings, and use that only at the time of an emergency. It is also up to you how much ratio should keep for your emergencies; some people may aside 20% out of their salary or others may put 5% for these abrupt situations.
6) Create a Retirement Fund
You should evaluate, gauge, and then start saving a fraction of your income for your retirement. You can either create the retirement fund on your own by maintaining a separate account which you keep untouched until your retirement or opt for a 401(k) retirement plan. If you opt for such a plan, always do make sure to optimize it by ensuring it is reaching its maximum potential, especially if you have lofty retirement plans.
Just like, till the time you do not know your ‘destination,’ you would not be able to choose the right path. Similarly, the first thing you should do is to set a retirement plan based on which you would require to accumulate savings from your income. Here ‘retirement plan’ depicts the ‘destination’, and the ‘savings’ demonstrates the ‘path’.
Until you have a perfect retirement plan, you would not be able to know how much to save, and you might be ending up in a troublesome situation in case you come up with a shortage of retirement funds. And it is one of the best money management tips for beginners.
7) Follow Money Management Tools
Many dynamic financial management apps are available that can provide you with important money management tips, and keep you well informed. These apps or websites act as a financial guru, and they help you get the best version of yourself, financially.
Now, you do not need your calculator. These apps or tools will do all the hard computational and budgeting work to facilitate things for you. Some of the tools that assist you in money management are Spendee, Mvelopes, YNAB, Personal Capital, Acorns, Dollarbird, etc.
You just need to pay heed to these advisors and follow them vigorously in accordance with your current financial position. Basically, they will help you in managing your finances better than before by mapping out your personal finance strategy with your current short-term and long-term goals in mind. Many people have taken assistance from these money management resources, so why not you?
One thing has to be taken care of. There are ample resources available online that claim you for getting your financial management to the track. However, all of them are not as compelling as some of them could be spam or bogus. Hence, you should first assure the authenticity of the app or the resource which you are about to take the assistance of to get your money managed effectively.
8) Grab Opportunities Offering Free Money
Taking advantage of free money is always useful for everyone. Many people these days consider using those apps which provide huge cashback offers.
Numerous digital payment apps are available in the online market. However, there are very few of them that provide you with excellent cashback deals. These apps are not only reliable but also incredible to use. Not only you get cashback offers from certain apps as an advantage, but there are plenty of other beneficial deals that you can take advantage of, including availing instant discount offers, reward points, referral bonuses, etc.
You should also check all the privileges that are included in your job. As your job might already be adding a health insurance plan, or it might give you an additional benefit of offering a discount on the particular gym membership. These things will help you save some money, and you will be able to make better use of your saved money.
It is also feasible to use credit cards offering great rewards points, and cashback offers on various transactions you using them. Certain credit cards help you earn additional gift cards on their purchase. But always explore multiple options before you opt for one as different credit cards consist of different deals and offers. Just ensure that you pay the credit cards bill timely if you start using one as interest levied after the due date is very high.
9) Scrutinize Your Taxes
It is imperative to optimize your taxes as it will not only give you more money to save but also to invest. You might not think of optimizing taxes as learning about taxation is not very interesting, but still, it is definitely worth it.
You need not have expertise in taxation laws if you just know the basics and understand your own taxes even if you have hired an accountant; it will immensely help you in managing your money.
If you meticulously study and observe the taxes you are paying each year; you will be able to easily spot where you have the slightest possibility of saving money next year. It would bring into notice about the deduction you can take the very next year.
If you also have a passive income, you can launch a Limited Liability Company (LLC) to avail more opportunities in order to deduct your side-income expenses from your taxes.
10) Invest Smartly
You should not only invest vigorously but often, and as early as possible. There are some platforms where you can invest your income and increase the scope of your savings, including Real Estate, Stock market, bonds, and gold.
It is really important to invest your money into these key variables ensuring the maximization of your investment returns and minimization of the risk. The return you get out of your investment, can further to be re-invested to the same or other platforms. This way, you can boost your overall wealth and assure your financial well-being by continually growing.
The investment strategies are simple yet effective. Always prefer to invest in index funds, which has low fees and inconceivable diversification. You can also opt to buy the entire stock market instead of buying the individual stocks. Several investment apps can help you in making crucial investment decisions.
If you are already investing in stock, real estate, or any other variable, always try to maximize it by minimizing your unnecessary expenditures. Always remember, as much as you increase your investment, it will help you boost your savings and hence the income. So, invest as much as you can as it is one of the crucial money management tips for beginners.
Get to know about money management skills is potent to solve all the problems that you might be facing in terms of financial stability. Determining your monthly payment and keenly understanding your expenses will help you maintain the balance, which is essential to remain financially sound.
Of course, there could be hard times that you could face in spite of following all the above tips, but that’s life. So, do not worry. Things will come on track!
One magnificent tip for big merchants or entrepreneurs is that they can hire financial advisors if they want their monetary transactions to be carried out smoothly.
Recommended: 10 Best Long Term Investment Options in India
Did these tips help you in managing your money?
If you have any other questions related to this article’s topic or in case we have missed any other useful tips to manage your money, you can reach out to us in the comments section.