Do have friends or colleagues at work who just seem to be amazing at money management? You know the ones we mean. They’re saving money religiously every month for retirement but still have enough money available to take nice vacations or send their kids to private schools.
Stop envying them
You don’t need to envy these people because you can become a money management pro yourself in just a few months. All it really takes is planning and some self-discipline and you could soon become the money manager that other people envy.
Where managing money all starts
The best place to start is to go off alone somewhere quiet, sit down and decide your most important goals. It could be a month-long vacation in Tahiti, a golden retirement or a second home. In fact, it doesn’t really matter what your goals are so long as you can list them. Next, calculate how much it would cost to achieve your goals and set some timelines for accomplishing them.
For those big goals like a great retirement or second home, you might want to create some smaller steps that would get you there. As an example of this, a first small step towards getting that second home would be to set up a savings account specifically for it, while a second step might be arranging to have money automatically transferred from your checking account to that account every month.
The next step in becoming a money management pro
Now that you know your goals and how much money you will need to achieve them, you might want to spreadsheet everything. You could then sit down and update it every month and see the progress you’re making towards realizing your goals. This can be a powerful motivator to keep you on track.
Create a spending plan
The reason why most people do a poor job of managing their money is that they have no plan. It simply becomes that old cycle of money in/money out – until they reach the end of the month or run out of money. If you want to be a money management pro you need to track your spending for three or four weeks. The reason for this is that you can’t manage your money until you know where it’s going.
Once you have a detailed list of your spending, you should organize it into categories such as food, clothing, entertainment, dining out, insurance, debt payments and so forth. Then start looking for what are called “leaks” or those areas where you could reduce your spending. The best places to look for leaks are food, dining out, clothing and entertainment. However, depending on your lifestyle you may find other areas where you could cut costs without having to sacrifice much.
It’s a lot to easier to do this than you might imagine thanks to the apps and software available today. We especially like Mint.com and Manilla. Mint was the Mac app store Best of 2012 and for good reason. It’s a nice, simple app that that will track your spending and then show you how much you’re spending in each of your budget categories. It includes personalized budgeting tools that can help keep you on track. For that matter, if you overspend in any category, Mint will send you an alert via email. It will also alert you if it finds a financial product that’s better than one you’re currently using (think credit cards).
Manilla is another well-regarded financial organizer designed to help you manage everything from your credit cards to magazine subscriptions. Manila keeps all your information in one place and provides reminders of bill payments. It will even monitor your travel reward points. With Manilla, you always know exactly how much money you have and how much you owe. This can be a godsend in terms of planning for upcoming bills and other expenses – and without having to paw through stacks of paperwork.
Smart money managers don’t spend a lot of time writing checks to pay bills or making transfers between their various bank accounts. You should do what they’ve done which is automate everything by paying your bills electronically and by arranging automatic transfers from your checking account to your savings accounts and investment accounts. That way you would never have to write another check to pay for your utilities, cable bill, automobile insurance, etc., but you would also never miss a payment. That alone could take much of the hassle and stress out of your financial life.
Review your insurance policies at least annually
Last but certainly not least take some time at least once a year to review all of your insurance policies to make sure that you don’t end up experiencing a very unpleasant surprise. You’ll want to make sure your liability limits are high enough to protect you in the event of an automobile accident and that you have all the appropriate coverage. If your family situation has changed, you may want to update your life insurance. If you don’t have term life, you should get some. It’s a great price/value and would be a great way to protect your family in the event that something happens to you.
Follow these money management tips and you’ll be on your way to better finances, peace of mind and more money in the bank.