If you are reading this blog, you are motivated to start managing your money. Learning how to manage your money can be overwhelming. Growing up, my parents taught me amazingly little about money. I had no idea what to do with the money once I got it! Once you get your head to understand simple money management principles, you will see a huge difference in your finances.
1. Track Your Spending
How to create the money management plan that will work for you? Firstly, print out your bank statement and credit card transactions for at least the past month. It is vital that you see your spending habits. That will help you understand how to spend your money going forward. If you do not tell your money where to go, it will go somewhere.
Write down your monthly expenses. Go to thefinanciallady.com and get your Money Management Plan Worksheet.
Example of a month of spending:
- Groceries: $300.00
- Restaurants, bars, Uber Eats, Door Dash, and fast food, etc.: $600.00
- Clothes: $300.00
- Miscellaneous (lotto tickets, hair, mani/pedi, Starbucks, alcohol, cigarettes, and eyelashes, etc.): $400.00
- Entertainment (travel, sporting events, and concerts, etc.): $600.00
- Total: $2200.00
You might be amazed by the total when you add it up, but it is crucial to have a starting point. You can reduce your expenses going forward.
2. Write Down Your Monthly Income:
One of the fundamental parts of money management is knowing how much money you bring in monthly. Defining and determining your income will give you the foundation you need to complete the remaining steps. Write down and add up all your sources of income.
That will include your day job(s), side hustle, your business, your spouse’s income (if you are married), and any passive income source(s).
3. Define Your “Why You Need to Manage Your Money”
Maybe you want to be debt-free, have a down-payment for your new home, or take a big trip. Whatever your inspiration is, it’s essential to have a clear reason “why”.
Managing money requires discipline and daily repetitions. Beginning new habits is uncomfortable but knowing your “why” for doing so helps when you are struggling to manage your money.
One way to keep your financial goals in front of you is to create a vision board. That is easy to do. Go online and print pictures and words that support your vision. You can use magazines or the newspaper. When I created mine, I used a crock board, but you can use a poster board, or whatever you have. Make sure you place your vision board in your bedroom. Seeing it every day keeps your “why” in front of you.
4. Establish Financial Goals
Many of us set goals for the other areas in our lives, but when it comes to money, find it hard to set a goal. I struggled with this step in the beginning. Setting goals for my money now is easier by using this method. This template https://pin.it/5NnKs41 (I’m going to have one for my business) shows one how to save any amount of money. Put your financial goal at the top of the worksheet.
For example, if you need to save $1000.00 to pay for a vacation to Miami in July of 2021, do the following: if you get paid weekly, biweekly, or monthly, put how much you will set aside in cash or another bank account just for “financial goals.” That is easy to do when you create your paycheck money management plan.
During this time, tell your money where to go. For instance, commit to saving $200.00 a month towards the vacation trip to Miami. You can put away $100.00 every two weeks, $200.00 a month, or $50.00 every week. Use this same principle for anything you need to save for or pay off. Most importantly, print the sheet out and post it in your bedroom. Once you put the money away, put a line through the week. That shows your progress with your financial goal and holds you accountable for your goal.
5. Be Realistic with Your Goals
We all want to have the “American dream” … a house, cars, a well-paying job, and 2.5 children. To have this dream, we must do the work and be realistic with our financial goals. Ask yourself: “Do I earn enough money? How much debt do I have? Do I have a problem with spending and not saving?” and “Do I need help with my financial life?”
Be aware, be informed!