Money management is the process of expense tracking, investing, budgeting, banking and evaluating taxes of ones money which is also called investment management. Money management is a strategic technique to make money yield the highest interest-output value for any amount spent.
Life is much easier when you have good financial skills. How you spend your money impacts your credit score and the amount of debt you end up carrying. If you’re struggling with money management, for example, you’re living paycheck to paycheck despite making more than enough money, here are some tips to improve your financial habits.
Being good with money is about more than just making ends meet.
Make a budget and stick to it.
Many people don’t budget because they don’t want to go through what they think will be a boring process of listing out expenses, adding up numbers, and making sure everything lines up. If you’re bad with money, you don’t have room for excuses with budgeting. If all it takes to get your spending on track is a few hours working a budget each month, why wouldn’t you do it? Instead of focusing on the process of creating a budget, focus on the value that budgeting will bring to your life.
A critical part of your budget is the net income or the amount of money left after you subtract your expenses from your income.
If you have any money left over, you can use it for fun and entertainment, but only up to a certain amount. You can’t go crazy with this money, especially if it’s not a lot of it has to last the entire month. Before you make any big purchases, make sure it won’t interfere with anything else you have planned.
Work together with your partner/spouse on the same financial goals.
Commit to saving money.
Contribute to Savings Regularly: Depositing money into a savings account each month can help you build healthy financial habits. You can even set it up, so the money is automatically transferred from your checking account to your savings account. That way, you don’t have to remember to make the transfer.
Being Good With Money Takes Practice: In the beginning, you may not be used to planning ahead and putting off purchases until you can afford them. The more you make these habits part of your daily life, the easier it is to manage your money, and the better off your finances will be.
STAYING IN THE HOUSE MAKES THIS PROCESS A LOT EASIER!!!
NO ONE GETS RICH OR WEALTHY ON ACCIDENT
Sometimes events happen in our lives, maybe it was because of our own doing, maybe it was something we had no control over. Some common factors that may cause a financial crisis are:
Irresponsibility – irresistible credit cards, spending disposable income on luxuries (wants!) or not knowing how to budget.
Loss of a job – perhaps you were laid off due to an economic strain or let go due to a termination.
Health Issues – maybe you or a loved one were diagnosed with an illness, disease, or were injured, causing major financial strain or, on top of that, no longer able to work.
Divorce – everyone has heard of divorce situations that were less than amicable.
Sometimes the inability to agree on how to take care of or separate expenses that were incurred while together causes one or both parties to lose control of their financial situation.
What Are Your Options?
There are different options to resolving or overcoming a debt problem. Remember, the choices you make now may impact you down the road. Your decision needs to be made carefully and many factors need to be considered: your level and type of debt, assets, income, and future goals.
DIY – Do It Yourself
This requires persistence and hard work – you may be dealing with debt collectors for months or even years. You have to be able to negotiate. Having a backbone is a must and you have to educate yourself and become savvy.
Consult a tax accountant – be very careful that the debt written off in a settlement will not count as income.
Check your past due accounts and contact the company with questions about what will happen with your delinquent account. You want to make it better, not worse.
Find money. Ways of coming up with cash or assets will increase your chance of success.
Set up a timeline and strategy. Take a realistic look at your financial state to see how quickly you could come up with money.
Explain your hardship. Have details and evidence ready – debt collectors may be more willing to help if they see that you have legitimately been through a hardship and that you are very willing to do what you can.
Get it in writing. If you reach an agreement, get it in writing.
Refinancing is replacing an older loan with a new loan offering different terms, whether it’s changing the interest rate or the term of the repayment period. If a homeowner is refinancing a mortgage, they may be able to borrow additional funds against the house to pay off other debts. Be sure to compare your existing mortgage to any proposed refinancing before you make any decisions – you want to be in better financial shape, not worse.
Liquidating Your Assets
Liquidating your assets may be another option for repaying your debts. If you are willing to sell valuable possessions, this could be a way to come up with fast cash. Items such as jewelry, antiques, collections, extra vehicles, or ATV/RV type vehicles. Be sure to research what your property is worth – get appraisals and educate yourself as far as a fair and reasonable selling price, don’t just take what you can because you’re in a bind.
A personal loan is a loan made to an individual by banks, credit unions, or private lenders. One typically needs to have good credit, although it’s not impossible if you do not. The lower your credit, the fewer choices and more you’ll have to repay with higher interest. There are several types of personal loans:
Signature loans – this is an unsecured loan and based on your promise to pay (and your credit score.)
Credit cards – credit cards are set up so that you can borrow what you need, up to a specified, pre-approved limit, and pay it back, immediately or over a period of time. If you don’t pay it back right away, you pay interest on the balance until it’s paid off and generally are required to pay a minimum balance. It’s very easy to get into trouble with credit cards – the balance and interest can add up quickly if you’re not prepared to pay it right away.
Student loans – this is another unsecured loan. Student loans are designed for funding education. Some features of student loans are flexible repayment options, grace periods, and interest subsidies. The biggest requirement with student loans is that you have to be a student seeking education.
Debt Management or Debt Repayment Plans
There are companies out there that offer assistance in repaying debt, typically for an up-front fee, at a reduced level over a fixed period of time. Do your research – use extreme caution so that you do not become a victim to a predator in the field.
Bankruptcy is the process by which a person or business is legally declared unable to pay outstanding debts and is protected against them or is assisted in re-paying a portion of them. The cost of filing for bankruptcy protection can be high for both individuals and businesses; both will likely see a dramatic drop in their credit score, which only time and dedication can repair. There are different chapters of bankruptcy, depending on a person’s or institution's situation. The most common types of bankruptcy are:
Chapter 7 – For individuals, married partners, or businesses, debt is discharged granting a “clean slate.”
Chapter 9 – Considered a municipal bankruptcy, for city or state agencies.
Chapter 11 – For businesses with a great deal of property or assets, restructured debt is repaid on a payment schedule.
Chapter 12 – For family farmers or fisherman.
Chapter 13 – For individuals or married partners with a great deal of property or assets, restructured debt is repaid on a payment schedule.
Chapter 15 – For individuals or businesses which involves clearing of international debts.
Some steps you can take now to regain control:
Keep a tight rein on your checkbook – balance your ledger every time you write a check, use your debit card, or make a deposit. Remember any bills that are automatically drawn from your checking account so that you can plan ahead for it.
Keep your bills separate from other paperwork. Track them by date and remember to take into consideration whether you can pay online on the due date or if you have to plan ahead for delivery time through the postal service. If a bill payment needs to be mailed across the country from you, mail it earlier so that you know it will arrive by the due date.
Create a monthly budget. Determine your monthly income and all expenses. Be sure to include fixed expenses, which are bills due at the same time for the same amount every month; variable expenses, which are bills due every month at the same time but the amount due may vary from month to month; and periodic expenses, which are expenses that may not be due every month, such as insurance premiums, but you still need to plan ahead and account for the expense each month.
Prioritize your expenses – always take care of the needs before considering wants. An example is dropping your daily cappuccino or latte – this could save over $1000 a year!
Set strict spending limits for each spending category. Keep a close eye on bill statements to make sure you’re not paying for anything unnecessary.
Develop a diversified savings plan and make regular payments in to that account. Shop around for an account that has a good interest rate. Make your savings the first bill to pay each month!
Contact creditors if you are having trouble or know ahead of time you may be late or unable to make a payment. Some creditors may be more willing to work with you if you are honest and up front with them.
If your employer offers a retirement plan, such as a 401(k) be sure to participate. This is a great way to save money for the future.
Record every penny you spend – write everything down. This helps you become more conscious of what you are actually spending, what you are spending it on, and spot where you cut back or eliminate.
There also ways to find extra bucks
Take advantage of “free” fun – curl up with a library book or visit a free exhibit, have sex etc. Be careful so that you don’t cut out all the fun – life is meant to be lived, just be careful of overindulging and spending money you can’t afford to spend.
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