The average American is around $90,460 in debt. Many will never pay off this huge sum in their lifetime let alone save for their future.
There are so many reasons why people have bad money management skills. Some live or used to live in poverty. Others never received financial planning education from their parents or school.
But having a good grip on your personal finances is the best way to take control of your life. Financial freedom gives you so many more options and helps you stop worrying about the future.
Not sure where you’d even begin to learn about managing money? Here are some essential tips to get you started!
1. Have a Financial Safety Net
Are you renting a house that has damp and a pest problem? Is a colleague or manager making your work-life miserable? Is your partner becoming controlling and possessive?
These are all potential emergencies that you only have the freedom to leave if you have the funds. That’s why it’s so important to be saving money into a safety net account.
The amount of your safety net will depend on your circumstances. But it should be around three to six months of your monthly expenses.
2. Choose an Investment Strategy
If you’re not investing or planning for retirement then you are not planning to have a future. Even investing small amounts of money into Index funds and/or a 401k now is far better than nothing as it will gain interest.
And by investing small amounts now, you will be exercising an important money management muscle. Once you start the habit, it will become easier to build on it.
How to best save for retirement and where you should invest your money will be different for everyone. Consult a money manager that will be able to give you specific financial planning tips for your situation.
3. Pay Off Your Debt as Soon as Possible
Having debt is the opposite of having financial freedom. Until you get better at managing money and start paying it off, it will be like living with a ball and chain.
Start by learning exactly how much debt you have. Pay off the smallest amount of debt first to start a snowball effect. Once you are debt-free, always pay off your credit cards and other bills so it never happens again.
4. Always Live Below Your Means
When the pandemic hit in 2020, it tipped people close to bankruptcy or financial ruin over the edge. Many of those were living beyond their means and they could not take the added pressure.
When you live below your means, you are better prepared to handle life’s unexpected events. Losing your job, vehicle breakdowns, and medical emergencies will not be as stressful because you will have the spare cash to afford them.
Become a Money Management Master With These Tips
Money management is one of the best skills you can learn as an adult. And now you know these tips, once you put them in place, you will also gain complete financial freedom.
Learning how to manage money is the first step. But it helps to earn more of it too. Browse our money and business articles to learn how to make extra income today!