Simple Steps to Manage Your Money

Things you can do today to improve your finances.

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Your money and how you manage it are some of the most important things in your life, since they influence where you live, what you drive, and almost everything you do. Therefore, it is very important that you manage your money properly. Here are some steps you can take today to start better managing your money and improve your finances.

Start tracking your spending. The first thing you need to do is determine where your money is currently going. See what you are actually spending your money on. There will likely be a few surprises when you see the results of your tracking. You are probably spending more in some areas than you think--small expenses can add up quick.

To start tracking your money, keep receipts and write your expenditures down on paper, or use a spreadsheet or even budgeting software. The important thing is that you record what you spend as soon as possible to keep your records accurate. Even your guilty splurges need to be recorded. For now, you just want to see where your money goes. You don't need to worry about whether something is a good or bad expenditure yet.

Set up a budget, or if you prefer, set up a spending plan. To manage your money properly and get ahead financially, you need to spend less than you earn. Record your sources of income and when you receive them. Then determine how much of your income is spent on monthly bills and necessities. Plan how you will spend or save any remaining funds.

After tracking your spending for a month, you will likely see some categories where you can cut your spending and keep your budget on track. When making your budget, remember to plan for irregular bills such as car insurance and set aside some money for unexpected expenses. Make sure you review your budget every few months or whenever there is a significant change in your income or spending.

Now that you know where your money is going and you're spending less than you earn, you can start saving. To get ahead financially, you need to set aside a percentage of your money. If you are just starting to manage your money, you probably are not used to setting it aside and usually just spend it as you make it. An easy way to start saving is to have a portion of your paycheck automatically put into a 401(k). If you do not have a 401(k) at your job, you can have your bank account automatically drafted each month and invested in a mutual fund. Saving 10 percent of your income is a common goal and is a good amount to start with. But once you get used to saving, you may want to increase that to 20 percent or more.

If you don't consistently pay off your credit cards every month then stop using them. One way to do that is to not carry your credit cards with you. You can hide them or freeze them in a block of ice if they are tempting you. There are many tips to not use your credit cards. If you do not use credit cards then you can't spend money you don't have and will not be spending more than you earn.

If you have credit card debt, you can save money by calling your credit card company and asking for lower rates. The best way to save money on credit card bills, though, is to pay them off as soon as possible.

Once you start managing your money, you will find out that  it makes other parts of your life easier as well.

Andy Hough writes about frugality and living well on a small income at TightFistedMiser.com.