What is money management?
The definition of money management varies. Money management is the skills that allow you to control your money. Money management is utilizing tools to manage your money. There is a wide variety of tools that you can use and not every tool is going to work for every person. You will need to figure out what works best for you and your family.
What are some of the basic tools?
-Spending journal (where are you spending your money currently?)
-Budget (no this is not a swear word, nor is it hard or difficult)
-Debt repayment plan (evaluate how much you owe and how to repay your debts)
-Savings plan (short-term, long-term, and planned spending)
-Bill payment sheet (do you know how much you owe and the due date of each of your bills)
-Other tools might include: meal plan with a detailed grocery list (food is very costly)
-Calculate your family’s net worth
How do you find the right tools?
Part of it is trial and error- the key is to just try something. Start somewhere. In a later post I will try to help lay out a plan of how to incorporate and add different money management tools to make your life run smoother and more efficiently. But as a sneak peak, I believe there are 2 places to start that will set you up for long-term success.
Organization is key- you need to figure out a system for dealing with opening your mail and bills. Are you paying your bills late every month? This has a negative affect on your credit score but is easy to fix and is completely in your control. So the first step is to get organized- dig out all your bills and debt repayment -start a list. When are your bills due? How much do you owe? Is it an automatic withdrawal or do you need to manually pay the bill? Set up a time to pay your bills. Keep all your bills in the same location. Start a filing system.
You must deal with the reality of your spending and where is your money going on a monthly basis? Be honest….look at receipts, keep the receipts and a running list. This isn’t fancy. The second step is to start keeping a spending journal. Keep it simple and easy. Track every penny (add) that comes into your household. Track every penny you spend (minus) that leaves your household *every penny is exactly how it sounds. This is all bills, all expenses, every dollar you spend in a given month. Label each entry correctly. You will use this to figure out categories for your spending and when you set up a budget later on. Do this for a month or two to start figuring out where your money is going.
This will open your eyes to the reality of your spending. Are you over or under spending? Are you missing categories or areas? What about planned spending for upcoming spending such as holidays or registering your car (only happens once a year)? Do you have an emergency fund? Do you have a fund for maintaining your vehicle? Not to mention various savings accounts
If all your minuses equal more than your additions than you are overspending.
Who is the money manager in your household?
Me and my husband have a firm policy that we do not spend money without informing the other person beforehand (larger purchases -anything more than $50.00) and we have decided to have weekly money meetings every Sunday. I love that we are so open and honest about our money and that we share the responsibility of money management.