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5 Basic Money-Management Habits

Money Management Habits

I’ve made a lot of mistakes where money management is concerned. Mistakes are how you learn, however, and over the years I’ve become a big fan of budgets and savings plans. You might even call me obsessed (my wife does). But good money management habits will cut down on your stress by 50 percent, guaranteed.

 

Money Management Habits

Money Management Habits

Here are five basic money management habits anyone can adapt to make money management easier:

1. Know what goes in and what goes out. I’m not talking about your diet, but your income and expenses. I write down the amount of every cheque I receive and I record every expense, whether I pay with a debit card or cash. When you can see in black and white exactly what you earn and spend, it’ll become easier to strike a healthy balance based on your budget. If you want to manage your finances online, Mint.com is a free and convenient tool to track what you spend and what you owe.

2. Speaking of budgets—make one. It doesn’t have to be colour-coded in a fancy Excel spreadsheet, but you should have a written budget. Allocate funds to specific purposes, and keep track of any deficits or surpluses at the end of each month.

Make sure you also have categories for savings, charity donations and other expenses that aren’t necessarily part of your daily spending habits.  Quicken Essentials is software that you can buy to categorize transactions and also allows you to view all your accounts in one place.

3. Practice delayed gratification. Decide on a threshold (e.g. $100), above which you will not buy a product until you’ve given yourself a specific amount of time to think about it. I’ve often discovered that if I eliminate the possibility of impulse purchases, I buy much less stuff. I’ll eventually decide I don’t really want/need it, or that I’m simply too lazy to go back to the store to buy it.

4. Use an accountant. I’m a freelance writer, so my taxes are a bit more complicated than the average employee’s, but I recommend everyone use a tax accountant. These guys can save you thousands of dollars (not to mention mountains of stress), and their fees are worth the expense. Choosing the right accountant for your personal finances can be complicated, you may want to do some research on the accountants in your area and how they can help you.

5. Save as much as you can. This is simplistic, but I’m advocating an extreme policy of saving. If you get a bonus from your job or if you win a few dollars on a scratchie lottery ticket, dump it into a savings account and forget you ever received it. You never know when your car will need a new transmission or your kid will need braces, so pretend you make 30 percent less money than you do and put the extra in a low-risk investment or savings account. With the different types of saving accounts out there, do you research and know which one is right for your money.

Effective money-management habits can take years to perfect, and you’ll make mistakes. God knows I did. But eventually these habits will become second nature and you won’t have to think about them anymore.

And because you’ve been such an attentive audience, here’s a bonus tip, direct from me to you:

Don’t Spend Money You Don’t Have. It’s a handy rule of thumb, but one most guys don’t follow because we’ve been raised in a buy-now-pay-later culture. Credit cards are shiny and easy to carry, but don’t be dazzled by their seemingly magic powers. Pay with cash, and you won’t have to worry about how you’ll fund the purchase in the next billing cycle. If you do have credit card debt, know if they charge compound interest and then calculate how long it will take to pay off that debt.

What are some of your tips or tools you use for managing your money? Share them with us below.

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