Manage Your Money

To be able to effectively manage your money, you have to cultivate some attitudes; the more you translate these attitudes to habits, the better you are with your money. Fortunately, you do not need to be an accountant or have any financial knowledge to be a good manager of your money. You can develop effective money management habits by taking the following simple steps.

1. Set up a budget and most importantly, stick to it. The rule is to spend less than you earn. Having a budget helps you track your spending, i.e. you know what you spend money on, on a daily basis. You may be amazed that those little amounts you spend on certain routine adds up. One good way of tracking your spending is to open a bank account.

2. Understand the flow of your income: Know what you earn from your job or your business. Know your true income. If you are a salary earner, your true income is your earning minus compulsory deductions such as tax, pensions and other statutory deductions required to be taken out at source by your employer. If you are a business man, place yourself on a salary and discipline yourself by living within the salary as though you are an employee by following the rules highlighted above. This is what accountants refer to as net income. Budget on your net income. You cannot manage your financial resources properly if you do not have a clear idea of what those resources are.

3. Actively manage your bank account. Some people do not pay attention to what goes on with their bank accounts. Keep a record of all additions to your bank account and all that you have withdrawn from it either directly from the bank, checks or the electronic channels like ATM machine and POS terminals. At the end of the month, make sure that what you have in your account tallies with what you expect to have based on your calculation. Where you are not able to explain any differences in the number, contact your bank immediately for an explanation.

4. Start saving: You have a budget; you track your spending and you are probably spending less than you earn; now it is time to begin to save. You should have a savings account and once you received your monthly salary or earn income from your business, put away a portion of it in the savings account. An easy way to save is to give a standing order to your bank to transfer a certain amount of money to a named savings account once your salary account is credited.

5. Invest: By investing part of your savings, you are actually getting your money to work for you. Set aside a portion of the money in your savings account for investment on a regular basis. There are many options available to you to start investing such as stocks and mutual funds. For a beginner, mutual funds are a safe and easy way to begin investing.