Three ways to better manage your money
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There's no rule book on how to manage money. We don't get taught in school how we should set up our bank accounts, or what we should do with our money each week when we receive it. In fact, we don't even learn about superannuation. All of these things that every one of us need to make a decision on just isn't taught.
So, what is the best way to manage what money comes in, what goes out, and what to do with the remainder?
Here are three simple things that anyone can implement today in order to immediately reduce their spending:
- Pay yourself first
Usually, when we receive our salary, the first thing that gets paid is our rent or mortgage, followed by bills, groceries and other living expenses. The chances are that at the end of the week or month there is nothing left at all for savings, once everything has been covered. Avoid this situation by establishing an automatic transfer into a savings account or investment immediately following your payday. The rest is yours to spend on all of the above. By "paying yourself first" you've saved something for you, each week.
- Complete a budget
Budgets are for poor people right? Wrong. All of the wealthiest people I've worked with live by some kind of budget, they know where they spend their money. Completing a budget means facing up to where you're spending your money, making your more aware and attentive to it. Anything we focus on, we will be able to improve, so the simple act of spending 15 minutes to create a budget will encourage you to spend less over time as you come to appreciate how much certain things are costing you.
- Use cash for weekly spending
Once you've completed a budget, you'll be able to come up with a rough figure of what you need in terms of weekly expenses: groceries, dining out, socialising and getting around. If you take this amount out of your bank account in cash, knowing that this is all you have until the following week, you are far less likely to overspend. Being able to see exactly what you have in your wallet and watching it dwindle away throughout the week will bring the consciousness back to your spending behaviour. If you'd prefer not to use cash, use a simple weekly budget app (there are plenty available) or a small diary to record your purchases each week to ensure you stick to your allocated amount. It might sound like a lot of extra work, but if it means the difference between reaching your goals and not, I'd spend a few minutes each week doing this anytime.
Just remember, wealth creation is not rocket science and anyone can achieve it. Think simple, think slow and steady, think consistency and you're well on your way.
Build it slowly.