How to Manage Money
Many people grow up without knowing how to manage their money. That lack of knowledge and confidence leads to a lot of confusion and a sense of overwhelm. They find themselves living paycheck to paycheck and hoping it all works out. Yet money management is something that anybody can do. You don’t need a college education. You don’t need to know anything other than that managing your money is about controlling your money and knowing where your money is going.
There are three pillars to easy money management.
Know What You Have Coming In
The first thing you want to know is how much money you have coming in. We’re talking about your income and any additional sources of profit. For example, you may have money coming in from your tax returns. You may have money coming in from interest on your savings accounts or investments. And you may have income from royalties, affiliate sales, and part-time income.
Know What You Have Going Out
The second fundamental component of money management, and you might be able to guess it, is to know what you have going out. Here we are talking about your expenses. This means everything from your rent and gas money, to your phone bill and the money that you spend on entertainment.
It’s important to know how you spend your money. Ultimately, that gives you the information to make the best decisions for you and your financial goals.
Your Financial Goals
The third main component of money management is your financial goals. These goals can be as fundamental as making sure that you’re able to pay your bills every month. Larger-scale goals are things like:
- Saving to buy a car
- Saving for an emergency
- Saving for a vacation
- Retirement savings
So the three fundamental components of money management are to know what you have coming in, know what you have going out, and know what you want to save for. That’s not too complicated, right? It’s pretty basic and you definitely don’t need a college education to understand those concepts. Nor do you need an education on how to set up systems to support you with those three components of money management. We’re going to talk about systems next week.