Money management is key to improving or maintaining your financial situation. Each of us has our own particular relationship to money. Some want as much of it as possible and devote significant time and energy to its pursuit. Others prefer to live simply on minimal resources. Perhaps most of us fall somewhere in the middle, wanting to live comfortably without sacrificing the quality or balance of our lives. No matter what you want your money to do for you, learning the basics of money management will help you make it happen.
Most people find dealing with personal finances a chore. Often they're not comfortable with math, don't feel they have enough time, or are even fearful of finding out that there's just not enough money in the bank to cover the bills.
Willful ignorance about finances, however, will get you nowhere -- not even if you're flush with cash or not. Financial knowledge yields financial power.
To improve your personal financial management skills, you must learn what's involved. The different aspects to financial management include:
You don't have to learn everything at once or become an expert. Start with the basics, and continue to educate yourself over time. The following list will get you started.
Drafting a personal budget is one of the best ways to control your spending. Until you know what you earn and spend, you can't figure out how to live within your means. Don't be intimidated by the process. Creating a budget can be simple and easy. For information on budgeting, see Nolo's article How to Make a Budget.
When it comes to deciding where to keep your hard-earned money, not all banks are the same. Fees vary greatly. Banks may charge you for visiting a teller, speaking with a customer service representative by phone, paying bills online, overdrawing your account, or many other events. Choose a bank that has the best balance of customer service and fees, considering the types of services you plan to use the most.
Checking accounts. Many checking accounts waive certain fees if you have your paycheck directly deposited into your account. Most checking accounts also come with debit cards, which you can use to withdraw money from your account and to pay for items as you would with a credit card.
Savings accounts. For savings accounts, ask about interest rates, minimum balances, and whether you're allowed only a certain number of transactions per month. If so, you will generally be charged for each transaction over the limit.
Protect yourself from identity theft. Be sure to ask about the bank's policies to protect you from fraud and identity theft if someone uses your ATM or debit card without your permission. (To learn more about preventing identity theft, see Nolo's Identity Theft area).
File your tax return on time. If you can't, it's easy to get a four-month extension by filing a simple form. However, an extension does not extend your time to pay any taxes you owe; you'll have to pay these when you file for the extension. Keep all documents related to your return for at least three years after you file. For more information on paying taxes, see Nolo's article Personal Income Taxes: Overview.
When considering ways to invest your money, some common possibilities include (in roughly increasing order of risk): certificates of deposit (CDs), bonds, mutual funds, real estate, commodities, stocks, and business ventures.
The riskier an investment is, the more important it is that you have some expertise or get assistance from a competent agent. Also consider how quickly you'll be able to cash out of the investment if you need quick access to the money. For more information on real estate investments, see Nolo's Real Estate & Rental Property area. To learn about diversifying your investment, see Nolo's article How to Diversify Your Investments: An Easy Rule of Thumb.
Joining a club is one way to learn more about investments. For more information, see Nolo's article Joining an Investment Club.