Money management is the key to improving or maintaining your financial situation. Each of us has our own particular relationship with 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. Financial knowledge yields financial power.
To improve your financial management skills, learn what's involved. The different aspects of 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.
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.
When it comes to deciding where to keep your hard-earned money, not all banks are the same. Fees vary greatly. Banks might charge you for visiting a teller, speaking with a customer service representative by phone, paying bills online, overdrawing your account, or 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 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 monthly transactions. 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.
File your tax return on time. If you can't, it's easy to get an extension by filing a simple form. But an extension doesn't 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.
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.
Joining a club is one way to learn more about investments. For more information, see Joining an Investment Club.