With the new year approaching, we are all making New Year’s resolutions. Losing weight, controlling spending, improving relationships, all of these are worthy of our attention. However, with the higher costs of gasoline and food and impending tax increases, it’s more important than ever to manage our personal money. For those of us who rely on a salary to fund our existence, our take-home pay will decrease in 2013 due to the expiration of the payroll tax holiday.
Money constantly changes, it never stops. Time, interest rates, amounts, cash flows, inflation and risk all play a part to create a current that is ever flowing, thus the need for money management. Steven Covey, the author of The Seven Habits of Highly Effective People, states that the number one habit of highly effective people is that they are proactive. They “happen” to things, things don’t happen to them. The same is true in managing our money, we must be proactive.
We all have money personalities, so to speak. Some of us prefer to not think about money, some of us love to save, but are not investors, some feel that our money problems are the result of our surroundings. Here are a few good links to check out on money personalities.
Whatever your attitude about money, the first step in managing your funds is to think about your dreams and desires. What would you like your net worth to be in 5 years? 10 years? It could be as simple as not worrying about paying your bills. I can remember the days when I had to drink a glass of wine before paying my bills! As if the wine would magically make money appear?! I guess I was one of those who had their head in the sand, more on that in future posts. Take some time to think about your situation and set some goals, keeping in mind that they need to be realistic and flexible. Once you have some definite ideas, it’s time to work on a budget.
A budget allows you to understand where your money goes, ensures that you don’t spend more than you make, and helps you find uses for your money that will increase your wealth. In order to develop a budget you need to calculate your monthly income, track your daily expenses, and determine how much you spend on monthly bills. It is helpful to keep a record of the amounts you spend each day so you can determine where you spend your money and the areas in which you may want to reduce your spending. You can use one of the popular apps for your smart phone, a notebook, or whatever works for you to track those daily expenditures. Once you get started, you will be surprised how much money you spend on things you don’t really need or care that much about.
Budgeting is an exercise in discipline, but once you get a budget established and start working the program, it can become very exciting when you see it’s actually working. When you know where you are spending your money, you are taking control of your money instead of allowing your money to control you.