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10 Tips to Manage Your Money Wisely
Most of us aren’t really taught how to manage our money wisely in school. So we grow up doing the same things with money that we see our parents and friends doing. In some cases, this can be good if your parents or friends had good spending habits. But for many people, their own parents or friends were not taught how to handle money properly, so there is a vicious cycle of handling money improperly. Here are 10 tips to manage your money wisely:
1. Spend less than you earn – This is the most obvious lesson when it comes to managing our money, but for some reason, most people don’t get it. If you spend less than you earn, you’ll be able to save money for your future and won’t have to rely on credit to get you through tough months.
2. Operate on a monthly budget – Setting a monthly budget is a great way to keep track of your expenses and make sure you’re spending your money wisely. If you don’t know where your money is going each month, you will have no idea how to move forward with your finances.
3. Create an emergency fund – An emergency fund is money you set aside to use for emergency expenses that come up during the month. If you don’t have an emergency fund, you’ll be forced to use credit or other savings to pay for unexpected expenses. Having an emergency fund creates a financial safety net you can rely on.
4. Pay in cash – Cash is king and I still totally believe that. Having cash on hand can get you a lot further than paying for things with a credit card. Most people don’t pay off their credit cards every month, so something you thought would only cost you $100 could end up costing you double or triple when you factor in interest charges. Using spending cash to pay for things like entertainment helps ensure you stay within your budget, because once money’s gone, it’s gone! It forces you to spend your money wisely and think about what you buy.
5. Start saving for retirement early – Compound interest is a powerful tool once you understand it. If you start saving early for retirement, you’ll have the power to compound interest on your side. A person who invests $5,000 at age 21 will have $120,000 more than the person who waits until they are 39 to start investing (assuming an 8% interest rate). Start early to start building wealth for yourself.
6. Don’t waste money on food – The grocery bill and eating out is one of the biggest ways to waste money. Buying only convenience foods from the grocery store can be expensive. Spending double and triple on food that you could prepare yourself at home is not a smart way to spend your money. Learning how to cook meals at home from scratch can help you save money on your grocery bill each month.
7. Decide what is important to you – Spending your money wisely isn’t about cutting out everything you like just to make sure you pay the bills. You should decide what you want to keep in your budget and what you want to give up to make sure you are spending your money wisely.
8. Realize when you’ve made a mistake and stop – If you’re going through a period where you’ve spent too much money and you know you’re not spending your money wisely, take a step back and observe your behavior. Everyone makes mistakes when it comes to money. This is how we learn. The most important thing is to stop and get back on track as soon as possible.
9. Buy generic when you can – Sometimes it just doesn’t pay to buy a name brand. Things like food and clothing all have some form of “brand name” brand associated with them. If you’re looking to spend your money wisely, buy generic or off-label when possible.
10. Use thrift stores, dollar stores or yard sales – There are treasures to be found at places like thrift stores and yard sales, it just takes a little effort. If you’re smart with your money, you’ll let other people pay full price for things you can later pick up for pennies on the dollar.
These tips to help you manage your money wisely are just a few ways you can make an impact on how you handle your money. If you start paying attention to your spending habits, you’ll be surprised at what you find and how it’s possible to start managing your money better.
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