How To Manage Your Money Wisely: 9 Steps To Avoid Being Broke

No one likes being broke, but wait, let me tell you something. Most times it’s as a result of our actions and lifestyle. For most people, financial struggles are not due to bringing in little money. The problem comes from not spending the money wisely.

It is sad, money management is not taught in most high schools and colleges. This lack of basic financial education leaves many young adults clueless about how to manage their money and stay out of debt. 

You see, it might seem like an impossible task, but that is because you’ve not taken the time to start managing your income. You don’t have to be a math whiz or an expert in finance to manage your money wisely. Managing your money well can be one of the most rewarding things you can do, and you can do this without getting an MBA.

In this article, we’ll take a look at some money management tips that can be the light at the end of the tunnel for those that want to get their financial life in order.

1. Create a financial budget

If you’re bad with money, you don’t have room for excuses with budgeting. Managing your money starts with you. You need to have a clear idea and make a budget plan to get there. Creating a budget and sticking to it isn’t for the faint-hearted. Your budget is vital to helping you achieve your goals and stay focused. It requires a great level of commitment. It is still the best way to be in control of your finances.

Having a budget plan is more than just calculating how much would be left in your account at the end of the month. You need to have a plan for your money. Do you want to travel? Do you want to save? Buy a car? Start a business?

You need to understand the difference between “wants” and “needs’ and budget accordingly. Your budget will make you aware of how much money you have, how much is left, where it needs to go, and so on.

You can also use personal finance apps to help you budget. Your budget is no good to you if you’re not using and updating it. Refer to it regularly to help guide your spending decisions.

2. Track Your Spending

How much do you spend monthly? If you sit and think about it, you’ll probably be shocked by how much you spend ordering fashion items, eating at restaurants, cab rides, and so on. These small expenses add up quickly, and before you know it, you’re out of cash.

Think about it: many people don’t know how much they spend monthly. Before you can manage your money wisely, you first need to understand where your money is going.

Keep track of your receipts, bills, rent or mortgage, savings, utilities, tax, etc. to get an accurate picture of your spending habits. Modern technology has also made it easy; you just need to log-in online to see your bank and credit card activity. Once you know where your money is going to, you can start looking for ways to spend it better.

You’ll be able to discover expenses you can reduce or eliminate. If tracking your spending is difficult for you, some apps can help you. Apps like Mint, Mvelopes, and more will give you a view of your finances with less stress.

3. Spend within your limit

You are in charge of managing your money. You need to stop trying to impress other people, spending to keep up with the upper class will leave you broke. Credit cards, expensive taste, peer pressure, numerous adverts online have increased the rate at which people spend above their means. Some people even go out of their ways to acquire loans for irrelevant things. This lifestyle is not sustainable and it often leads to huge debts.

For you to spend within your limit, you need to know how much you make so you can focus on reducing your spending to fit your income. You also need to stop trying to impress other people when it comes to purchasing things. Go for the items you want and enjoy.

From experience, I know that if you feel you have to spend as much as other people so you don’t seem broke, you’re only shooting yourself in the leg. Try going for affordable things within your budget or start shopping for value. You should also review your expenses regularly, you’ll probably find one or two you can cut down on.

 4. Cut down on some expenses

You keep paying for gym memberships but you exercise at home; you keep buying those season tickets as a West Ham fan but you don’t attend most of the games. You’re throwing money down the drain. One of the biggest challenges people have is figuring out ways to spend less money. Turns out one of the best ways to do this is to cut down on some expenses.

Most people spend money on things they don’t need, these expenses add up and create holes in their pockets. To manage your money wisely, you need to think long and hard about those subscriptions, tickets, services, monthly bills, and memberships, etc. that you can do without.

You can start by reducing some expensive hobbies or understand your spending triggers. Eating out every day can be costly; you can cook at home sometimes. Making use of public transportation can save you quite a bit of money on gas, parking, and maintenance over time or consider walking or riding your bike. At home, you should be conservative to reduce your water and electricity bills and also lower your internet, phone, and cable costs.

Try spending money on items and experiences that truly bring value to your life; things that make you happier. Cut back on spending on vices like alcohol, cigarettes, and avoid losing your money to betting or gambling The idea is to manage your money wisely by slashing unnecessary expenses.

5. Acquire multiple income streams

Do you work 5 days a week, but still struggle with money at the end of the month? Nowadays, it’s becoming a necessity to have multiple income streams.

Turns out millennials have been breaking the trend of having just one 9-5 job. Side hustles, freelance jobs, monetizing talents, social media jobs, and entrepreneurship have become the norm and people are diversifying their income streams.

It’s important to find out some ways to earn extra cash which can help you meet some expenses, or pay off debts. Skills like article writing, website development, photography, social media management can earn you extra bucks. You can also try out things like babysitting, selling of goods on social media or eBay, tutoring students, and others.

And the good news is? Technology has also made it easier with platforms like Freelancer, Fiverr, Upwork, Uber, and many more that allow you to make money from anywhere at your own time.

Remember, the goal is to live within your means and manage your money wisely.

6. Emergency Funds!

Did your car break down on your way out? Did you or someone you love get in an accident?

There is no certainty in life. Things happen and it’s best to always be prepared. This is why setting money aside for emergencies is extremely important.

Best of all, it’ll help you stay out of financial trouble, and you’ll sleep better at night.

Yes, I know you’re occupied with lots of other expenses but it is wise to set aside some amount of money monthly to save in an emergency fund. You shouldn’t touch take out of this money unless it’s for something important. Having money to deal with problems as they come will help you stay out of financial trouble and help you feel more secure.

7. Save Regularly

Are you planning on going on a trip to Ibiza? Are you thinking of going to college next year? Then you need to start saving. If you want to manage your money wisely, learning to save is one of the most important tools you can use.

But wait, let me tell you something. The sooner you start saving, the sooner you start building interest. Look for ways to save some part of your income. There are high-yield savings accounts you can put your money in.

Put some amount in the savings account each month, you would have saved up a good amount of cash over time. If you have bad spending habits, technology has made it easy, you can automate your savings with apps like Cowrywise, Piggyvest and many more.

Making a list of your saving goals will also let you know your short term or long term goals. Yes, you’re young and years away from retirement, but you still need to consider the future and start preparing as soon as possible.

8. Invest for long term

The earlier you start investing, the more you’ll be able to earn in the long run. Apart from slashing your expenses, and saving some of your income regularly, you also need to take that money you’ve saved and invest it.

Investments will put your money towards things that will grow and help you reach your financial goals.

Think about it, you’re young, you need to make use of the time you have and enjoy the benefits of compound interest.

Unfortunately, most young adults would like to begin saving and investing but have no idea where to start. You need to acquire knowledge before investing your money because it carries some risks.

It is vital to get financial tips and guidance from a professional advisor when you’re not sure about investing. Stocks, mutual funds, real estate, agriculture, and so on are some of the channels you can invest in to get returns.

9. Limit your debts

No one likes debt. However, most people can’t help getting out of debt. One of the biggest mistakes young adults make is taking on unnecessary debts like multiple credit card loans. The debts keep piling up until the point where you have to make monthly payments for a long time to pay it off.  

For you to manage your money wisely, you need to get your debts under control and work on finally getting rid of it. Credit card loans, student loans, and loans to settle other bills may be helpful at times. However, before acquiring these loans, try to get the lowest interest rates possible.

Find ways to cut down your expenses.

If you have multiple debts, sometimes you worry about which one you should pay off first. Paying off high-interest debt saves you lots of money in the long run. Money is precious and the sooner you pay off these high-interest debts, the less interest you’ll end up paying.

Conclusion

Money is indeed a necessity. To stay financially secure, you can’t stop learning. You need to stay informed about strategies, tools, and resources you can take advantage of to manage your money wisely.

In my own experience, being good with money takes practice, the more you make these habits part of your daily life, the stronger your financial future will be.

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