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3 Basic Techniques for Money Management

3 Basic Techniques for Money Management

You financial freedom neither lies in enlisting the service from a personal finance consultant nor getting a raise, instead, it lies in mastering some basic techniques for money management. You may regard managing money effectively as a difficult thing when you see the gurus does on MSBNC, however this might not be the case. What you need to take good control of your money is to simply regulate your finances via logging expenditure and income, create motivating financial goals and prepare for the rainy day just in an occasion that you confront with unexpected bills or a round of layoffs.

1. Regulate your finances.

The first important technique for money management is to know your household monthly income and the expenditures on bills, entertainment or other miscellaneous purchases. You should know exactly how much is added into your bank account and how much is extracted, so that you can avoid the unexpected payments and overdraft fees. Let’s look at an example. If your monthly income is $3,100, and the amount of bills is $2,200, then you will have $900 extra money to spend with. You should take out about $300 for entertainment and activities, and the leftover should be saved or occasionally, you can buy yourself a pair of new shoes or golf clubs. But it’s highly recommended to save them instead of spending them.

2. Save for the rainy day.

Although the economy is being recovered, there is still large chance of a potential round of layoffs in many companies. Hence, even though you feel secure about your position, you still have to plan for the probability of a rainy day. The Mountain State Center for Independent Living suggests that you should have available savings in your bank account to cover at least three months’ expenditures and bills to be safe in case of layoff. If your income does not allow you to build up saving quickly, you can consider cutting back on some extras such as premium cable television service and unlimited data plan for cell phones.

3. Create your financial goals.

If you create realistic and achievable financial goals, you will have the chance to weed out the unnecessary spending. That is to say, if you have specific goals in your mind, you will be more likely to put aside the money for savings compared with having no plans. Determine how much you want to save and the timeline for the saving process. Get an idea about how much you should set aside for each month by dividing the total number with the number of months. In addition, set short term goals, midterm goals and long term goals according to the timeline of one year, two years or five years. An upcoming wedding is a good example of a short term goal. A long term one is saving for the birth of your baby and in the case you want to get your little one with high quality nursery or just quit the job to be a stay-at-home mom. Start saving today and be prepared for the bright future!

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