What Is Money Management?

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What Is Money Management?
What Is Money Management? (Image: http://www.leahymg.com.au/images/MM-Cashinhand_000.jpg,http://www.leavedebtbehind.com/wp-content/uploads/2009/05/money-management-piggy-bank.jpg)

Money management is often referred to as budgeting. Managing your money is a way to map out how your money will be spent and how it is currently being spent. It's good to start as early as possible on learning how to manage your money effectively so that you do not end up in debt or spend beyond your means.

Significance

Money management is used when you are planning for a purchase. Set aside a certain amount of money each month or week to reach your goals. By setting a goal on what you wish to purchase you will know exactly how much money you need to put aside. For example, if you are looking to purchase a new TV and it costs $600 and you want to have it in six months, you know you need to set aside at least $100 a month. Setting goals will keep you on track with your spending.

Budgets

Plan out your budget each month. Make sure to include all fixed bills such as rent/mortgage, utilities, telephone and insurance. These are bills that you know you have to pay each month. Subtract this from your income and you will know how much you have left. It's important to pay these bills first so that you do not get behind on payments.

Organization

Keep all of your bills in one place. A filing system works great. Have one file for incoming mail and another file for bills that have been paid. Note when the bill was paid and what the check number was. It's a good idea to have a permanent record of bills and purchases on file. This is good for insurance claims or if you are audited. The key is to stay organized and know where everything is.

Wasteful Spending

Take your lunch to work daily and save eating out for special occasions. This will reduce the amount of money you spend. Bring your own soda or bottled water to work instead of using the vending machines, which usually have a markup. A bottled soda from a vending machine costs approximately .50 cents more than one purchased at the grocery store. That adds up to $2.50 a week or $130 a year.

Savings

Set aside money each payday for savings. If you have direct deposit, have the money transferred into savings every time you get paid. Savings is important for those emergency expenses that you are not budgeted for. You can also use savings to plan for vacation or for Christmas money. The important thing is to be prepared and know where your money is going.

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