Money management is surely one of life’s most important skills, yet we’re not taught it in school or college. And for a lot of us, it isn’t even discussed at home. And for loads of people, the subject of money itself is taboo!
But managing your money well isn’t just fundamental to keeping hold of your cash and accumulating your wealth. It’s crucial to everything from travelling, to eating, to maintaining a home, to raising kids, to retiring, and most everything in between. In short, it’s crucial to life.
Employing even some basic money management techniques will help make sure that your money isn’t always locked in an ‘easy come, easy go’ cycle, that you’re living a more confident life, and that you can look forward to a more secure future.
In this article, we’ll cover what money management is, and how to improve your money management skills.
What is money management?
Money management refers to budgeting, spending, saving, or investing your money.
Are you tracking your spending? Are you living within your means? Are you saving up for a rainy day, and your retirement? Is your money working for you — which is to say, growing?
These are all key facets of money management.
Money management can also be a reflection of your overall well-being. People who feel good about themselves usually exert more control over their finances. People who are depressed or feel overwhelmed will often have more debt, or live paycheck-to-paycheck.
The good news is that starting to manage your money better will inevitably lead to feeling more confident and in control of your life.
Why is money management important?
Money management lets you see your finances more clearly, and get the most out of your money.
It helps you avoid wasting it, afford things you really want, and prepare for the future. And, as we said above, it makes you feel better about yourself.
Some more reasons why money management is important:
1. Money management helps you stay out of debt.
2. Money management helps keep you from living paycheck to paycheck.
3. Money management helps you save money for a house, car, child’s education, or wedding.
4. Money management helps you travel.
5. Money management helps you handle emergencies.
6. Money management helps you take care of your loved ones.
7. Money management helps you teach your children about responsibility.
8. Money management helps you make better investments, and grow your money more.
9. Money management helps you reach your retirement goals.
10. Money management helps you feel more in control of your life.
How to improve your money management skills?
Since money management encompasses multiple actions, there are loads of ways you can improve your skills. You don’t have to attempt them all at once — in fact, that might prove overwhelming, and set you up for failure.
Instead, take them one at a time. Dig into each one, so it becomes second nature, then add another.
Some examples of how to improve money management skills:
1. Make a budget and stick to it — It can be as simple as saying ‘I won’t spend more than £100 on takeaway this month’ and keeping track of your spending. Apps like HyperJar make this easier by letting you put money aside in virtual jars and label them with different categories (like ‘Takeaway’).
2. Save money — Set a daily or weekly goal of setting aside a little money, and pretty soon you’ll notice how much it adds up. For instance, if you only set aside £20 each week, after one year you’ll have $1,040. And you can use that to…
3. Invest money — It’s important to get your money working for you — that is to say, growing — and you don’t have to start with a lot. Sites like MoneySavingExpert have great tips on investing small amounts.
4. Be mindful of your spending — Try waiting a day or even a week before you buy something. That’ll help show you if you really need it. It can also be helpful to keep a spending journal. When we write our actions down, we come to new understandings of them.
5. Shop around — If you really do need to buy something, make sure you see the prices for it at at least 3-5 different merchants.
6. Seek professional help — There are countless sites that offer free advice on money management, and there are also countless finance coaches who can help you personally. Just head to Google.
7. Avoid unnecessary debt — Try to set limits on how much you’ll spend on Buy Now Pay Later or credit cards each month. Or better yet, if you have multiple cards, cancel as many as you can. That’ll help curb your temptation.
8. Sever your subscriptions — Take a good look at the streaming services, magazines, gym memberships and other subscriptions you pay for regularly. Cancel the ones you really don’t use.
9. Join forces — Practice any of these strategies with friends or family. They’ll be easier to do successfully when you have people to hold you accountable.
10. Give yourself a break — Remember, money can be deeply tied to our feeling of self-worth. If you do find it difficult to manage your money, don’t be too hard on yourself. That’ll only make things harder. Instead, say ‘Tomorow’s another day, and if I can do one small thing to manage my money better, I’ll be headed in the right direction.’
Good luck. You got this!