4 Tips on How to Manage Your Money – Create a Budget
4 Tips on How to Manage Your Money More Effectively
Congratulations! The day that you’ve been dreaming about has finally arrived…you’ve graduated from college and hopefully learned how to manage your money. Now, depending upon the career field where you have your degree, it could be a bit of a challenge landing your first job. Soon, you’ll know how to handle your money.
We recommend that you follow these four tips on how to manage your money just as soon as you find that first job. Don’t delay, because you most certainly will be tempted in many ways to spend.
This is true especially of recent college graduates who have been living quite frugally juggling their pennies during those college years. They must learn how to save money.
Tip # 1 – Create a budget
This is probably the most important tip and is the foundation for everything you do. In order to learn how to manage your money effectively, you must clearly define your needs and wants. There’s a huge difference between them and if you’re not able to set that priority, your spending may get out of control. Carefully review your budget and be sure to set a realistic one. Keep in mind too that it must be flexible because certain categories will change as you begin to set goals. One goal may be saving for a new car or even purchasing a home. For some individuals money management worksheets are helpful as they learn how to create a budget.
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Tip # 2 – Establish savings goals
An important part of any budget is teaching you how to manage your money properly. An easy budget method for saving for that new car or the first home, is known as the envelope method. You don’t put cash in envelopes, but have an “envelope” category in your budget where you set aside a part of your paycheck to save for a certain goal. The important thing here is to learn how to manage money better and always be in control of your spending. Don’t make the mistake of buying your “wants” with a credit card either as this is a disaster waiting to happen. As you learn how to budget your money, this will become crystal clear.
Tip # 3 – Establish a cash reserve
This is also called an emergency fund and is how to manage your money so that when some major calamity strikes, you’ll be prepared. Notice that we used the word “when” and not “if”, because it will happen. Loss of a job in today’s world is common as are accidents and an illness. Many planners say to keep a reserve equal to three months of expenses. That was okay many years ago, but now, we highly recommend six months or more. By setting aside a certain amount from each paycheck, this fund can grow, and hopefully far exceed the six month goal. These tips to manage your money are very important.
Tip # 4 – Saving for retirement
Many young workers in their first job say, “retirement”, I’m too young and I have plenty of time to save later in life. Nothing can be further from the truth! If your employer has a 401(k) plan, join as soon as you can, and put as much as you can into it. Many employers also put in a matching contribution as well, and these funds will grow over the years. They are also usually a pre-tax instrument, and with compounding, this can be a sizable nest egg for your retirement years. There are also other instruments available for you to invest in if you qualify. Don’t put off saving for retirement – that day arrives much quicker than you realize.
Learning how to manage your money from the beginning of your working career will benefit you in many ways. You’ll learn how to set goals, save for them, and most importantly, be in control of your spending. Another factor is to eliminate debt, especially credit cards, and when the day comes for you to retire, be totally debt free. We recommend this to all of our clients so that they may have a stress free lifestyle during those golden years. Knowing how to handle money is very important.
Gust Lenglet is the CEO of HBS Financial Group, Ltd., an accounting & tax preparation firm in Maryland. He has more than 25 years of experience in the banking and financial industry. Gust started his career as a loan officer at a major national bank, and then moved on to become controller of a multi-state law firm. In recent years, he has written many financial articles that have been published on Ezine Articles and many websites.