When it comes to managing your money, we all have to live within our means. First and foremost, this means that we always want to make sure we have a roof over our head, clothes on our back, and food on the table before we consider all the things we want. With that being said, managing your money can be a challenge and poses some difficulties if priorities aren’t set from the get-go. Without a doubt, poor money management can lead to financial stress, lifestyle difficulties and more, but by following some basic guidelines, there’s a good chance you can meet you needs and still have a chance to satisfy at least some of your wants.
Redefine ‘Pay Yourself First’
As Vice President of Matson Money, Michelle Matson believes you should redefine the way you pay yourself. This means pay your needs first. Then, if anything is left over, focus on your wants. Start by creating a realistic budget, which allows you to pinpoint what ‘needs’ must be paid, how much they cost and where your money is going. Your “needs” budget should include a savings account or retirement plan before you begin to focus on ‘wants’. Sit down and outline your finances in order to start the budget process. By sticking to your budget, you will know exactly how much is left over on a weekly, monthly or annual basis to cover nonessential items. By exercising healthy spending habits, you increase the potential of having extra funds available for wants.
The Next Step
Once you have successfully created and implemented a realistic budget, you will know whether or not you have any discretionary income leftover, this is the time to hone in on your wants, which may include investing at least 10% of your annual discretionary income in the stock market. Investing has the potential of producing positive returns, but you should be aware that the market is impossible to predict and not all outcomes will be positive. However, by building diversified portfolios with your extra funds, you have the chance of developing a stronger financial footing.
Just remember to live within your means and keep an emergency fund set aside. Remember to exercise caution when it comes to luxury items, because their value may be short-lived and at the end of the day, often aren’t worth the price you paid. By properly managing your budget and keeping your goals in mind, a well-rounded financial future can be within your reach. Always be absolutely sure you can afford something before purchasing it or investing in it!