Budgeting and money management plays a role in nearly every aspect of life, from housing to education to retirement. Learning how to budget and manage money is the most important skill for any woman looking to live smartly. To create a budget and begin planning for your future, use these tips.
Assess the Last Six Months
You can't properly learn how to manage your finances without first understanding your spending habits. Thankfully, online banking has made this process easy and painless. Go through your credit cards, bank accounts, and savings accounts and pull the last six months of reports. Create a spreadsheet or use pen and paper to track how your earnings are being spent. Compute the percent of your income you spend on each major category of purchases to understand better what expenses are consuming the bulk of your budget. Many banks provide this analysis at the end of each year with your monthly bank statements.
Create a Reasonable Budget
While you may be able to buckle down and stop all excess spending for a couple months, extreme frugality isn't indefinitely sustainable. Instead, create a reasonable budget with some room for impulse buys and indulgences. Some expenses may be easy to eliminate, such as a gym membership that hasn't been used since last January, or a premium cable package fo a TV you never watch. Other expenses may be harder to eliminate. Keeping track of your spending history will allow you to see where you can cut back the most.
Micro Mange (Or Ditch) Plastic
Credit cards are a huge source of financial hardship for many young professionals. The lure of perks often leaves users blinded to high interest rates and other fees. Unless you plan on paying off your card every month, a credit card shouldn't be used at all. According to financial planner Dave Ramsey, credit card use actually compels users to spend more than cash or debit purchases - up to 47 percent more! Flexing your savings muscle by waiting to purchase a new dress or coffee table until you can afford to pay cash will make future impulse purchases easier to avoid.
Plan For the Future
Learning how to manage your finances isn't only about day-to-day budgeting; it's also about looking toward the future. While working at a physically demanding or time consuming job may be fine in your 20s and 30s, perhaps you will want to transition into freelance work, travel the globe, or become a stay-at-home-mother in the future. Having the financial means to achieve these goals is essential to living a full, satisfied life - so start thinking ahead! Map out five, ten, and twenty-year goals. Have benchmarks to guide you on your way to savings. Reaching smaller, more frequent goals can help keep you motivated.
Invest
Learning the ins and outs of investing can seem impossible. Thankfully, the mutual fund industry offers no shortage of diversified investment options tailored to your risk profile. Many of these investment options suggest (or even require) a minimal amount of involvement on the part of a new investor. Consult your financial advisor to select the right mutual fund for your age and financial goals.
Take control of your finances to ensure a brighter future with more time and money to achieve your dreams. Start with a basic budget and monitor it monthly. Then once you're adhering to the budget and getting out of debt, place money into savings and investments to help ensure your long term goals are achievable.
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