Money comes in and money goes out. That’s the ebb and flow of income and expenses. Sometimes it can feel like the money has just come in and it’s already gone, which can be defeating and make you anxious.
Living paycheck-to-paycheck or client-to-client causes you to make choices you might not make under better circumstances. It can feel as though you just can’t get ahead, and you may be deluding yourself to the fact that there’s nothing you can do about it, but you can!
There are three basic strategies for money management that can stop the leaks in your bank account and help you save more, spend less, and get ahead. Here’s how:
Strategy #1. Have a Budget
This simple but often overlooked or avoided strategy really can help you save more, spend less, and get ahead. Having a budget takes into account the income you receive and the expenses you expect each month.
Having a budget makes it possible to be honest about your fixed expenses and your discretionary spending. Creating and sticking to a budget can help you be disciplined and stop yourself from getting in over your head.
Make sure your budget honestly reflects your income and your spending. You may be surprised how many things you buy that you don’t account for in a budget. Use the last three months bank records to see your spending history and make a budget based on your fixed expenses and your daily spending habits.
Strategy #2. Keep Track of Spending
Once you have a budget, it’s important to keep track of your spending so you know you are staying in line with your budgeted expenses. If you have allotted $100.00 of discretionary income for incidentals, it is important to know when you are reaching that limit.
Knowing where you are day-to-day in relationship with your budget goals helps you make micro decisions about whether or not a purchase is the right idea. Keeping track also helps you make future decisions about your money. You may change a budget item – reducing or increasing your budget to accommodate for your spending patterns.
Strategy #3. Review and Analyze
Creating a budget is a fluid action. Time and habits will show you how you spend and how easily – or not – you stick to the budget. Reviewing and analyzing your budget also makes it possible to make changes.
If your fixed expenses are cutting into your discretionary income, consider changing your contracts or plans for more favorable terms. You may even look into refinancing your mortgage, moving-out to a lower rental or selling your car and use public transit instead. There is no shame in doing this. Keeping up with the Joneses is your worst enemy.
If your discretionary spending is out of hand, make commitments to reduce spending in one category to free up income for another. Example: Consider making your own lunch three days a week instead of getting take out so you can afford a pedicure once per month.
Making financial decisions is easier when you truly know what is coming in, where it is going, and what are your spending priorities. Managing your money shouldn’t feel threatening or oppressive, it should feel powerful.