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Money management is an important skill to have. You should never ignore your finances nor should you let it go for long without organizing it. Learning how to manage your money is one of the basic skills that you need to have. It should be prioritized along with learning how to add and subtract. Fortunately, financial managementis a growing concern for schools. Personal finance classes are already added to their curriculum and hopefully, it will be enough for future generations. We all want them to avoid the mistakes that we made and we hope that they will be better managers of their money than their elders. According to an article published on MoneyManagement.org, 7 out of 10 Americans are worried about their personal finances. This is probably connected to the fact that 6 out of 10 Americans spend without a budget. The data that came from the survey done by the National Foundation for Credit Counseling (NFCC) and a personal finance site, NerdWallet. It is also revealed that 9 out of 10 Americans are confident about their personal finance knowledge. While this is commendable, you cannot ignore the fact that the acquisition of knowledge, by itself, will not translate into financial success or confidence. You need to learn how to implement what you know about money management for you to really benefit from it.
Survey reveals that Americans are struggling to organize financial obligations
While we know that financial management is already being taught in schools, it remains to be a top financial concern for Americans. According to the latest survey from Bankrate, a lot of Americans are struggling to stay current in paying their bills. This may not seem like a money management issue until you hear them say that they feel positive about their financial situation. If someone has positive feelings about their financial situation but continue to experience problems with paying their bills, we can make a couple of assumptions. They are not keeping track of their financial obligations. Our first assumption is that they cannot keep their bills current because they are not tracking it in the first place. This probably means they are not filing their bills in one place so they are not sure what is paid and what is not. It is also possible that they are not sure what bills to pay. Believe it or not, you can be so disorganized that you forget what accounts you should be paying on a monthly basis. They are spending their money on other things. Another scenario that we can also assume is that the money is being spent on something else. If money management is not implemented, there is a high chance that the money allotted for bills payment will be mistakenly spent on something else. It can be an unnecessary expense or it can be a payment that does not have to be paid yet. If you run out of funds, that could become a problem for you and the bills that you have yet to pay off. They do not know how to manage their money. The third scenario that we can assume is that some Americans do not know how to manage their money. According to the data from Bankrate, the lower the educational attainment, the higher the chance to fail in paying bills on time. 47% of those with a high school or less level of education have indicated that staying current on their bills is a financial priority. This is far too much compared to the 28% of those who are college graduates. Apparently, the education level plays a big role in helping Americans manage their money. They became too financially confident that it made them reckless. The last scenario that we can assume involves the lack of proper implementation of money management. Sometimes, the people who have a stable financial situation are those who end up being reckless about their money. Their complacency have led them to feel too confident about their finances that they loosen the restrictions on their budget. They end up not paying attention to their budget and that led to a couple of mistakes. These four scenarios are all issues that can be dealt with by proper money management. Even if you are a high school drop out, if you are concerned about financial management, you will find a way to teach yourself how to pay off your bills on time. This should not be a problem at all. In case you are struggling with managing your money, you need to seek out a professional financial advice. If you do not have the money to hire a professional, you have to work harder to teach yourself. It is important that you take charge of your own financial literacy issues so you can manage your money more efficiently from now on.
Habits that will make financial management easier
For first-timers, money management may not come easy. If you really want to implement it, you will realize that you will be breaking a lot of bad financial habits. To help you get started, here is a list of the habits that you need to develop in order to make financial management easier to implement in your life.
- Budget everything. Start with a budget. This is always a great place to start. When you have a budget plan, you are forced to look into both your income and expenses. You are in a better position to make decisions because you know your financial capabilities.
- Wait before spending. The next habit that you need to develop is to wait before every expense. This could mean thinking before you make the purchase. It also could literally mean going home and thinking about the expense before you come back for the item you want to buy. By waiting, you are giving yourself some time to think about how necessary the purchase is. The more expensive the purchase, the more time you should spend thinking about it. That is how you can break those bad spending habits.
- Save after every paycheck. If you find it hard to save money, you need to remove it right after you get your paycheck. It would be more effective if you auto debit your savings a transfer it in another account. That way, you will not be tempted to spend your savings. You will not think about spending something that is not reflected in your bank account.
- Minimize debt. Another habit that you need to work on is minimizing your debt. If you have existing debt, pay it off aggressively. In case you want to borrow more, make sure your debt level is low before you add more to it.
- Prepare for emergencies. Money management also involves preparing for emergencies. You have to consider how you can survive future financial setbacks. Since emergencies are unavoidable, your only chance is to prepare for them by saving up funds. That way, one emergency will not lead you to debt.
- Invest in the future. Finally, you need to learn how to invest for your future and that of your family. After the Great Recession, it is revealed that 40% of Americans are reluctant to invest in the stock market. This is according to the data released through BankofAmerica.com. While it may be scary to risk your money, this is the only way that you can make it work for you to increase your net worth.
Once you develop all of these habits, it should be easier for you to implement money management in your life. It may take a lot of effort at first but as soon as the habits are developed, managing your finances will come more naturally.