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Does managing your finances stress you out? If so, you're not alone. A survey in June of 2018 indicated that money issues are the number one cause of stress among Americans, surpassing even work, health, and relationships. It doesn't have to be that way, however. If financial worries have you down, remember the three M's: management, monitoring, and maintenance. They can help you get your finances under control and have some well-deserved peace of mind.
One of the best things you can do to get the most out of your money is to manage it more closely. When it comes to money management, setting a budget and getting sound financial advice and support are two of the most important steps you can take.
Make a budget
One of the best steps you can take to improve your financial situation is to make a budget. Surprisingly, many Americans just don't bother with this key part of money management. Less than half of Americans currently have a budget, as most end up just winging it from month to month when it comes to money. Don't leave your finances to chance; instead, make a budget that includes your income, expenses, savings, and long- and short-term financial goals. A budget will provide you with a foundation to manage your money more effectively, and you can use it to accomplish your financial goals.
When it comes to money management, you should never go it alone. Instead, find some trusted financial professionals to help you make the best choices when it comes to your hard-earned money. For example, accountants can analyze your income and expenses and put you into an optimal position when the time comes to file your state and Federal income taxes. Additionally, good financial planners can help you navigate investment and retirement planning. Finally, a trusted insurance agent can assist you with mitigating risks to all the things that are important in your life, ensuring your most valuable assets are protected.
Monitoring all aspects of your finances can help increase your situational awareness, so you can make the best decisions about your money at all times. Monitoring your credit and tracking all your expenditures are two great ways to do this.
Monitor your credit
One money management skill everyone needs is ensuring the credit rating necessary when it's time to borrow funds or make important life purchases, such as buying a home, starting a business, or buying a new car. You should monitor your credit at all times and do everything you can to maintain a good credit rating. Fortunately, it's easy to keep track of your credit these days. Many financial institutions offer complimentary credit score tracking. Mobile apps such as Mint do so as well. Additionally, you can order one free credit report every 12 months from each bureau to get an in-depth assessment of how the major credit agencies view you. Taking these steps will help you stay aware of anything that could potentially harm your credit, so you can take all necessary actions to maintain a stellar rating.
Track your expenditures
While budgets are important, they only work when you follow them. One of the best ways to adhere to your budget and maintain financial awareness is to track all the money you spend. Carefully recording your expenditures will help you better gauge where all your money is going and give you the capacity to review your expenditures and make spending adjustments if necessary. Fortunately, thanks to mobile and smartphone technology, it's easier than ever to track your expenditures. Apps such as the aforementioned Mint let you turn your cell phone into a powerful tool to track and categorize your spending, so you know where every dollar goes.
If you want to manage your money effectively, you must practice good maintenance. Money maintenance tasks help you improve your present situation, mitigate the threat of the unexpected, and prepare you for the future. Building an emergency fund, preparing for the future, and getting smarter about financial issues are great examples of maintenance tasks.
Build an emergency fund
Are you prepared for an unexpected expense this month, such as an emergency heating system replacement or car repair? Unfortunately, fewer than 40% of Americans have $1,000 on hand to cover an emergency expense. If you're one of them, start building up your emergency fund right now, so an unexpected financial requirement doesn't turn into a major disaster. If you can't commit a lump sum to your fund immediately, that's fine. Simply save a bit of money each month until you have enough cash on hand to take the sting out of any financial emergency.
Prepare for retirement
When do you plan to retire, and how much money will you need? If you don't know the answers to those questions, you should try to find out as soon as possible. Planning and saving for retirement are two of the most critical components of sound money management; after all, at some point in life, you'll want to (or have to) stop working, so you need to be prepared. You should sit down and attempt to calculate how much money you'll need for retirement; then, based on that number, you'll have to figure out the best way to save those funds for when you actually retire. You'll also want to determine the best type of retirement account or plan to enroll in as well, so you can start saving for retirement as soon as possible.
In 2017, over 94% of respondents failed a quiz that measured basic financial literacy. They were unable to answer general questions about interest rates, retirement savings, and inflation. Most of us would be better off if we had better financial literacy, so it's important to spend some time getting smarter when it comes to money. Consider subscribing to newspapers and magazines that discuss important financial issues, such as The Wall Street Journal or The Economist. Monitoring good financial websites can be helpful as well. Finally, if you have the opportunity to take classes or seminars related to finance and money, even if they're online, you should definitely take the time to do so. The smarter you are when it comes to your money, the better.
Use the 3 M's to Start Managing Your Money Better Today!
If your money management skills aren't what they need to be, don't panic. Instead, study the 3 M's approach to money management described here, and start applying them in your everyday life. Doing so will help you manage your finances more effectively and help put your money to work for you!