By Temidayo Joshua
A sound spending and savings plan is the foundation for your long-term financial success. Any amount of money can prove to be too little if you lack good money management skills.
Money management is also known as investment management. No matter where you are in your financial journey, it’s incredibly important to track your money.
Money management is not just about saying “no” to any purchase, but developing plans that allow you to say “yes” to the things that are most important to you. The idea of money management techniques is developed to plunge the amount individual, firm and institutions spend on items that add no significant value to their living standard, long-term portfolios and asset-basins, so as to ensure every expense made worth it.
Good money management skills will help you determine your net worth, set goals, monitor your cash flow and track expenses.
The following are few money management tips:
1. Know Your Financial Position
The start of good money management requires you to know where you’re at in terms of assets (things you own) and liabilities (amounts you owe). Your assets include your bank accounts, investment accounts, retirement accounts and property, like your house and car. Your liabilities include your credit card balances, car loans, mortgages and other debts.
When you subtract your assets from your liabilities, you get your net worth. If your liabilities are more than your assets, your net worth is negative. This will guide you in allocating your money wisely and prevent you from living above your means.
2. Set Goals
Your goals dictate how you manage your money. It’s easy to overlook your long-term goals in favor of just trying to figure out which bills get paid today. However, by setting goals, you can give clarity to which expenses are necessary and which ones you can cut out. This will help you spend money on things that really worth it .
3. Make a budget and stick to it.
Budgeting allows you to plan where and when you want to spend money in your business. This budgeting process depends on your understanding when your bills are due and when you will receive payment from customers If your budget fails to consider the timing of these payments, you may be caught struggling to pay bills when you haven’t received any money from your customers yet. A review of your expenses and spending habits
will enable you to design a realistic monthly budget.
4. Avoid Impulse Purchases
Spending money to provide all cravings is a natural human phenomenon but impulse purchases can quickly destroy any budget. If you spot something you want that isn’t on your list, wait at least 24 hours before you buy. This allows you to assess whether you were enticed at the moment or if it’s something you actually need. For bigger purchases, you may want to instill a 7- or 30-day waiting period, just to be safe.
5. Monitor your cash flow.
It’s crucial to understand what your cash flow is, how to calculate it and how to use a statement to keep on top of things. While your turnover might be a nice big number that gives you confidence that your business is doing well, it’s the cash flow that offers a better insight into how well your business is managing. As the old saying goes – turnover is vanity, profit is sanity and cash flow is reality.
By tracking actual cash flows against forecasted cash flows on a daily, weekly, or monthly basis, your company can now review developing trends, anticipate their impact, and take actions that will maintain and perhaps exceed your forecasted cash flow expectations.
6. Know when to get help
If your financial situation seems like it’s getting out of control and is too much for you to handle, seek help from professional money managers. There are many reasons a person’s finances could spiral out of control, so don’t be ashamed to ask for help.
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