Top ways to manage your money better

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In order to manage your money and finances much more successfully, you must learn to have discipline with the money you have. Money discipline is an essential piece of the puzzle, and it is what will help you survive these bad economic times. If you are not able to discipline your self with money and spending, you may never be able to save any money or survive when times get tough. Disciplining yourself with spending money does not mean you have to deprive yourself of life's simple pleasures. All you need to do is force yourself to have better control over your financial habits.

1·  If you read my article about how to apply the classic snowball debt consolidation method to paying off your high interest debts, then you know how important it is to pay off all your high interest credit cards. If you have not read that article yet - check out the link in the resources section of this article. The basic tenant is that out all of your debt, you need to get rid of the highest interest debt that you have first so that you can avoid having to pay out the huge costs associated with these debts and use your money for other things. Once you have gotten rid of the highest interest debt, move on to the next highest and start paying that one down. Keep going until all of your debt is gone. My wife and I did this when we fist got married and we are still working the plan. We first got rid of a high interest credit card she had before we were married that was killing us in fees. Once that was gone, we moved on to one of my high interest credit cards and zeroed out the balance. Now we are working on the car payment and other loans with smaller interest rates. Do not close your credit cards, just get rid of the debt and high interest on them!

• 2  Similar to the first step - the second step is to pay off all of your debts outside of your high interest credit cards and other high interest debts. Get rid of your car loans, your student loans, and your mortgage. Like I said, this is the step my wife and I are working on now and these loans take up a large portion of our income.


• 3  After you have worked out a plan to get rid of your high interest debts and after you have created a plan to allocate some money toward your other remaining debt payments, take a look at the money you have left over (which you will have once you get rid of some of your high interest debts) and try to start an emergency fund. This is money that you can put into a savings account to be used in the event of a serious life emergency such as a job  loss, a medical emergency, vehicle accident, home damage, or other unforeseen events in life. My wife and I found out how important this was when she was let go from the company she worked out due to down-sizing. Money was tight, and we had to use the emergency fund to cover our bills for a while. As a rule of thumb, you should save at least a month and a half worth of living expenses for each person in your house. I have an eight month emergency fund since there are 5 people in my house.


• 4  If you have a 401K or a retirement plan and your work matches - max it out. Talk to your company HR and see what the full amount is that your company will match. If you are not putting that full amount from each paycheck away into your retirement, you are throwing away free money! Do this first and foremost. Then talk to a retirement planner at work, or from the company that you use for your retirement savings, to plan how much money you will need to live comfortably in retirement. Start planning for retirement as soon as you can!


• 5  If you have kids, it is time to start saving for college. College expenses are at an all-time high and they keep going up. If you can, look into setting up a 529 college savings plan for your kids and contribute the same amount to the plan each month. I have a college savings plan set up through my investment company and I contribute $100 a month for each kid.


• 6   Even though the market is rough and business does not seem to be doing so well, it is still a great idea to invest in the economy. The safest investments are usually found with mutual funds, low-cost broad-based index funds, and other long term investments. Talk to your HR manager about plans that your company may have available or call your bank to discuss investments options and brokers.

 

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