Because money management skills typically aren’t included in our grade school curricula, many adults know little about it. Unless you were lucky enough to grow up in a household that taught basic money management skills, you might find yourself a bit lost. Even worse, you might be in over your head with lots of debt and need to seek some form of debt relief.
While debt relief options and the help of a debt relief company exist if you need them, sometimes you can turn your finances around by simply educating yourself on money management. Read on for five money management skills that will help you improve your finances.
#1: Assess your Financial Situation
While it might scare you a little to take a look at your finances, especially if you have been ignoring them for a long time, the first step in getting a handle on your finances is to see where you stand. Once you assess your current situation, you can figure out what areas need improvement and what skills you need to develop to make your financial goals a reality.
Take a look at your bank and credit card statements from the previous year and determine where all of your money went. Once you’ve figured this out, you’ve set yourself up to begin to tackle any areas that need improvement (such as bad spending habits) and come up with a plan.
#2: Write a Budget
Most people don’t budget because they don’t know how much they have and how much they spend. But once you’ve done the exercise of assessing where you stand, you can craft your budget. Based on your past spending habits, figure out what areas you can cut back on and what areas are monthly non-negotiables, like your rent or car payment.
Once you’ve decided what you can afford to spend, make a date with yourself to check-in at the end of every month to make sure you are sticking to that budget. If you need to reallocate funds or reassess your budget, the end of the month is a great time to do that.
#3: Involve your Partner
If you are married, living with someone, or are otherwise in a financial partnership, it’s important to get on the same page. Work toward an open dialogue with your partner about your finances. What are your individual goals and expenses? Your shared goals and expenses? Once you develop the communication skills to discuss finances together, you’ll gain the trust of a partner who can offer his or her support.
#4: Build an emergency fund.
If you don’t already have one, now is the best time to start an emergency fund. Ideally, accrue three to six months of expenses in an account that you can easily access if an emergency should arise. No matter your financial goals, having an emergency fund should be your number one priority, and taking the time to build it up is a fantastic financial skill to acquire.
#5: Know your Credit History
Good money managers know what their credit score is and work toward increasing that score by doing things like making on-time payments and paying balances in full every month. Great money managers not only monitor their credit scores but also look periodically at their credit reports. By monitoring this, you can determine what, if any, negative marks show up and monitor for potential fraud or mistakes, which you should report immediately to the credit bureaus.
These simple money management tips certainly don’t provide a full picture of financial health, but they can help you start your adult life on the right track. By mastering each one, you can slowly build a foundation for a strong financial future.