We all know that money makes the world go round. That being said, the way people earn, save and use their money is one of the most important tasks everyone has, whether we admit it or not. Still, some people are extremely successful and wealthier than others, while some people struggle with their finances. What’s the reason behind this? The answer is not that simple. Out of all the possible reasons and factors that could easily influence someone’s income, and the way they think and act when it comes to their finances, one thing is sure – it is the way they handle their money, that determines whether that person will be financially stable in the long run, or quite the opposite. And we all want to be financially stable, don’t we?
Recent surveys showed that millions of Americans miss their credit card payments regularly, which allows certain financial institutions to gain enormous amounts of profits, thanks to the penalties people then have to pay. This is a perfect example of how money is usually wasted, since the penalties are quite high, and the amount of money used that way could be invested in innumerable other ways or areas, giving their owner more opportunities in life, and making their lives better. Unfortunately, by being late with their payments, they lose more money than they have planned, and at the same time, they are erasing their chances for certain improvements and progress on a financial level. And this is when something called money management comes in.
Have you ever heard about the term money management? If you have, chances are you are already living by some of its principles; or you may have just heard about it but you’ve never taken the time to really acknowledge all of the benefits people who are good at it have. Either way, this is something that every person can learn, but it is at the same time one of the most important skills you need in a fast-paced environment and a money-oriented society we live in today. Why? Things that are complicated usually need some practice to master. In other words, almost everything on the planet needs practice, and money management is not an exception. You don’t have to be great at money management nor you should feel bad if this skill didn’t come naturally to you. However, you have to spend some time researching, brainstorming and learning about the ways to become better at it. And the results will most certainly come.
Nonetheless, one of the most common beliefs is the belief that you don’t need to acquire the skill of financial management at all. The vast majority of people think that they are handling their finances the right way, even though they have debts or they make certain financial mistakes, big or small. This is one of the first signs that something is wrong and rather than refusing to get some help or gain knowledge about the topic, you should consider taking some time and putting in some effort, to find a strategy that works for you and that can help you become a master of your life (and your bank account!).
To be able to understand the importance of the topic, it is good to know what negative effects poor money management can have (although you are probably aware of some of them already). First of all, and the most obvious consequence is debt. Even with no further explanation, you know that having a debt is bad for your finances, both now and in the future, when thinking of your retirement and savings. That being said, poor money management can lead to poor quality of life when you retire, or no retirement at all, which is something you should be really concerned about. Other than that, life is full of unexpected things and events that could happen to you, and you need to be prepared for each one of them. There are certain situations in life that just take away lots of your money, so there always has to be a plan, to help you maintain stability even when something happens.
But other than thinking you don’t need financial management, what are the other signs that you need to improve your financial management skills? Let’s dig into that.
1. You don’t track your expenses
A dollar here and there and you might think that it’s not that much and that you have things under control. But is it really like that? If you don’t know where your money is going, then you have no power over your spending nor your spending habits, which are crucial when it comes to managing your finances. When you don’t know where your money is going, you can easily overspend and in the end, you might not be able to pay off your priority bills and monthly expenses, which is something you should avoid at all costs. Luckily, there are numerous apps and platforms such as Monite that can help you out by calculating and predicting your expenses, bills and payments in general, working as your personal finance manager assistant.
2. You are not aware of your debts
Although you might think this is not so common, you might be surprised with the fact that millions of people don’t know the exact amount of debt they have! This leads to miscalculations, being late with payments and in the worst case scenario – bankruptcy.
3. Yoy are overusing your credit cards
Using credit cards regularly can give you a false sense of having more money than you really have in reality. Also, the habit of making a debt when purchasing things is something you have to put under control and apply different strategies on your spending.
4. You are not saving nor planning
Saving money and thinking about your retirement or about your children’s education is something you have to keep in mind all the time. If you live in the moment and you still have no plans nor you’ve ever thought about these things, then it’s a clear indicator that something is wrong and that something should be changed in your mindset. The sooner you start planning, the better. This doesn’t mean you should stick to a strategy that doesn’t suit you, it simply means that you should be aware of your future and your future self, whether it is in 5, 10 or 20 years from now.