Basic Money Management Skills

Money. That which makes the world go round. It all boils down to the money that we have at the end of the day. Money determines the way we live, what we do, and basically every other decision of our lives. Without money, we are basically nothing. And that, I know, is something that no one will want to go through. So it becomes imperative that we earn well. But earning well is not the end all of everything. It actually begins from there. Money which is earned, needs to be managed well, so that we continue to benefit from it for a long time. And therein comes the part where we need to learn some basic money management skills. Because without these, we will not be able to develop effective methods of money management.

Most of us do not have the knowledge of what some of the most simple and effective money management skills are. So to help you out, this article shall provide you with just that.

Money management skills are not difficult to learn once you get the hang of how to go about it. Given below is a step by step plan that you can follow in order to nurture some of these skills.

Take Stock
The first thing you need to do is calculate how much you are earning. Add in all the resources. Once you have this figure, calculate how much money you need to spend every month. To learn how much you spend every month, the best method is to write down each and everything that you spend for a couple of days. The amount will most generally exceed the amount that you had in mind―that’s because we don’t realize how much we end up spending on small things. Keep in mind that you need this spending figure to learn the basic skills. It is also important to note that the figures of two months will never be the same, there will be more expenditures incurred in a particular month and not so many in the next. But an average figure can be definitely arrived at.

Allot Amounts
Now that you know an average amount of the money that you need to spend for a month, it’ll be easier to allot amounts to different things. Make a list of all the things that you need to spend on―rent, tuition, bills (newspaper, Internet etc.) groceries, emergency (very important), and miscellaneous. You can make a long term-short term list as well. Like monthly/weekly/daily, and segregate the items accordingly. Now calculate the amount that you need for each and allot the money accordingly.

Many people use the envelope method for household items and it seems to work for them. For this, use different envelopes and mark them―for example ‘vegetables’, ‘toiletries’, ‘groceries’ etc, and at the beginning of the month fill the envelop with the amount that you need. Stick to that amount no matter what. When you put it down on paper like that, you are constantly reminded of it and the tendency to overspend is curbed.

Take Care of Debts
Never ever keep a debt. Pay a debt off as soon as you can, because if you keep on piling it, it’ll just keep getting bigger and bigger and cut into your regular saving plan. Find out how much you owe and what you need to pay off―that is the first step in managing your debt. Credit cards, surplus bills―everything needs to be paid off. Make a plan for the same. How? Along with the other envelopes, make another one for the debts so that you have a clear segregation made. It might be difficult in the beginning, but once you start physically putting in the money, you’ll deal with the problem head on and with continued efforts, the amount will be paid off.

Plan the Future
Now that the preliminary stage is taken care of, you’ll need to save for the future. The most important thing to do here is draw up a goal. What do you want to save for? Retirement? Children’s education? A house? Car? Or even small plans like a music system, a new phone etc. Calculate the amount you’ll need to save for it. This is your first step. The next steps will be how to get that money in a stipulated period of time.

Budget
Having a budget is really important. One way of budgeting is the envelope way, so that you don’t end up spending more when you have already allotted a fixed amount to yourself. The second method of making a budget, and this is somewhat of a conscious change in attitude, is that you get it in your head to budget things. Consciously decide that you want to budget. Do not spend recklessly. Other than that, planning for the future and drawing up plans of the things you need to save for will help you to budget well. This is because you’ll know what and how much you need to save up on to get that amount.

Invest
After paying all the bills, the surplus amount that lasts needs to be invested well. There is nothing worse than stagnant money. So consult a financial adviser or an investment adviser who will calculate how much you can afford to save per month, after deducting the expenditure and surplus. After this he will draw up a scheme that suits you best. It could be anything from a fixed deposit account to investing in mutual funds or buying property as assets.

Easy Saving Tips
Along with budgeting and drawing up plans, you can also consciously decide to save. Here are some money saving tips that you can use:

Buy things in wholesale.
Instead of buying books, join a library or start a club. Use this same formula for different things.
Car pool to work, that will save on money for gas AND is good for the environment.
Buy things on sale.
Go through your daily expenditure sheet, you will find that there are several things in there that you can easily give up. Like a very expensive brand of hair product.
Turn off the power when you don’t need it.

Earn Extra
It has been found that we never tap the full potential when it comes to expending our talents or finding other means of earning some extra money. This is one of the more indirect money management skills that we need to learn. Here are some of the easiest ways to make money―taking on freelancing jobs, giving tuition, making use of your hobbies and talents like singing or dancing (giving classes, singing in a club) or cooking (providing snacks for a establishment or making a fixed amount for a bakery). Other methods include, selling things for scrap, holding garage sales etc.

Acquiring money management skills allows you to live better. It secures your future and helps you gain control over your life rather than the debts and money problems controlling you. It should therefore be our prerogative to learn and practice the several money management skills to lead a more fulfilling and comfortable life.

Financial Problems in a Marriage

It is said that marriage is the best thing that can happen to two people in love. It is true, provided the spouses understand each other and are aware of the responsibilities that come with marriage. However, married life can suffer a setback, if there are financial issues in a relationship and the partners do not work it out properly to solve these problems. In studies conducted by experts, financial issues have been included as one of the top reasons for a divorce. So, it is always better to be aware of financial problems, if any, and find effective ways to deal with them.

Monetary Issues and Their Solutions

Handling Finance
This is one of the basic issues that married couples face. They are not clear about whose salary should be used for household expenses and whose should go in for savings. Lack of planning leads to confusion, ultimately resulting in differences between a couple.

Solution: Couples should try different ways to handle their finances and check which one works the best for them. According to surveys, around 64% of couples have joint accounts, 14% of them have separate accounts, and 18% of couples have both joint as well as separate accounts. There is no particular method to handle finances; it depends on a couple as to how much they want to spend and how much they want to save. So, sit down to decide among yourselves, and make the best call for your future.

Excessive Spending
Among the various money-related problems affecting a marriage, spending habit is a contentious issue. Many a time, one of the partners is inclined to shop and spend more than the total earnings with the help of loans and credit cards. Mounting bills and high interest rates can really make things difficult for the family.

In certain cases, among the two partners, the wife mostly has the habit of presenting her family with goodies every now and then. The expenditure made, might irritate the other partner and ultimately give rise to arguments.

Solution: Couples should fix a budget for the month and keep a check so that the expenditure does not exceed the limit. As far as possible, use of multiple cards should be avoided. When going through tough financial times, couples need to cut down on entertainment and leisure expenses. Wives and even husbands, if either is into the habit of buying unwanted gifts, should keep away from doing so. This is because, occasional exchange of gifts does not affect, as much as the usual ones do.

Mounting Debts
Sometimes while making hasty decisions, it might happen that married couples tend to apply for house loans or car loans without figuring out their repayment capacity. Apart from that, some are even in a habit of using credit cards in excess. This negligence in handling money leads to rising debts which becomes difficult to repay in future.

Solution: Taking loans only as per one’s need and repayment capacity, is the first solution to avoid the problem of mounting debts. One should have realistic aspirations and dreams, and think twice before applying for loans and pledging assets with the lenders. And, if both the spouses are working, they should contribute equally to pay off the EMIs.

Improper Investments
In order to lead a settled life, couples have to think about their future and secure it. Investment done inappropriately is one of the prime factors to be looked into, especially when you have a family to take care of. For this, couples have to make precise investments and while doing so, they have to be careful as it might be a risky affair.

Solution: Couples should figure out the investment goal and time frame, and make sure to review their investments at least once a year.

Unnecessary Expenses
Love is blind and people in love know no boundaries when it comes to spending for each other. They tend to buy expensive stuff in order to please their respective partners. This act of unwanted splurging causes problems later on, and couples start blaming each other for mismanagement of money.

Solution: In order to avoid financial hassles, couples should refrain themselves from buying expensive gifts and going for lavish holidays. As is rightly said “cut your coat according to your cloth” couples should spend according to their capacity.

Crisis
An unstable monetary situation arises due to the lack of savings for your future use. An accident, a major illness or an unexpected pink slip, or any other emergency – all situations which require you to dole out a large sum of money – can land you in peril.

Solution: Problems are unavoidable and can never be predicted. So, instead of waiting for the problem to arise, couples should keep themselves prepared for the bad times. They should make sure that they have an emergency savings account. They should plan their monthly savings together along with a target amount to be saved every month, so that they have enough in hand when a sudden need arises.

Ego Clashes
This is the age where women have caught up with men in every field and are the breadwinners. These days, in many households, we can find women earning more than men which hurts the male ego to a great extent, and if a man is jobless then the situation gets even worse. In such cases, it becomes really difficult to save the relation, as both the partners have their self-pride and none of them is ready to bow down.

Solution: Marriage is a union of two souls and bodies, so couples should treat each other as one. To avoid ego clashes, men should see situations in a broader perspective, and instead of getting offended by their respective wives’ earnings, they should encourage them to work. After all, whoever earns, eventually the income will be utilized for the family.

Keeping Financial Secrets
This is undoubtedly one of the biggest financial problems in a marriage. Many spouses are seen hiding their financial documents, bank account statements and information about their assets, which can be frustrating for the other spouse.

Solution: It is always better to speak the truth, and show all your financial details to your partner. By doing so, your better half would be able to suggest ways of dealing with finances, if need be.

Some Tips for Managing Family Finances

A family begins with ‘We’ and not ‘I’. So, while dealing with money matters, always remember that you should think for the well-being of your family.
If your problems are too big, take suggestions from a financial planner.
When you commit to managing finances, fulfill it at any cost, because the other person relies on you.
Think before you spend, because money should be used wisely.
Try to avoid interference from relatives in your family finances (if any).
Don’t be jealous of a higher-earning spouse. Instead, motivate your partner to do well in his/her career and earn even more.

Marriage is a lifetime commitment, so never ignore the petty issues. Financial issues can be resolved easily, so do not waste time crabbing about it. Your family’s betterment and future depends on the same.