Why Money Management Is Key to Making Your Life Easier
Though money management might be a scary term for some people, it doesn't have to be. In fact, taking the time and investing the effort to get your financial house in order can actually make your life much easier -- and less stressful -- because you put systems in place to account for life's "what ifs."
Peace of Mind From Knowing Your Finances
When you have solid money management skills, you know where your money is going -- or at least the vast majority of it. That gives you the raw data you need to make changes, whether you're single and setting up your own financial plan or in a relationship and need to have an informed conversation about spending. While you might still have to hash out how much in any given category is too much, when you know where your money is going, there's no way to argue that you're spending only $50 on coffee each month when the numbers add up to $150. If you have a hard time tracking receipts with paper and pen, consider investing in financial management software.
Limiting Surprise Expenses
When you start managing your money more carefully, you learn where all of your money is going -- and you can compare that to how you want to prioritize your spending. "People are usually surprised by things like eating out, where each individual purchase never feels that big," according to Matt Becker, a financial planner practicing in Pensacola, Florida. "It's only when you look at a monthly total that you're really able to see how much you're spending." For example, if you start tracking your spending and realize that you spend twice as much each month eating out as you do on your car payments, you might consider whether you want to spend a little more time in the kitchen so you can divert those eating-out funds elsewhere.
If you're part of a couple, good money management can improve your communication with that special someone. "Having your finances under control makes for a much less stressful relationship, especially when there are kids involved," says Becker. "Not only is there one less thing to worry about, but when you've proactively worked together toward such a big common goal, it's just easier to feel like you're rowing in the same boat."
Enabling Long-Term Financial Goals
Good money management helps you set and achieve long-term financial goals, whether that's as big as buying a home or planning your retirement, or as routine as funding an emergency fund so you aren't stressed out over every unexpected expense that pops up. When you start managing your money, Becker advises starting small. For example, if you want to build an emergency fund, Becker suggests figuring out how much you want saved -- he recommends three to six months' worth of expenses -- and how quickly you want to reach that goal. Then you can simply divide to get your monthly savings goal. From there, he advises that "you can go back to your budget and see what kind of changes could be made to fit that savings in."
Automate Your Bills
When you have your money management running smoothly, you can automate many of your expenses so you can focus your time elsewhere. "You can send money from your checking account to a savings account or retirement fund so that your savings are growing every single month without you having to worry about it," says Becker. "This kind of automation accomplishes the goal of budgeting without all the stress of worrying about how every single penny is being spent."