Managing your finances is money management, that’s true, but is it as simple as it sounds, and if it is, then how should you go about it?
Concept of Money Management
The key to managing money is controlling expenses, according to News.com.au. We normally do not realize how much money we spend until we exhaust the complete paycheck, by the end of the month. Why does that happen? It happens simply because we do not segregate needs and wants and over-splurge.
Another reason that we go on a spending spree is the power of plastic. Most of us have that seemingly limitless credit card to take care of all the big and trivial things we buy. Everything is simply a swipe away. Its only on receiving the hefty bills one tends to realize how much money has actually been spent.
How to Manage Expenses?
One simple way to keep a check on expenses is by maintaining a diary or using a similar app on a smartphone. Once we keep a tab on all the spending, small, big and huge, we can analyze. We can figure out the basics or the needs like the electricity bill, gas bill, grocery charges etc. Then, we see the discretionary spending, like the five-star dinner, the expensive pair of shoes and the mesmerizing French perfume. This is where we need to choose, how and where and how much to spend.
One way to manage it is by partitioning money. That is simply by allotting money to various heads and then stick to the budget. This will easily help in deciding the fixed expenses and the discretionary expenses. By making choices with the discretionary expenses, one can certainly achieve one’s short term or long term financial goal that one has set up.