Managing your money is an important skill that can easily be learned, even if you aren’t the best at math or accounting. Although you might find you are building debt, it is never too late to start a budget and learn to get into healthy money management habits. Both spenders and savers can always make improvements to their money management skills. Most people fall somewhere between the two, but feel they don’t have the skills needed to make smart money decisions. This simplified money management guide will provide you with the basics to help you start being a wise spender with savings, a good credit rating, and limited debt.

Assess Your Income

To be a good money manager, you have to first keep on top of your monthly income. For most people, this is reasonably easy as they have a regular paycheque that is the same amount each week. For others, when income fluctuates due to hourly wages or because you are self-employed, this can be more of a challenge.

Knowing how much money is coming in each month is a must for smart money management. Without tracking this, you are more likely to overspend, which leads to debt. For those with less certain income, always base your budget on the least amount of expected monthly earnings. This way, you are less likely to run into cash flow issues.

Tally Your Expenses

Once you have a handle on your income, you can tally your monthly expenses. This must include all of your expenses from rent and groceries to gas and entertainment. If you aren’t certain, refer to your monthly bills and take a look at the last couple of months on your bank account for all of your debit transactions. You can also refer to your credit cards. Don’t forget to include all of your debt balances and how much you must pay each month when tallying your expenses.

Tally the Difference

Once you have your total monthly expenses, deduct this from your monthly income. You are hopefully going to end up with a number on the plus side, so you have money to put towards an emergency fund and savings. If you break even, this is still no reason to panic, and it will just require some finessing to make sure you do have some flexibility for savings. However, if your spending exceeds your income, you’ll need to make some serious changes to help you manage your money wisely.

Set a Budget

Setting a budget is the best way to manage your money wisely. The bigger the difference you see in what you spend and what you earn, the stricter your budget will become. In theory, a budget is simply making adjustments to the money you spend to suit your income. If you can save, then good for you. Just continue spending as you do and build up your savings. You can speak to a financial advisor to see what they recommend to help grow your money, while having access to cash in case of an emergency.

If you are breaking even, look for areas where you can stand to reduce your spending. This can be anything from bringing your lunch to work more often, to taking public transit to save on gas.

However, if you are overspending each month, you need to make changes to allow you to at the very least break even. This can mean looking at every possible saving opportunity, including:

• No unnecessary spending, including take-out food, dining out, entertainment, clothing, expensive beauty products, etc.
• Refrain from the use of credit cards until you pay down your debt.
• Cash only spending until you pay down your debt and balance your budget.

Once you get a good working budget each month, you will see what a difference it makes. You might even find you don’t miss all those little extras that were eating up your savings!

Look for Spending Issues

If you are facing issues with your money management every month, you will notice the red flags, including:

• Being late more often for paying your necessities, including rent/mortgage and utility bills.
• No savings included in your budget.
• No emergency funds to cover unexpected costs and expenses.
• No plan in place to manage large expenses, such as taxes and insurance.
• No financial plan in place for the future.
• No working budget for your net income.
• Over 20% of your net income goes towards paying your debt.
• You spend without thought to the cost, budget, or finding the best deal.
• You use your credit card(s) regularly and are unable to pay off the balance in full every month.
• You overspend every month (the budget doesn’t balance).
• You have limited access to credit due to maxing out limits or a bad credit rating.

If you have any of these red flags, then you are on your way to a financial emergency.

The Basic Rules of Money Management

The good news is that it is never too late to take control of your finances. Even in the worst case, you can seek financial assistance with a Licensed Insolvency Trustee to find solutions to help you get back on track. You should always be aware of your finances. It might seem like everything is going well, until you take a serious look at your spending, how much your debt is accumulating, and how often you are making late payments on necessities like rent and utilities.

You should also be proud of yourself if you have limited income, but are managing your finances well. If you are doing this monthly, you can do even better if you use some basic money management rules.

You can follow these basic rules of money management to keep your finances on track:

• Always know your income.
• Always track your spending.
• Always have a monthly budget.
• Adjust your monthly budget to suit changing needs based on income and changes to necessary spending.
• Always have financial goals worksheet to assist with savings.
• Always be aware of opportunities to improve your savings plan.
• Plan to have savings to cover at least three months of your expenses whenever possible.
• Do not use credit cards unless you can pay off the balance every month.
• When your spending is consistently exceeding income, speak to a financial or credit advisor right away.

These are the most essential steps for smart money management. However, you should never put off speaking to a financial or credit advisor for credit management tips and debt solutions. Your money can help you lead a happier, stress-free life and plan for a strong financial future. By taking control of your finances with a little assistance, you will be able to see financial gains, even on a very limited budget. Without a good understanding of your budget, you can continue to mismanage your money and find yourself in a financial crisis. Avoiding unmanageable debt should be everyone’s goal for strong financial futures.

Contact Charles Advisory Services at 416-486-9660 if you would like to set up a consultation with our advisors or click here.