How to Manage Money Well

A budget is a critical component of a household money-management plan.
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Money problems can put a strain on any couple’s relationship — that’s why it’s important to know how your partner feels about finances. A couple’s ideals and money management skills can impact their lifestyle either positively or negatively. Money values have a way of affecting our day-to-day decisions and actions, so which way it goes is up to you. However, if you are looking to prosper in life, there are some fundamental money lessons you need to keep in mind.

Step 1

Write down everything you spend money on for a month or two. Most couples can do a better job of controlling their spending when they know exactly where their money is going. Tracking expenses can be a real wake up call for some people.

Step 2

Create a monthly budget. List all sources of income in addition to itemizing your expenses. When it comes to extras like shopping, eating out and entertainment, set a spending limit each month and stick to it. Be careful about the choices you make. Bear in mind that living on a budget probably won’t allow you to buy or do everything that you want.

Step 3

Save receipts as an additional check system on your spending. Go through the receipts often to see where your money went. Even if one partner is primarily responsible for paying the bills each month, keep each other updated about household spending, savings, investments, taxes and major purchases.

Step 4

Plan for any big expenses well in advance. If you want to go to the beach for a few days next summer or buy a new computer, start putting money aside now. Decide together how you are going to pay for something before you spend money on it. Don’t drain your finances for things you merely want and don’t necessarily need.

Step 5

Prepare for unexpected financial emergencies. Kiplinger recommends saving enough cash to cover normal living expenses for at least three months. Setting aside a six-month cash cushion is even better. Adequate insurance coverage is another thing that can provide you with some valuable protection in the event that something goes wrong. Health insurance, auto insurance, life insurance and renters or homeowners insurance are all coverage you should have.

Step 6

Sign up for your employer’s retirement plan or set up a Roth IRA, from which you can make tax-free withdrawals after you retire. Since it’s never too early to start planning for your retirement years, contribute as much as you can to an employer-sponsored 401(k) plan, or at least enough to get the company match.

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