1. Study Your Money
First, you need to gain an understanding of your income and expenses throughout the year. Gather your bank records, credit card statements and receipts from cash purchases for the last 3 months. Create a spreadsheet with columns for income, housing, entertainment, food, hobbies, debt and miscellaneous for your personal spending. Record all income and expenses, and total each category. Study your spreadsheet, highlighting how much money is spent on items you want but don’t necessarily need.
2. Make Financial Plans
Decide how you want to spend your finances to manage funds according to the lifestyle you want. You may want to have a nicer house instead of a nicer car, or you may want to dress better and pay less for housing. Consider setting up your spending with a percentage system in which you designate the percent of income you will spend for each budget category. For example, spend 25 percent of monthly income on a house payment, 15 percent on car-related expenses, 10 percent on entertainment and so forth. Discipline yourself to stay with the financial management plan you set up.
Plan ahead for vacations, college funds, having kids, retirement and major purchases. Adjust your budget by spending less in some areas to put money toward major purchases without using loans.
3. Put Your Money to Work
Invest your money to create a brighter financial future for yourself. For example, if you are planning a vacation next year, put the funds in a CD to earn more interest than a checking or savings account. The money you set aside for savings should go into bonds, stocks, real estate, mutual funds and/or other forms of investment, allowing you to take advantage of compounding interest. If your company allows you to participate in a 401(k) plan, put as much money into the plan as you can to make sure your retirement years are covered.
About this Author
James Kitchens has over 15 years of experience counseling individuals and families struggling with relationships, money management, personal well-being, career choice and other life issues through seminars and one-on-one consulting. In addition to his work as a freelance writer, Kitchens is an ordained minister and co-founder of Clear Vision Ministries.