Money management is a strategy to ensure you get the most out of your money. It includes expense tracking, investing, banking, taxes, etc. Good habits and character are the foundation for money management. You can’t outperform a bad strategy no matter how much money you have. Learn how to steward what you already have no matter how little it is.
Having money seems like a desirable thing. How can you manage the money you don’t have? To be honest, I had to step back for a minute and think about it. Most of us have money. It might not be as much as we want, but we do have some source of income. The problem we encounter is when the money we have doesn’t cover the needs we have. Here is where money management skills come in: you have to decide how to allocate the limited resources to cover necessities.
Learn While You Don’t Have Much
I do believe that having less money teaches us more about money management than having plenty. It is also easier to manage less money. You’ve probably heard the saying “more money, more problem”. There is a level of complexity that comes with having more money that you won’t be able to handle if you don’t understand the basics. When you have little, you are more intentional about what you spend your money on. You think hard and long before making any purchase. You learn to distinguish needs and wants. You understand how to stretch every dollar not because you want to but because you have to!
Now let’s reverse the situation: you have a lot of money but no management skills. It won’t be long before you lose it all! Money not invested will deplete. Even if you decide to put it in an account at the bank and not touch it, inflation will eat up 2-4% each year. Would you prefer to see your money disappear over time or multiply? We all think that we are very discipline, but cash will tempt you to buy things you don’t need and things that don’t have long-term value.
Learn To Be Consistent
Consistency can be your best friend. They said that you need to do something at least 21 times to make it a habit. Practice being consistent in your finances. Saving or investing habits will have more impact on your financial journey if done consistently.
The lesson we all need to learn is stewardship. How do we handle what we already have? It’s not about how much money you have but how well you manage it. Wealthy people are not prosperous because they have a lot of money. They are wealthy because they know how to keep the money and generate even more from it.
Three areas would help you manage your money correctly:
- Stay out of debt: debt means you bought something you couldn’t afford at that time and used someone else’s money at a cost (interest). It’s not the end of the world if you already have debt but plan on paying it off as soon as possible.
- Control your expenses: You can hustle and make more money, but if your expenses increase as your income increase, you can’t build wealth. Plus, the smaller your expenses are, the easier it will be to cover them without working too hard.
- Invest: choose a line of investing you feel comfortable with (stock, real estate, business) based on the risk you want. Also, some investments are more passive than others!
Learn To Adapt and Keep Improving
Your money management style will evolve as your money situation change. A W-2 employee doesn’t have the same “problems” as an entrepreneur. The way you manage money as a single person is not the same for married people. Although the principals are the same, the strategies will most likely be different. We are always learning and growing in other areas of our lives; why not apply it to our finances? When we have a routine that works, we tend to avoid change. There is a difference between routine and consistency.
Routine = doing something repeatedly the same way (almost mindless)
Consistency = planning & scheduling tasks regularly (more effective because it has a purpose)
I like to say that consistency is routine with a purpose! We need both for different situations. But I think for your financial health, you might want to go with consistency. I like the idea of setting things up and being less hands-on. But you also need to review and re-evaluate your settings and make adjustments as needed.
What’s harder: earning money or managing money? Finding ways to make money is easy. Deciding what to do with it requires wisdom that most of us are not born with it. There is no shame in admitting what I don’t know. But there is no excuse for not learning.
“If you are looking for a breakthrough, try breaking your routine”
