Managing money well is a challenge for a large percentage of the population.  It doesn’t seem to matter if you make a small paycheck each week or if you gross millions of dollars annually – effective money management is not something most people know intuitively.  Our schools rarely teach money management, and while most families try to teach their children responsible money habits – the problem is many parents struggle with their own money management situation – making it difficult to teach their children!

Luckily, learning to manage money can be done through “baby steps”.  You can sort of ease into better money management, and as you initiate each step into your financial routine, you’ll notice your financial situation begins to improve over time.

Step One: Make the Decision to Improve

No one else can make the decision for you – if you really want to improve your financial situation you have got to make that decision and then stick to it.  It won’t do any good to think about it, you have to commit to making lifestyle changes to really improve your ability to manage your money.

Step Two: Start Saving

Something that is often missing from the financial routine is an automatic savings plan.  Most people who don’t save say they don’t save because there isn’t any money left over to save after paying bills and living expenses.  For many, this is an unfortunate truth – however, you must make strides to pay yourself first and change that reality.  If you can only save $2 per week right now – save $2 a week.  The important part is to make it consistent, and to do it automatically.  One of the easiest ways to do that is to set up a savings account that is connected to your everyday checking account, and simply intiate an automatic transfer of $2 per week (or whatever you decide to save) on the same day, every single week.  If you get paid bi-weekly or monthly, you might want to transfer the savings on the day you get paid.  Once the money is in the savings account – don’t touch it.

Step Three: Learn to Budget

No one wants to hear about budgeting.  Budgeting is not fun for most people.  It means “going without” or “giving up” things, for most of us.  The truth is – having an effective budget will make it possible for you to pay your bills, living expenses, contribute to savings, and get out of debt.  A budget is the plan that makes it all possible.  Budgeting is the key to better money management.  If you don’t know where to start budgeting, just do a search on Google or Yahoo for “how to budget”, and you’ll have more information than you need to get started.

Step Four: Reduce Existing Debt, Avoid Additional Debt

It’s far too easy to generate debts.  If you’ve got excessive credit cards and loan payments, you can think back and remember the rationale to getting into debt.  It probably went like this:  “If I borrow $1000 to pay for <whatever>, I’ll only have to pay $20 a month until it’s paid off.  $20 a month is nothing!”  The problem starts when you have multiple debts that you’re only paying “$20″ a month on; and suddenly you’re debt repayments equal the amount you’re making each month (or worse – they’re more than you make each month!)  All of those little repayments add up quickly, and before you know it you are in trouble.

When creating your budget, look at ways to reduce your debt as quickly as possible.  Using a debt snowball can help you eliminate and pay off debts quickly – provided you create the plan and stick with it.  Don’t be tempted into taking out additional debt in the meantime – this is where you have to be committed to better money management.  When you are debt free, you’ll have your income back because you’ll no longer be making multiple payments every month to all of those creditors!



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