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!

Stepping into Better Money Management was created by and is property of American Consumer News.

Put More Into Retirement Accounts

If you’re lucky enough to work for a company that offers a 401K plan with a matching contribution – you would be crazy not to take advantage of the program. Each time the employer matches your contribution (or even if they only match a percentage of your contribution), that’s free money for you.

There are a number of benefits for saving with a 401K account, which makes it one of the favored options for retirement planning by many people.

Tax advantages include:

• Reduction in tax liability since contributions to a 401K plan are not taxed

• Tax deferred investment income

• Compounded interest (the earlier you save, the more you’ll have upon retirement)

If your employer doesn’t offer a 401K plan, or you are self employed, you may want to consider a Roth IRA which has a number of tax advantages as well as some distinct advantages over the 401K plan (primarily the ability to withdraw the money before you are 59 and a half, penalty free, in certain situations).

Pay Off Existing Debt

Many people who have debt to worry about are often concerned that by contributing more to their retirement accounts it will make it that much more difficult to pay off their existing debts. One of the easiest ways to answer the question of whether or not you should contribute more to a retirement or pay off your bills is this: if contributing to a 401K or other type of retirement account is not going to leave you enough money to pay your bills each month, you obviously are not in the position to contribute to a retirement account, yet!

On the other hand, it’s very easy to always say you don’t have enough money to save, so be sure to be honest with yourself regarding how much money you earn each month and how much money you are currently paying out for bills and living expenses. If there is more money than you owe; immediately set up an automatic savings option so that it comes out of your pay without you having to do anything. (if you don’t see the money, you won’t miss it as much!)

In most cases, it doesn’t make sense to skip paying into a 401K or other retirement account in order to pay your car loan or mortgage faster. This type of debt is often a fixed, low interest, and for most people- will be paid off before you are ready to retire. On the other hand, if you take and apply all of your money to these bills now, when you are ready to retire you may not have enough saved to stop working.

If most of your debt is high interest accounts, like credit cards or personal loans for example, you’ll want to pay these off as quickly as possible – even if it means reducing your retirement savings temporarily while you attack the high interest debt. If you paid only the minimum on a credit card that you over-spent on, you could still be paying that $4000 debt in 20 years time (and paying thousands in interest!) The faster you pay off high interest credit card accounts, the more money you save on interest and the more you will be able to contribute to your retirement account.

If your cash flow doesn’t allow you to pay more on high interest accounts because you are contributing to a retirement plan it is probably better to reduce or skip the retirement contributions for two or three years to get your debt paid off- and then put all of that money into your 401K or other savings plan once you are debt free.

Save For Later or Pay it Off Now? was created by and is property of American Consumer News.