Living from paycheck to paycheck can barely be considered money management.
Yet, that is still what the majority is doing, with a certain percent even reaching for their maxed out credit cards more often than they should.
Now, some studies show that only 18% of people know that they will reach their income goal in retirement.
Why is this percentage so low?
It seems that many young people in Western countries are still struggling with basic money management. Many are reported to lack an emergency fund and have difficulties managing their month-to-month cash flow.
In this situation, it’s even harder to get to the point of successfully handling piled up debts or saving properly for retirement.
However, taking baby steps into dealing with your financial priorities can still tremendously help with moving forward to a better financial stability.
1. Not having a clue of where your money is going every month
Money management mostly comes down to planning and organization. This does not come down solely to keeping track of your basic monthly expenses (bills, rent, and gas money).
You should be going regularly through your credit card bills, where you will probably discover many more recurring costs creeping.
To kickstart this useful habit (and see its importance), the first step would be to go through your last three months of expenditures. Record your expenses in a sheet by categorizing them nicely into separate columns.
This will finally give you the overview and better understanding of where you are financially.
2. Having unnecessary costs
This one goes without saying – your expenses need to be streamlined. You should stretch only as much as your financial stability allows.
No matter how much you earn, there are always people living on less money than you do currently. How do they make it? By cutting down the unnecessary costs.
Are there any membership you could cancel? Have you tried looking for comparison products to your weekly shopping lists? Do you need to get that Starbucks coffee on your way to work each day?
Basically, there are many cost-effective options to a lot of your daily or weekly routines that you can use and not necessarily sacrifice on any comfort you are used to.
3. Saving only what is left at the end of the month
Saving money is definitely fun, and more times than one will there be a special occasion for which an immediate expenditure is needed.
And the vicious circle starts. You save only what remains at the end of the month, and many months in the year (think about Christmas!) you will most likely max out your credit card instead of saving.
That’s why, it’s advisable to have your savings automatically set aside each month. There is more than one option for this, from using your retirement plan and have the savings deducted directly from your paycheck.
Money management – the resolution you should stick with
Finally finding the strength to start tackling your money management may just be the decision you’d be making in 2017.
After all, your retirement may seem far fetched in your 20s and 30s, but finding the balance between your working today and retired tomorrow is a must.
Employ some planning ahead, start with baby steps and soon you will see your bank statements looking much happier.