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Managing Money

If you don't control money, it will control you.

 

There are simple techniques for managing money, they are seldom used by ordinary people. I did not intend to write a lot about money but the two biggest stops that people Think they have are time and money. That's right I said think they have. I know that some people who read the next few sentences will get annoyed with me, that's alright, some people will never be successful. Time and money are excuses, the real problems are lack of understanding and control.

To get an understanding of what money is basically about you should read the page Money Tips.

There is one common idea about money problems that is totally wrong. Most people will tell you that if they just made more money they could handle all of their money problems. This is completely untrue. On another page I mentioned the fact that just about all of the big lottery winners were broke again within five years. It is a truth that people who can't handle money will only overspend any extra money that they get.


Change You Mind

To start managing money properly takes a complete change of mindset. The successful people that I have talked to seldom think about money, let alone worry about it. One of them said that he did not understand why money is a problem to so many people, it is really very simple. And it is true, it is simple when you know how and follow the steps.

First, stop worrying about money. Worry never accomplishes anything. Money is not a problem, if you try to deal with money problems then you handling the wrong thing. Consider this, a patient goes to the doctor with chicken pox. The apparent problem is that the person has itchy spots on their body. If the doctor then tried to handle that problem by cutting of the spots he would make it worse. Instead he will handle the infection within the body.

To handle your money problems you will need to handle your control problems. Learn to control yourself and your money.

The first rule for managing money is so obvious that it should not need to be stated. Spend less than you make. If you follow that one rule you will never have money problems again. How simple can you get? I can hear people saying but I have bills, I owe money, I need ...., I will deal with that later. For now just firmly plant in your mind "I spend less than I make."


Wasted Money

Stop spending into the future. this is the credit trap. Finance companies love to see you give them money that you can't really afford. Have you noticed how friendly they can be when they are 'helping you to get it now'? How friendly are they when you can't make the payments? Don't get suckered into accepting too much of their 'help'.

I have devoted a whole page to credit, Financial Freedom. If you bought some furniture for $5000 and put it on your credit card at 19% (the last time I checked the average was 19.7%). You decide that you can afford $250 a month. It will take you two years to pay it off and  $1060 in interest charges. That furniture cost you $6060 and two years of hoping your job was secure. And this is if you don't add any other purchases.

A simple tip that most people miss. If you have some money in a savings account for emergencies, then put it on your credit card or other high interest loan. A bank is paying you maybe 3 or 4% interest on your savings and taking 19 or 20% on your credit card, you can save 16%, that really adds up. If an emergency does come up the money will still be available to you.

Pay your bills on time but don't pay them ahead of time. If you have money set aside to pay a bill then use it to pay down your credit card. You can use the credit card to pay the bill when it is due. This gives you a few weeks or a month with a lower balance on your card and if you read the conditions you will notice that interest is charged on an average daily balance. It is quite an eye opener to check all of your bills in a month and see how much money you are giving away.

Credit cards can be useful, I keep one for emergencies, When they are needed to rent something or buy on the internet. I always make sure it is fully paid up on the due date. I don't think they like that but I don't feel any obligation to give them extra money.


Money Management

Its time to start managing money on a regular basis. Take a look at your spending habits, do you really 'need' that item. If you do need it, does it have to be brand new or top of the line. A good used car is usually less than a quarter of the price of a new one. The same is true of furniture, appliances and other items. Some people are embarrassed to buy used, but the second they take that new item home it is used. Personally I would find it more embarrassing to not be able to pay my bills.

Make a list of the absolute essentials that you need for a month. Really this should only include rent (mortgage), food, power and what you need to get to work. There will also be long term essentials, clothes, car tires, health requirements etc.

Now look at your non essential needs. Phone, cell phone, cable TV, internet etc. things you could give up but probably won't have to. You really won't 'die without them', people survived quite well before they ever heard of those things.

Whatever else you spend money on are niceties. It is fine to have these things but don't wreck your finances getting them. This about managing money, when you get your control over money you will find that you have more to spend on them. Even just honestly looking at your expenses will exert some control.

Part of managing money is setting up a basic financial plan. Whenever you receive some income, wages or whatever, set aside the money for absolute essentials first. Then with the rest assign 50% to non essential needs, 20% to long term essentials, 20% to niceties and 10% for emergencies. These percentages can be adjusted a little to suit your needs, just make sure that the absolute essentials come off the top and something is assigned to the others.

With the emergencies fund you should use most of it to pay down old debts first. After that do not touch it unless there is an emergency. No that stores emergency clearance sale is not really an emergency.

Note: if you get an unexpected lump of income use it to pay off debts. I know it is tempting to go out and get that thing you always wanted but in the long run it is better to get out of debt.


Debt Collectors

How to handle debt collectors. If bill collectors are harassing you then do the following. Work out how much you can comfortably pay them each month. Then tell them "I will send you $10 a month", or whatever figure you came up with. They probably will not like it and even threaten court action, don't worry, just tell them to take you to court and don't phone again. They will not take it to court, if they did and you could show that you were making even minor attempts to handle it then the judge will throw it out. You probably have more protection under the law than you realize.

Here is a quick recap on managing money. Spend less than you make. Pay off your debts, even if it is tough at first. Follow the simple financial plan. Do not incur further debt. You will find that your money goes a lot further and life is a lot less stressful when you are debt free.

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