6 Essential Principles for Better Money Management

Are you looking for ways to improve your financial situation? Fortunately, managing your money correctly is just like learning any other discipline. If you take the time to understand the basic principles of good money management and put them into practice, you’ll be well on your way to getting your financial house in order.

Here are 6 essential principles for better money management.

1. Make Sure Your Expenses Don’t Exceed Your Income

Sometimes, the best answers in life are also the simplest. The first way to manage your money better is to ensure that you don’t spend more than you earn.

Sit down and come up with a budget that itemizes all your monthly expenses. Then, add up your monthly income. If you find that your income is greater than your expenses, something has to change. You either need to increase your income or reduce your expenses. Those are your only two options.

2. Make Money Work for You

Rich Dad, Poor Dad author Robert Kiyosaki points out that poor people work for money while rich people have money work for them.

However, you don’t have to be rich to have money work for you. Stash some of your monthly income into an index fund and let it sit there for years (or, better yet, decades). Let your money grow and work for you over time.

3. Look for Discounts

Become a bargain hunter. Generally speaking, whenever you see something that you want to buy, it’s probably for sale somewhere else at a cheaper price. Do some comparison shopping and save.

Look for as many ways to save as possible. Use rewards cards. Clip coupons. Heck, you can even find discount rates for college students. Take advantage of every opportunity that you can to save money.

4. Be Ready for the Unexpected

You will need to plan for the proverbial “rainy day.” Put some of your cash into a savings account every month so that, in the event of an emergency, you’ll have some money that you can use.

You don’t want to have to go into debt when you get hit with a major repair bill, a medical expense, or some other expensive emergency. Plan for the future with a savings account that’s rich enough to handle some of life’s more unexpected money pits.

5. Avoid Excessive Credit Card Usage

As a rule of thumb, credit cards won’t help you practice good money management. That’s because they’re accompanied by an interest rate (sometimes a high rate) that effectively raises the price of everything you purchase.

Also, there are some credit cards to avoid because they don’t even offer you the benefit of cash-back bonuses or other perks. So you’re losing out on some of the best benefits while paying more for the things you like when you use those cards.

Instead, opt for a “strictly cash” policy. You’ll save a fortune on interest over the long run.

6. Sell Stuff

If you need to raise some cash, consider holding a garage sale or yard sale. You can clear some junk out of your attic or basement while at the same time raising cash. It’s a great way to collect some extra dinner money.

It takes practice and patience to learn how to manage your money well. However, once you get your personal finances in order, you’ll never regret it.