Financial success requires a man to have a plan for savings, as well as for spending, enabling him to create a surplus that wisely employ to bring financial freedom for the future. – Solomon
Commonly, our mindset of money is to spend it and then save what is left. We follow budgeting instead of managing our money. In result, we find it hard to multiply and grow our personal money and wealth. Or worse, we go down with arduous financial debt and crisis.
Previously, we’ve published a blog article entitled, Personal Finance 102: What is Money Management?, in which we’ve defined the meaning of money management, and how it differs from budgeting. If you haven’t read it, click here.
As mentioned in our previous blog article, Personal Finance 102: What is Money Management, the principle of money management is to pay yourself first. It means we allocate our earnings not based on expenses but based on financial categories; like investments, business, savings and expenses.
In today’s blog article entitled, Personal Finance 103: Money Management Tips, we will suggest to you a money management program that will get you started in learning how to pay yourself first.
Remember that the objective is for you to start building your own personal wealth and enable you to achieve financial freedom, instead of prolonging your money crisis and defer your freedom to enjoy life without worrying about money.
5 Steps in Creating a Money Management Program
Money management program is a personal finance system you will create and follow. It is better than a plan because it require action, and not just an idea.
1. Identify How Much is Your Cash Inflows
Cash inflows are the money equivalent of your income or earnings that you receive.
Identify and account how much cash inflows you receive. Ideally, you do it monthly. However, depending on your personal preferences, you can do it daily, weekly, or yearly, whichever is most convenient for you.
Accounting your personal cash inflows will give you a clear vision of how much money you will need to manage.
2. Identify Your Cash Outflows
Cash outflows are the money equivalent of expenses or disbursements that you spend.
Monitor and account your cash outflow by listing down your daily, weekly and monthly disbursements or spending.
When you are aware on where each penny of your income goes, you can gauge if you’re spending wisely or not.
3. Place a Category in Your Cash Inflows and Outflows
Now that you are done identifying and listing down each of your cash inflow and outflow, it’s time to organize them by placing a category.
By naming and grouping your cash inflow and outflow, it makes money management an easy task and more organized, especially once your personal money or wealth grows bigger.
4. Set Your Financial Goal
Having a financial goal helps you responsibly manage your money and finances. It makes you wiser in how you spend each penny from your hard-earned money, as well as, it encourages you to look for better income and earning opportunities.
5. Create Your Money Management Program
Now that you’re done identifying your cash inflows and outflows, you’ve placed categories and have set your financial goal, the last thing you need to do is create a plan that you will follow.
Here’s an example of a money management plan, wherein you pay yourself first by allocating your cash inflows based on financial categories, as follows:
In money management, you allocate your cash inflows not on your expenses but on cash outflows, of which can be both expenses and investments.
Depending on your preferences, you can alter or change the percentage (%) of allocation and categories of your money management plan. This is just an example that you can look upon. Just make sure you allocate your cash inflows on both expenses and investments, to ensure that you have a better financial future.
I hope this article has been helpful and motivating for you to start managing your hard-earned money more wisely.
For a final note, let me leave you this thought to ponder from Napoleon Hill, author of Think and Grow Rich:
Riches do not respond to wishes. They respond only to definite plans, backed by definite desires, through constant persistence.
Please do share this article to the important people in your life, so they can be saved from the stressful and disturbing financial problems or crisis. You may share by using the social media buttons below.