Knowing how to manage your money well is not innate. It can be learned.
And being in a good financial situation is not just about earning a good salary. To manage your finances well, you will need to put in place a good savings and investment system, and strategies that will help you achieve your projects.
But don’t panic: you don’t need to be a mathematical genius to manage your money well .
It’s all about creating good habits and laying a solid foundation for your financial health. And also and above all to learn how to change the way you think and spend.
Do you tend to overdraft too often or fail to set aside as much as you would like?
Discover in this article our best advice to improve your financial situation and learn how to manage your money well .
Having credits is no more or less than owing someone money.
And if the movies have taught you anything, it should be to never owe anyone money.
And we can easily tell ourselves that a small credit will not really hurt. But that’s always how it starts.
And we often do not realize all that getting into debt entails.
Already, you end up paying for what you bought much more than its original cost.
You can say thank you to interest, which makes a purchase that you already couldn’t afford to make even more expensive.
But taking out a loan also means making you extremely vulnerable to any unforeseen event in life (a car that needs replacing, job loss or inability to work, costly repairs, etc.).
If you choose to take credit rather than pay cash, you are probably already unable to afford the item or experience in normal times.
Which means that in the event of any financial emergency, the consequences could truly be disastrous. Because if you are not able to repay your loans on time, you are heading headlong towards financial disaster.
Of course, some credits, such as mortgages or certain student loans, can be worth it. Especially because they aim to ultimately bring you more than what you paid for.
But all consumer credit and other personal loans should be avoided at all costs.
Repay your existing credits
Repaying your loans in advance is often a very good decision for your finances.
The advantage is that you will not pay all the interest that you would have had to pay if you had kept your credit until its term.
Along with building an emergency fund (which we’ll see later in this article), paying off your consumer loans should be your number one goal in managing your money.
Stick to a budget
Keeping a monthly budget is an important step to consider when learning how to manage money.
How do you know where your money goes every month without a budget? How do you know what to try to spend less on without knowing what you are spending the most on?
And budgets aren’t just for people who can’t manage their money . Moreover, the authors of the book The Millionaire Next Door showed that more than half of American millionaires still have a budget. That is to say.
A budget is nothing more than a plan by which you will spend your money .
It gives you an overview of the income you receive and how you spend it.
Already, just seeing what expenses you make and in which categories changes the game. This can help you realize their importance, or detect problems or bad habits.
But also, forget the idea that the budget is meant to deprive you. It’s actually quite the opposite: a budget helps you spend your money on what matters most to you by teaching you how to prioritize . You take control of your spending, rather than letting your spending control you.
You can create your budget yourself in a spreadsheet if you want (even if it’s far from the most practical solution, unless you’re the queen of Excel tables 👸🏽).
But there are plenty of budget apps out there today that make organizing your finances much easier.
Build precautionary savings
In the most popular tips for managing your money well, it is often recommended to ” pay yourself first “.
This means setting aside money for your savings goals and financial security before you spend your money .
And one of the categories in which it is essential to put aside in priority is your precautionary savings .
Precautionary savings are neither more nor less than security savings that are there to protect you in the event of an unforeseen event and a financial emergency.
Like the loss of a job or an inability to work, expensive and unexpected repairs, or any life change that may affect your financial stability.
And the question isn’t whether your fridge or your car will break down – but when . Because financial contingencies will inevitably happen at one time or another.
Having some cash on hand for emergencies will help you sleep better at night knowing you’ll be protected should anything go wrong. And the peace of mind of knowing you can handle any emergency without a hitch is priceless.
It has also been shown that precautionary saving has a significant effect on our happiness . Much more than spending on a coat on sale.
Having an emergency fund will also help you avoid having to take out loans to get by, and thus make an already difficult situation even worse.
Define your financial goals
A notebook to manage your money well on a table. To manage your money well, one of the main tips to remember is to define your financial goals .
Because the goal of putting money aside is not to have the largest possible amount in your bank account.
Or bathing in a pool filled with gold coins (unless you’re Donald Duck).
It’s about using your money for what matters most to you , and contributing to your financial freedom .
Having clear goals will give you a long-term view of your finances, and help you understand how saving now will help you later.
And having a clear goal can keep you motivated and help you develop a plan to reach that goal even faster.
For example, ask yourself what your goals and plans are:
In the next 6 months
In 1 year
In 5 years
In 10 years
Here are some examples of common financial goals.
Improve your financial education
We tend to think that the subject of personal finance is extremely complicated. That you have to be a mathematician, or a trader to understand something about it.
But it is actually much more accessible than it seems.
Especially since there are countless resources to learn how to manage your money. This is particularly the case with books, which generally make it easy to learn both theory and practice. Read books like Rich Dad poor Dad and the Think And Grow Rich.