Mia
Why Is Money Management Important?
Your money should not manage you! Instead, you should learn how to manage your money. In fact, financial literacy is driven by money management, as it is one of the most actionable steps individuals can take in order to set themselves up for a successful financial future. Simply stated, money management is the process of managing and overseeing one’s income, budgeting, saving and investing.
While successfully learning how to manage your money goes hand in hand with growing your finances, there are also many other benefits to successful money management. Some of these benefits include:
- Positive Impacts on Quality of Life
- Ensure Financial Security
- Prepare for Emergencies
- Staying out of Debt
- Achievement of Long-Term and Short-Term Financial Goals
According to the National Library of Medicine, extensive research has shown a positive correlation between healthy financial management behaviors and improved quality of life. This improved quality of life also encompasses your relationship with your partner or friends, because positive money management often leads to reduced stress on outside relationships.
Additionally, money management can help to ensure financial security by helping individuals better prepare for unexpected life expenses. Life has a tendency to throw unexpected curveballs our way. According to Realtor.com, the unexpected costs of owning and maintaining a single family home hover around $18,000 each year. On top of living expenses, unexpected car repairs, medical bills or other emergencies can wreak havoc on an unprepared individual. While there is no way to avoid these unexpected life costs, individuals who practice successful money management have emergency funds that help them to prepare for these challenges.
In addition to preparing for emergencies, having a fund to help manage this can also help individuals avoid debt by practicing healthy spending habits. According to Forbes, a 2024 study reported that 78% of Americans were living paycheck to paycheck and outside of their means.
If you are constantly in debt or struggling to catch up on emergency expenses, it is impossible to plan for savings or to achieve any short or long term financial goals, especially with high interest debt like a credit card or car title loans. Setting and working to achieve financial goals is what helps individuals stay on track and to achieve their dreams.
It should come as no surprise that successful money management helps individuals to reduce stress. The cost of poor money management is high. Keep reading to learn more about developing successful money management techniques to get peace of mind.
How Can I Teach Myself Money Management?
Teaching yourself money management is a valuable investment in your future! While some individuals may have grown up in a household that exercised successful money management and were taught these lessons from an early age, others may need to put in some additional work in order to be successful in this arena.
Even if you feel as though you are “behind” in this realm, there are steps you can take to educate yourself! Some of these steps include:
- Reading: educate yourself by diving into some books and foundational texts that can teach you about money management. Check out these 10 Best Personal Finance Books or this ranking of the best money books of all time to compile a reading list.
- Online Courses: There are many online courses that are free to individuals with a thirst for learning how to manage their money. Some of these notable classes include:
- Finance for Everyone developed by the University of Michigan
- Personal Finance and Life Skills through Khan Academy
- McGill Personal Finance Essentials
- Financial Planning for Young Adults through the University of Illinois
- Blogs and Articles: Most people spend time scrolling on their phone each day. Let your scrolling work for you instead of against you and follow pages / blogs that offer financial planning tips and advice for money management.
In addition to the tips mentioned above, by creating and sticking to a personalized budget, you can also learn how to best manage your money. What works for one person may not work for you, so it’s important to tailor your budget to your personal financial situation and goals.
Incorporating smart habits surrounding money should be on the top of everyone’s life skills list. In today’s “little treat culture” it can be tempting to get the daily $5 Starbucks coffee or a new outfit. However, by practicing restraint, educating yourself and living below your means, you are investing in your future.
How Can I Get Better At Managing My Money?
If you have tried and failed, there are still ways you can improve at money management! In fact, you are not alone. The World Economic Forum reported that half of US adults lack financial literacy skills.
If you are still struggling with money management, the first place to start is with your budget. It is best practice to track your spending habits and income for 1-3 months to get an accurate picture of how much money you have going in and out.
It is equally important to ensure that you continue to check up on your budget. As you grow in your career and make more money, or as your living expenses change it is important to see how these life changes factor into your budget. Experts recommend reviewing your budget anywhere from once a week to once a quarter.
If you find that you are still struggling with financial management, you may want to seek out professional advice. Working with a financial planner can be extremely beneficial for many individuals. On top of this, you may want to consider working with a professional accountant who can help you plan for your taxes and ensure that you are receiving all of the tax breaks and money to which you are entitled.
Finally, consider finding support in your community. Joining supportive communities can help you feel less alone in your money struggles and goals. In addition, letting others know about your goals is another great way to hold yourself accountable!
Why Do I Struggle to Manage My Money?
If you are wondering why so many individuals struggle to manage their money, there are many root causes to this nation-wide issue. Increasing your awareness of the causes of your money struggles can be extremely helpful in overcoming these struggles.
Some of the reasons that individuals struggle to manage money stem from:
- Psychological Factors
- Poor Financial Education
- Lack of Reflection
There are many psychological factors that can be a detriment to your money management. Emotional spending is when individuals spend money driven by emotions. Oftentimes these emotions are stress, boredom or sadness.
Failing to educate yourself about good money management, or leaving others to manage your money for you can also keep you from developing good money management skills. 42% of Americans claim that they don’t regularly monitor their checking account due to fear. Fear should not control your finances!
In today’s culture of instant gratification, it can seem daunting to take the time and truly reflect on how you manage your money. However, the achievement of your financial goals can be incredibly rewarding! By arming yourself with knowledge and through education you can successfully navigate these waters and take control of your life!
