Money management is an important skill that you have to learn. You see, people think that to be financially successful, they have to earn a huge income. But that’s not true. What really matters is your ability to manage your money.
This is why there are people who are earning a 6-figure income who are currently struggling with their debts. That’s because they failed to manage their finances properly. It led them to borrow a lot of money. If only they learned financial management skills, they would have been able to pay for a lot of things in cash. Even if they decided to use their credit cards, proper money management would have allowed them to pay off debts within the grace period of the billing cycle. This means they won’t have to pay interest on the debt.
Keep this in mind if you want to improve your current financial situation. There are many benefits when you learn to manage your finances – and improvement is just one of them. It’ll also help you survive a crisis.
But how can you start managing your finances? You can start even if you’re in the midst of a crisis. In fact, you can learn a lot about it when you’re trying to survive a crisis. Like in one survey, 46% of the respondents said that they became more of a saver during the coronavirus pandemic.
As you can see, being in a crisis is no excuse to be reckless with how you use your money.
4 money management lessons you’ll get after surviving a crisis
So what are the money management lessons that you should be paying attention to while you are in the midst of a crisis?
Always have a budget
If you want to have financial freedom, you need to have a budget. No matter what state your finances are in, it’s very important that you always have a budget plan. In fact, every time there’s a change in your finances, you have to revisit this plan so you can check if you’re still using the right budgeting strategy.
When you have a budget, you have a better chance of managing your finances. You’ll know your current income and expenses. It also allows you to make informed decisions that’ll only strengthen your finances even in the midst of a financial struggle.
Track your spending
Another money management lesson you’ll get from going through a crisis is learning how to track your expenses. When you have limited finances, you’re more likely to be very mindful of what you’ll spend. You want to make sure that even if you only have so much money coming in each month, you can make it stretch.
This is a very important habit that’ll help strengthen your finances. After all, someone earning $30,000 a year but spends $25,000 is better than the one who spends $100,000 but spends $105,000. So make sure you are not spending more than your income. The extra money will help secure your financial future.
Limit your credit card purchases
Being in a crisis will really make you cautious about how you spend credit. While there are times when you’ll be forced to rely on your card if things get really rough, you’ll learn how to make this as the last resort.
Make sure you have the same mindset even if you are no longer in a crisis. You have to limit your use of credit cards – especially since this has a high-interest rate. If it’ll take you a long time to pay it off, you might end up paying so much more than the value of what you purchased. So just be careful. The only time it’s okay to use your credit card is when you have the cash on hand. This will allow you to completely pay off your balance when the billing statement comes.
Be a consistent saver
Earlier in the article, it’s mentioned that a survey revealed how a lot of Americans became better savers. If you’re one of them, that’s good for you. But make sure you keep saving even after the crisis is done. Why? Because your savings will help you get out of a lot of tight spots in the future.
You can use your extra savings when another crisis strikes. And if you happen to encounter an emergency situation, you know that you have the means to get through it without putting yourself in another debt situation.
What good money management skills will bring
Learning the right money management skills will really take your finances to the next level. How? Most of it stems from the fact that you’re now making better choices when it comes to the use of your money. This will not just lead to wiser spending choices – but also more savings.
There are three ways that scenario can benefit you.
When you have more savings, you’ll feel more financially secure. Your savings, specifically your emergency fund, will keep you from panicking in case another crisis will happen. This will not just give you the money to spend in case your income is compromised. It will also allow you to deal with any situation with confidence.
And this goes for other things too. If you feel secure about your finances, you’ll be more confident to take risks and grab opportunities. Because of that, it’ll be easier for you to enjoy the next benefit on this list.
When you use money management skills, it’s easier for you to build wealth. You’ll gain the habits that‘ll get you closer to your goals.
Since you’re able to take more risks, you have the opportunity to take in more rewards. After all, the higher the risk, the more chances of getting more out of it. Just make sure that you know how to play this game so you can come out on top.
Another way that you can build wealth is by using your extra money to set up a passive income. Maybe you can invest in real estate. Or you can put your money in stocks and bonds. There are many ways to do this and you’ll be surprised at how quickly your net worth can all grow.
Finally, proper money management will also make you live with fewer worries. According to reports, 77% of Americans feel anxious about their finances. Usually, they feel this way because their income is not enough to cover their expenses.
But if you learn to manage your finances wisely, this won’t have to be a problem. You’ll always be cautious about how you spend your money. You’ll never allow yourself to spend more than what you can afford. And that’s one of the best ways to improve your financial situation.
Since you’re not worried about your finances, guess what? You’ll enjoy better relationships. You won’t have to channel the stress that you’re feeling because you know your lifestyle is secure.