5 Money Management Tips to Improve Your Finances

1. Start Saving Early
   It’s often said that it’s never too late to start saving for retirement. That may be true (technically), but the sooner you start, the better off you’ll likely be during your retirement years. This is because of the power of compounding—what Albert Einstein called the “eighth wonder of the world.”

Compounding involves the reinvestment of earnings, and it is most successful over time. The longer earnings are reinvested, the greater the value of the investment, and the larger the earnings will (hypothetically) be.

1. Build and Maintain an Emergency Fund
   An emergency fund is just what the name implies: money that has been set aside for emergency purposes. The fund is intended to help you pay for things that wouldn’t normally be included in your personal budget: unexpected expenses such as car repairs or an emergency trip to the dentist. It can also help you pay your regular expenses if your income is interrupted; for example, if an illness or injury prevents you from working or if you lose your job.

2. Track your spending to improve your finances.

If you don’t know what and where you’re spending each month, there’s a good chance your personal spending habits have room for improvement.

Better money management starts with spending awareness. Use a money management app like Money Track to track spending across categories, and see for yourself how much you’re spending on non-essentials such as dining, entertainment, and even that daily coffee. Once you’ve educated yourself on these habits, you can make a plan to improve.

1. Save up cash to afford big purchases.
   Certain kinds of loans and debt can be helpful when making major purchases, such as a house or even a car that you need right now. But for other big purchases, cash offers the safest and cheapest buying option.

When you buy in cash, you avoid generating interest and creating a debt that requires months—or, often, years—to pay back. In the meantime, that saved money can sit in a bank account and accumulate interest that can be put toward your purchase.

1. Start an investment strategy.
   Even if your ability to invest is limited, small contributions to investment accounts can help you use your earned money to generate more income.

Find out if your employer offers 401(k) matching, which essentially serves as free money. Consider opening a retirement account or other investment account.

The path to better finances starts with changing your own habits. Some of these changes will be easier than others, but if you stay committed to this transformation, you’ll end up with great money management skills that will serve you throughout your life—and in the meantime, you’ll have more money in your pocket.

The foundation of good money management is a rock-solid budget. Create your own by downloading A Complete Guide to Budgeting today.

1. Set the right financial goals
   If you are getting serious about your money, then setting goals is one of the most important money management tips you can use! Creating financial goals will help you stay focused and motivated towards where you want to be financially.

There is no wrong answer, but you’ll need to take a minute to think about your plans and how money would factor into them. Once you have an idea of how money will play into your life, make clear and specific goals for your money.

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