Managing money is a skill that seems to be missing from the education curriculum. With the current recession it is even more important that money management skills are learned and practiced as it is the ability to manage money that brings power — the power to make choices.

The first step in managing money is in knowing where it goes. Try keeping track of what you buy and add up every dollar you spend for a month. You will be surprised at how much you spend on small things that add up to big amounts.

It is important to understand the difference between your needs and your wants. For example, you need to eat, but it is not necessary to spend money at a restaurant to satisfy your need. Money wise spenders understand that needs and wants are different and they create a plan for both. This plan is called a budget. And yes, you can plan for a want, providing you can cover your needs. Your budget plan will show you if this is possible.

A budget is a tool to help you to know where your money comes from (your income) and a way for you to plan what goes out — in the way of saving and spending. Following a budget puts you in control of your money.

The reality is that sometimes your financial plans don’t turn out the way you would want. If you are currently in a position to be able to allow for future problems do so by setting aside an emergency fund (called a reserve fund) when you plan your budget. Allow this reserve fund to build up to at least three month’s worth of income.

If you are currently having financial problems it is important not to be afraid of the budget as a financial tool. Your budget will show where you need to make changes and give you a clearer picture of your financial situation. Once you know the extent of any problems you can take steps to rectify them. The fear is in seeing it on paper or on the computer, but ignoring it will not make it go away.

Financial education is the real key to being successful with money. Making a budget plan is the best way to understanding your finances and managing money. It will give you power — the power to make choices.

Tags: budget plan, Financial, Financial education, Managing money

This entry was posted on Saturday, June 20th, 2009 at 6:23 am and is filed under Budgeting. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.