Money can be a tricky issue for many people, especially in the last few years when we have had record high unemployment rates and difficulty making ends meet. As you get ready for the new year, you can prepare yourself with some new tools that can make 2012 one of the best years for managing your money.

YNAB

I started to get serious about my money situation about halfway through 2011 when I stumbled on one of the single best money management / budgeting apps around: You Need a Budget. We have actually had the founder and creator of YNAB featured here at Lifehack in the past.

YNAB is a piece of software (that works on Mac or Windows) where you setup your accounts and start to budget the money that you have during the month. It’s sort of like making buckets for things that you have to pay during the month and then sticking to them.

The whole idea though with YNAB, rather than just following a simple budget, is to build up your “YNAB Buffer” where you will use it to eventually pay next month’s bills with this month’s money. This “Buffer” allows you to not get into the “not-enough-money-at-the-end-of-the-month” phenomena and helps relieve a bunch of tension in your life, especially if you have been struggling with keeping track of your money. It took me about 4 months to get my “YNAB Buffer” setup, and I will tell you, the stress and pain of worrying about where my money for this month’s bills is going to be is gone because they were payed with last month’s money.

YNAB also has apps for iOS and Android to track what you have spent on the go.

Credit Cards with rewards

I wouldn’t say that I am a credit card connoisseur by any means, as I do believe that credit cards can get you into some serious trouble if you are not responsible with them, but they can be appealing if you pay them off every month and use them appropriately. The three cards that I can recommend from personal experience are:

The APR on these cards are pretty darn high, but as long as you pay off your balance before you get hit with the rates at the end of your month cycle, you can get some great cash back rewards when purchasing a good amount of gas or even ordering things on Amazon during certain times. Keep a look out for other cards that offer some sort of reward that is applicable to you to help you save a little bit of money here and there on things you already purchase.

Envelope System

If YNAB is a little too technical for you, there is also a tried-and-true-system that is a lot like it. I have seen this technique in many different places, and I’m not exactly sure who to credit it too, but the-get-out-of-debt guru Dave Ramsey has surely made it popular on his radio broadcast: The Envelope System.

At it’s core, The Envelope System requires you to take your paycheck, figure out how much money need to goes to what category (to food, clothing, rent, cable, etc.), create a separate envelope for each category, put the cash in the envelope, and only spend that cash. Sounds simple, hmm? Think again.

The Envelope System is truly powerful, but only if you can stick to it which is tough to do because budgeting is tough to do. I much prefer the YNAB system to this one, but if you can only live paycheck to paycheck until you get out of debt or make more money, then The Envelope System is probably your best bet.

Common sense

Ahh, yes. A little common sense can go a long way when it comes to money. Here are some things to follow. Some of them were new to me this year while some are things that I need to be aware this coming year:

  • Don’t spend more than you make
  • Create a budget and stick to it
  • Try to find a way to make more money rather than cut out every last expense that you have
  • Try giving money away to charity or a cause every month
  • Start saving money for the future today
  • Read a good money book like I Will Teach You to Be Rich
  • Don’t use a credit cards unless you can pay off the entire balance by the end of the month

Conclusion

Like I said above, managing your money comes down to making smart decisions (saving for the future) and avoiding bad ones (like not paying off your credit cards). If this year you budget your money correctly, save, and make smart decisions with how you spend, hopefully your money will be controlled by you rather than you controlled by it.

(Photo credit: 3D illustration of dollar from Shutterstock

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