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Complete Your Money Management Plan in 6 Easy Steps

Complete Your Money Management Plan in 6 Easy Steps

Managing your money can be a real pain in the rear end. If you’re in debt, then you probably have people calling you or sending you mail to remind you of your debt every month. Then you have food, bills like insurance and phone, and all sorts of other stuff. How do you keep track of it all? You can start with this simple money management plan to get you going.

1. Figure out your bills

A surprisingly large number of people have no idea exactly how much they fork out every month in bills, rent or mortgage (as applicable), and all of the other monthly payments you make to various places for various things. The first step to any feasible money management plan is to sit down and figure out what you spend. Once you have an idea of how much you spend every month, you have a better idea of what you need to stay afloat.

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2. Create a debt elimination plan

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    Being in debt sucks and it should be your number one priority to figure out how to eliminate as much of it as possible as quickly as possible. Debt is not only dragging down your credit, but it’s also negatively affecting your credit, your debt-to-income ratio, and it’s less money in your pocket every month. You should make a plan to pay off your debt. If you’re already making monthly payments, try to pay more every month if you can afford it. If you have debts that you don’t pay on, you should call those companies to either arrange settlements or begin monthly payments. The sooner you start, the sooner you get it over with.

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    3. Develop a budget

    Now that you have an idea of what you spend every month and how you plan to get rid of debt, it’s time to set up a budget. On a budget you can better manage your money, put some money away for a rainy day, and more effectively eliminate your debt. Budgets can be hard to stick to but a fun trick I’ve always used is to have an entertainment budget line every month, where you can splurge on things like eating out or attending fun events. If you don’t budget, you may overspend one month and all of a sudden you’re behind on your bills and you have to start over again from scratch.

    4. Improve your credit

    There are ways to get credit cards even if your credit is pretty bad. They’re not the most desirable credit cards, but hey, welcome to having fair to poor credit! Use the credit cards to build your credit. Don’t overspend and don’t get into more debt, but improving your credit is important if you ever want to do something like buy a house or a car again. Talk to your bank to see what they offer in terms of credit cards and credit-building opportunities.

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    5. Create an investment plan

    This is going to be the toughest one for a lot of folks because this is something many people never do. The idea of investing your money is that it grows over time. If you invest well, you essentially give yourself free money. If you don’t know anything about investment, now is the perfect time to learn. You can call various investment firms, search the internet, or maybe even take a class to learn how to properly invest your money. Once you learn how it’s done, find a way to do it and then do it. Investing may not sound like the best idea now but in 10 or 20 years, you could reap the benefits of your labor.

    6. Track your net worth

    This sounds difficult but it’s actually quite easy. Here’s what you do. You take everything you have in terms of assets, cash, and properties and add up all of the value. Then, take all of your debts (including your credit card balance) and subtract them from the value. The result is your net worth. You can become rich without actually having a lot of money. For instance, you may have $100 in your savings account but drive a $5,000 car. That means your net worth is $5,100. Once you perform the prior five steps, you should calculate your net worth every month to see if it’s trending up or trending down. If you’re doing it right, it should be trending up. From there you can create goals and work toward making yourself well off.

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    It may seem like these six steps are easy to follow, and they are. However, it does take a certain level of discipline and that’s where people have problems. You can create all of the money management plans you want but if you don’t have the self-control to follow through, then it’s all going to be totally useless.

    Featured photo credit: Rap Fix via rapfix.mtv.com

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    Joseph Hindy

    A writer, editor, and YouTuber who likes to share about technology and lifestyle tips.

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    Last Updated on March 4, 2019

    How to Use Credit Cards While Staying Out of Debt

    How to Use Credit Cards While Staying Out of Debt

    Many people will suggest that the best thing to do with your credit cards during these tough economic times is to cut them up with a pair of scissors. Indeed, if you are already in huge debt, you probably should stop using them and begin a payback strategy immediately. However, if you are not currently in trouble with your credit cards, there are wise ways to use them.

    I happen to really love my credit cards so I will share with you my approach to how I use mine without getting into deep financial trouble.

    Ever since about 1983 when I got my first Visa card, I continue to charge as many of my purchases as possible on credit. Everything from gas, groceries and monthly payments for services like my cable and home security monitoring are charged on credit. Despite my heavy usage, I have maintained the joy of never paying any interest fees at all on any of my credit cards.

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    Here are some tips on how best to use your credit cards without falling into the trap of paying those nasty double-digit interest fees.

    Do Not Treat Credit Cards as Your Funding Sources

    Too many people treat their credit cards as funding sources for major purchases. Do not do this if you want to stay out of trouble. I use my credit cards as convenient financial instruments so I do not have to carry around much cash. In fact, I hate carrying cash, especially coins. When you buy things on credit, the purchases are clean and you will not get annoying coins back as change.

    I do not rely on my Visa, MasterCard or American Express to fund any of my purchases, large or small. This brings me to my golden rule when it comes to whether I will pull out any of my credit cards either at a retail or online store.

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    I never purchase anything with my credit cards if I do not have the actual cash on hand in my bank account.

    If I really cannot pay for the item or service with cash that I already have at the bank, then I simply will not make the purchase. Remember, my credit cards are not used as funding sources. They are just convenient alternatives to actual cash in my pocket.

    Make Sure to Always Pay Off Balances in Full Each Month

    The next very important part of my overall strategy is to make absolutely sure that I pay the balances in full each and every month no matter how large they are. This should never be a problem if the cash has been budgeted for my purchases and secured in the bank. I have always paid my full balances each month ever since my very first credit card and this is why I never pay interest charges.

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    Using Credit Cards with Rewards

    Most of my credit cards are of the “no annual fees” type, including one MasterCard on a separate account I keep at home as a spare in case I lose my wallet or incur any fraudulent charges. However, I do use a main Visa card which does have an annual fee because all purchases on that card reward me with airline frequent flyer points. For me, the annual fee is worth it since I do travel and I get enough points to redeem many free flights.

    You have to decide for yourself if you will charge enough purchases on credit each year without paying interest charges to warrant a credit card that rewards you with airline points (or other rewards). In my case, the answer is “yes” but that might not be the case for you.

    I occasionally use a MasterCard or American Express card on small purchases just to keep those accounts active. Also, I have been to the odd retailer that accepted only a certain type of credit card, so I find that having one from each major company is quite handy. Aside from my main Visa card which earns the airline points, the rest of my cards are of the “no annual fees” variety.

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    So this is how I use my credit cards without getting into any financial trouble with them. This strategy is recommended only if you are not in debt, of course. In fact, it is worth keeping in mind once you’re out of debt so that you can keep your credit cards active and treat them responsibly.

    What are your credit card usage strategies? Let me know in the comments — I’d love to hear what methods you use.

    Featured photo credit: Artem Bali via unsplash.com

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