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How to be Wiser About Managing and Saving Your Money

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Budgeting and managing money aren’t subjects typically covered in the education system; even when they are, the concept of living below your means isn’t practiced when first joining the real world. It’s through the mistakes of overspending and the inability to keep up with the bills that we start to understand its importance. That's when we finally realize that budgeting money and learning how to save money are essential habits.

It is never too late to learn how to manage money wisely; it doesn’t necessarily mean that you’ll have to create and follow a budget either. Here in this guide, we will cover simple ways that you can become a master of managing your financial life and learn how to budget money wisely.

Start with your Credit Habits

Those enticing offers of travel reward points, low introductory interest rates, and cash incentives are reasons why we open credit card accounts. The simplest way to build your credit is using a credit card.

You can easily fall into the trap of spending more than you can afford and end up with a revolving balance. That's why budgeting money should start with looking at the way you're using your credit cards. The interest rate on this balance is normally in the double digits, which means that those purchases just got even more expensive. Plus, if you forget to make a payment, you’ll get charged a late fee, and your credit score plummets.

Revolving a balance and missing payments will negatively impact your credit and make it difficult to make big financial moves like buying a car. To improve your credit, follow these tips:
  • Set up automatic payments so that you never miss a payment or alerts (text messages, push notifications, or emails) to remind you before the due date.
  • Only use your credit card for purchases that you know you can pay in full each month to avoid incurring a balance.
  • Prioritize paying down your credit card debt as fast as possible.
  • Click here for more credit mistakes you should avoid.
A good credit score will make it more likely that you’ll be approved for loans, save money on home/car insurance, and even help get into a new apartment. It's the first step you can take toward managing money wisely.

Make Conscious Spending Decisions

Avoid buying new clothes, electronics, or going on expensive trips to keep up the lifestyle of your neighbors and friends. Chances are that they are having similar challenges with financing these expenditures and aren't budgeting money to keep up with the lifestyle either.

Before making a buying decision, ask yourself why you’re considering this purchase; is it something that you need or want? If it's a want, do you have the money to pay for it now and afford your necessary expenses?

When buying products and services, look around to make sure you’re getting the best deal possible to save money. Search the internet to find out if there is a better deal elsewhere. Certain items are more expensive during certain times of the year than others. For example, if your kids are going to need new winter coats, the prices on these items start to drop beginning in January. Brands start slashing these prices and putting them on clearance racks to make room for new items.

Download and use some money-saving apps to help save on your everyday purchases like soap, toilet paper, and food. When you save money, even just a few dollars on your necessary products, it will make an impact at the end of the month.

Is this the year that you’ll be replacing your air conditioner? Are you planning a family vacation on the beach next summer? Try to anticipate what big expenditures you’ll face in the future and start saving for them now.

Here is how to manage money wisely on these types of big costs: Get a sense of how much your big-ticket item will cost by looking at how much the item or something comparable costs today, then work backward and divide that amount by how much you’ll need to save each month to buy it around the time you expect to actually purchase it. Budgeting money in this way to cover these costs will improve the chances of reaching your goal because you have a plan in place to help you get there.

Start Investing your Money

The last section of this guide on how to manage money wisely is all about creating a strong financial future. Investing can help you maximize your savings so you can afford to send your children to college or build a nest egg to retire comfortably. While the value of stocks, bonds, and other types of securities will fluctuate based on market conditions, it is still one of the best way to build long-term wealth.

The average stock market return from 2012 to 2021 for the S&P 500 index was 14.8% annually. The average interest rate on a savings account as of July 18, 2022, is nationally at 0.10% according to the Federal Deposit Insurance Corporation (FDIC). Investing will allow your money to work harder for you.

To invest, start by looking at your place of employment. They might offer an employee-sponsored plan that might be one of the following:
  • 401(k) or 403 (b)
  • Simple IRAs (individual retirement accounts)
  • SEP (simplified employee pension)
  • Profit-sharing plans
  • Employee stock ownership plans
If your employer offers one of these plans, make sure that you’re contributing a portion of your income towards it each paycheck. The money that’s contributed comes out of your before-tax dollars, which reduces your taxable income. Keep in mind that, when you start pulling your funds from these types of retirement accounts, you must pay taxes on these withdrawals.

If your employer has a matching plan, they will contribute up to a set percentage of your contributions. Make sure that your contribution matches at least the maximum amount your employer will match.

Open up a Roth IRA if your employer doesn’t offer a retirement account or if you want another investment option to add to the mix. These types of retirement accounts take your after-tax dollars. That means that, when you start withdrawing the money, you won’t have to pay taxes on them.

Power Financial Credit Union is Here to Help

Our purpose is to help guide our members to better financial lives today and for generations to come. Our blog has topics like raising financially responsible children and tips on becoming a homeowner to keep you informed on financial topics. Want to talk to us about your financial goals? Contact us today to learn more about our solutions.