Three Core Principles for Smart Money Management

A good money management plan will keep you solvent even in the most difficult financial times. Taking care of your money is something you have to do on a daily basis. Just like dieting, it requires a little bit of discipline and planning to get it right. But a good financial plan can become a normal part of your life, the same way a healthy diet and exercise can become regular parts of your days. Begin with these three core principles and you’ll find that good money management is easier than it sounds.

Live Within Your Means

It sounds simple, but this can be the toughest part of money management. It all boils down to only spending as much money as you make. Credit cards and monthly payment plans are the fastest way to get in over your head with interest rates and revolving balances. Credit cards are good ways to increase your credit rating, and they are good for emergencies, but they have to be used carefully. Never charge an item that you wouldn’t be able to pay off completely within a month, and then really do pay them off when the bill comes in.

Some interest rates are unavoidable. Mortgages and car payments are large enough that can rarely be paid off all at once. You can be careful to shop around for the lowest interest rates and the shortest loans that you can afford. Buying your own home is not always a sound investment depending on where you live. Look into all of your options before you jump into a 30 year mortgage.

Keep Your Money Working for You

Having a savings account is an excellent beginning toward financial stability. Every bank offers a different interest rate for their different types of savings accounts. Find the account that will give you the best return on your investment. Over time, the difference between a 1% return and a 1.5% return can become substantial.

It is also possible to earn money as you spend it. Many credit cards today offer cash back programs that will give you money each time you use the cards. As long as you remember to keep the credit card spending within your budget, you can build a nice stash of money by taking advantage of these reward programs. If you don’t find a program that offers cash back, you may be able to find one that gives you points toward travel or other purchases that will save you money in the long run.

Be Ready for Anything

Life isn’t always predictable. Keeping an emergency fund available for those unexpected expenses will save you a great deal of money and heartburn. Most economists recommend that you keep an emergency fund that is equal to your salary for three months of work. That way if you lose your job or are unable to work for some reason, you will still be able to make all of your payments on time until you get things all sorted out.