Did you know that about 70% of Canadians believe they won’t have enough money to retire? Some of these individuals may have extenuating circumstances, but many don’t know how to manage money.
There’s no shame in admitting that you’re a beginner in money management, no matter how old you are.
Managing money is difficult, especially if you have a lower income. Everyone, no matter their background, needs to learn about financial management.
What is financial management? Keep reading to find out.
What Is Financial Management?
Financial management refers to the multitude of tasks required to manage finances:
It’s a complex process that takes time and attention to master.
The better you can manage your finances, the more you’ll get from the money you have.
Why Is Financial Management Important?
Financial management determines whether you can meet your individual money goals. Whether you want to save a thousand dollars or invest a million, the right financial management strategy can help.
Through financial management, you can improve your personal funds in many ways.
Financial Management Tracks Funds
Through the right financial management system, you can track your incoming and outgoing funds. It’s like creating a budget.
Some people use excel sheets and others use online tracking systems.
No matter what you decide to use, make sure you’re counting every cent. You should have a clear idea of where your money is going.
Financial Management Cut Costs
As you’re tracking your expenses, you may notice that you’re spending money on things you don’t care for anymore. It could be an old subscription you forgot about or a recurring charge you didn’t sign up for. You may even notice that you’re spending a lot more on eating out than you realized.
Whatever it is, it’s time to chop it off and cut costs.
Nobody likes to think about the money they’re spending. But, it’s the only way to be sure about exactly how much you’re spending and where it’s going.
Don’t cringe at the numbers. Tell yourself that you’re going to be better this week, the next week, and so on.
Financial Management Scales Income
If you have control of your finances, you can scale your income. You may want to get a promotion, go for a new job, or add on a side-hustle.
All of these income streams will be easier to manage if you have a good financial management strategy. Without it, you may be blowing through your money or forgetting to invest and save.
Additionally, with a scaled income, you’ll be able to have more financial freedom. So, you’ll stress less over bills that you may have piling up.
Financial Management Provides Insights
As you’re analyzing your income and expenses, this will help you identify areas for improvement. Depending on the system you’re using, this could become an automated process.
For example, you may notice that you spend more in the summer and save more in the winter. This could help you plan better over time.
These insights into your spending habits can help you better balance your spending and saving.
Financial Management Improves Financial Planning
Overall, financial management is the pinnacle of financial planning. Everything you do to manage your finances helps you plan for the future.
From tracking money to reacting to insights, financial management provides everything you need to plan for your future.
How Can I Learn to Manage Money?: Money Management Tips for Beginners
If you’re looking to get started with financial management, there are a few steps you should take along the way.
Whether you’re an expert or a beginner, you should follow these steps for how to manage money.
1. Assess Your Current Financial Situation
Many tips for managing money skip right over the assessment part. You can’t make changes to your financial habits without understanding what your current habits are.
This is why we’ve placed this at the top of your financial management list.
While you’re assessing your finances, you have to make note of your income and any fixed costs. From there, you can determine the average amount your spend in non-fixed categories (e.g., entertainment).
The more data you collect, the more information you’ll have to work with.
We recommend going at least three months back in your financial history. This will ensure that you gather enough data to have reliable insights.
2. Develop Financial Goals
Now that you understand your current financial state, you can make some SMART financial goals. The number one thing to remember is that you should be able to attain your goals.
Don’t start with saving one million dollars if you haven’t saved a thousand yet. Even if one million dollars is your ultimate goal, you should make mini-goals to reach that amount.
You should do this with each large goal you have to make each step more attainable. Think about saving a hundred each week rather than a million in several years.
3. Identify Actionable Steps
Now, it’s time to take steps towards those big goals. What can you do to get closer to each financial goal you wrote down?
If you want a promotion, you need to start asking around. If you want to invest more, you need to start doing research.
4. Evaluate Plan Effectiveness
Before implementing your plan, you should make sure it’s attainable.
Often, consumers focus on more than one goal at a time. This can make saving and investing unbearable.
You may need to slowly ease into your financial goals. Think about what makes sense for you.
5. Use Your Financial Plan
Now, it’s time to implement your plan. As you’re following it, note how well you’re staying on track.
6. Review and Revise Often
Lastly, you should review and revise your plan as much as needed. This may be monthly or yearly depending on how well you stay on track.
Beyond Money Management Tips
So, what is financial management? Well, it’s the pinnacle of financial planning and it can help you make and save more.
If you’re having trouble getting started, you may need a loan from us to kickstart your savings efforts.