Have you ever wondered what you spend your money on? Like; Just a week ago, you had a wallet puffed up with cash; but now, nothing. Not literally nothing, but at least a significant portion of your cash seems as though it disappeared into the thin air overnight. Where did it all go?

Bad money management seems nasty; and most likely, you do not want to have anything to do with it. Yet, somehow, you find yourself wallowing in its enticing pool. Not just you, a good portion of individuals around the world find themselves in similar situations.

However, between managing a retirement plan, saving up for an august event, and dealing with the numerous bills you’ve got to settle, it is easy to get lost. And, it is even easier for the act of proper funds management to seem like an uphill struggle.

But, if you do not take conscious steps to get organized, you might feel like you are swimming against the tide; with understanding your personal finance life becoming a more daunting task.

That being said, there are some tried-and-tested steps you should consider. But, you should note that this would require an enormous amount of commitment and patience on your part. If you are ready to go through this journey, here are the steps:

Create a budget   

First things first: if you do not have an actual budget, create one. And, I am not referring to the mental note you have in your head; I mean an actual, visual budget. So, write it out. Why? As a human, it would be easy for you to put aside essential details, while you chase unnecessary ones.  A mental note, won’t be very much helpful in this aspect, meanwhile, a typed out budget gives you a point of reference in case you are confused about your next point of financial action.

Budgeting opens up our financial eyes to see with clarity our present financial situation. It is of ultimate importance in finance management and setting up a proper investment plan . It is the first step we must take when it comes to achieving a settled financial life.

When creating a budget, there are two things you must take into cognizance: understanding your expenses, and your income. This would be explained in subsequent steps.

Understanding your expenses

Go down the road and ask 10 people how much they spend in a month. Most likely, eight of them do not know. This isn’t rare at all.

Most workers, salary earners, and business owners do not understand their expenses. However, creating a budget requires you to do so. So, here’s what you do: classify your expenses based on whether it is fixed or variable. For the fixed expenses, write down the amount. For the variable expenses, make an estimate. Easy-peasy. Be sure to take into account all the cash you know you would spend in a month.

Also, make room for miscellaneous or emergency expenses. This way, you won’t be caught unaware in case an emergency pops up. Make sure you use an order-of-preference approach when listing out your expenses.

One more thing: be careful when calculating your expenses. A lackadaisical calculation could lead to budgeting an amount lower than that which would be required. For instance, if you were to pay $50 interest on a loan monthly, and you mistakenly put in $5; imagine the look on your face when it’s time arrives. Personally, that’s why I use scotia auto loan calculator. Its automation makes the chances of mistakes greatly reduced.

Understanding your income

Who doesn’t know how much they make? In fact, almost everyone would tell you off-hand. Although they probably won’t agree to tell you, they are super-sure of it internally.

And, that’s what makes expenses quite different from income. People, often make conscious efforts to be aware of the status of their income, yet, become relaxed when it comes to understanding their expenses. As a budget planner, you should not be one of them.

The main task was understanding your expenses; which you do now. Once you understand your income,

So, here’s what you do: Subtract your expenses from your income.

If you have a positive answer, thumbs up! Increase your savings.

If you have a negative answer, reduce your expenses; which leads to the next point…

Slash off the unnecessary expenses 

Do you call the technician to fix your light bulbs; releasing 3 bulks each time they get damaged? Stop it.

Do you subscribe to Netflix although you do not have time to watch movies? Stop it.

Do you love Starbucks so much that you end up with a cup of coffee in your hands every morning? Reduce your intake.

Not just that; there are countless other things you pay for that might be actually unnecessary. The idea is not to enjoy yourself; no. The point is, there are certain alternatives such as learning how to fix a light bulb, or using a friend’s subscription once-in-a-blue-moon, or visiting Starbucks 3 times a week -instead of the whole week; alternatives that would help you cut down your monthly expenses.

Remember, the concept of money management entails streamlining your resources; your money towards things that really matter and taking into account every single penny that exits your wallet.

Save and Invest 

Nothing is too small: 5%, 10%, 15%: simply ensure something goes into your savings account each month. Saving does not just make you financially secure, it also makes your retirement more worth-while and peaceful.

That being said, when you save, your money isn’t multiplied, neither is it reduced anyways. But, when you invest, you put your money to work. I do not mean saving is a bad idea; it simply implies investment is a better option.

If you are not a risk-taker, it is better to stick to a savings plan. However, if you are a person who enjoys taking risks, be sure you invest in credible platforms such a the crypto-market or stock-exchanges.

The bottom line

Just as the saying goes, practice makes perfect. Managing money is something that takes time to understand and improve on. So, be patient with yourself. However, once you get in-tune with proper finance management skills, you save a lot of time, experience less stress, and concentrate more on dreams.

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