Money management may not be the most exciting topic, but managing your money can have a hugely positive effect on your life. It also doesn't have to take up much of your time. After some initial financial planning, the good money management habits you implement today will serve you for a lifetime. Plus, Ownr has plenty of resources to help you get to grips with accounting, bookkeeping and more.\r\n\r\nGood money management strategies don't change with your level of income, which means you can apply these tips to your business no matter where you are on your financial journey. \r\nWhat is money management?\r\nThe essence of money management is the knowledge and understanding of your financial situation. It involves knowing how much money you have coming in each month and how you are spending it. Most people know exactly what their monthly income is, but have a less precise understanding of their monthly spending. \r\n\r\nMoney management involves understanding both sides of the equation so you can be intentional and self-aware about your spending. It enables you to make a plan, so you can be confident about meeting your monthly needs while also working toward major financial goals, such as growing your retirement savings. \r\n\r\nThis doesn't mean there’s no room for fun or spontaneity; it simply puts you in control of your bank balance at the end of each month, so you know much room you have for frivolous spending and fun indulgences. \r\nWhy is money management important?\r\nEveryone can benefit from improving their money management skills. Here are some key reasons why doing so should be a priority for you.\r\nReduce financial stress\r\nGood personal money management can meaningfully impact your quality of life by making personal finances less stressful. Credit card debt and struggling to pay for life's essentials can be a source of constant anxiety, and proper money management is an effective way to reduce that stress and achieve financial peace of mind. \r\nPlan for the future\r\nIf your approach to money is to spend everything you make, you can find yourself without any savings for the future, even if you earn a good income. If you want to travel, purchase a home, retire, or make any other large purchases, proper money management gives you the power to create a realistic financial plan for reaching those goals. Then, when you make a financial decision, you can be confident that it’s informed by your actual financial situation. \r\nHandle surprise expenses\r\nLife can throw unexpected and expensive surprises at us at any time. Injuries, illness, home renovations, and necessary repairs or replacements of expensive belongings like appliances can all derail our finances. Many households risk finding themselves in debt if an unexpected expense arises when they already have a negative cash flow. Money management can help you prepare for these unexpected financial hits. Your budget should include putting money away into an emergency fund.\r\nBuild wealth\r\nEven if you have a great salary or are a successful entrepreneur, you can easily fail to accumulate wealth if you spend everything you earn. Money management gives you the power to grow your wealth.\r\nAccess capital when you need it\r\nProper money management can help improve your credit score, which can result in more favourable loan options if you ever need to borrow money for a major expense, such as a mortgage or business loan. \r\nHow to manage your money better\r\nTo see the benefits of improved money management in your own life, start implementing the following changes:\r\nCreate a budget\r\nIn business and personal finance, a budget is key to a healthy financial management strategy. Your budget should include all of your current income and all of your recurring debts and expenses. We'll cover everything that should be included in your budget below.\r\nTrack your spending \r\nTo understand where your money goes in addition to recurring expenses such as rent and utilities, keep all track of all your receipts. The easiest way to do this is by using a budgeting app such as Mint. You might be surprised to see what some of your larger expenses are at the end of your first month of tracking. That regular coffee and pastry habit may be adding up, but discovering the impact of these little regular expenses is a good thing. It gives you the power to change how you allocate your spending.\r\nStick to your budget\r\nIt's not enough to create a budget; you have to stick to it. Commit to checking in weekly to log any payments and expenses, and to see which expenses are coming up. \r\nLeave room for unbudgeted spending \r\nAs a general rule of thumb, every budget should have some funds left over for unplanned spending. This gives you the flexibility to spend on extra treats here and there, so you won't feel too restricted.\r\nLimit the use of your credit card \r\nIf you're not someone with sound money management skills, it's best to avoid using your credit card wherever possible. This limits the likelihood that you will spend beyond your means. By sticking to your debit card, you'll only spend the money you actually have.\r\nHow to create a budget\r\nYour budget is the most important tool in your money management strategy. By spending a few hours setting one up, you'll be well on your way to improving your money management habits. \r\n\r\n \t Input your monthly after-tax income.\r\n \t Take note of each recurring monthly expense that doesn't change from month to month. This includes rent or mortgage payments, utilities, debt payments, subscription services, and any other essential living expenses.\r\n \t Choose a financial strategy for how much you want to save each month. While there is no magic formula, a popular plan is the 50-30-20 rule, where roughly 50 per cent of your income goes towards your needs, 30 per cent goes towards your wants, and the remaining 20 per cent goes towards savings. This may not be a manageable level for everyone, but it's a good starting point that you can adjust to make realistic for you.\r\n \t Track and categorize all of your expenses. The major categories outside of essentials like rent are food, clothing, and transportation. This will help you see how much you spend in each of these categories, so you can tell where you may need to reduce your spending to meet the goal you set in step three. \r\n \t Continue tracking expenses. This is the only way to ensure you're staying on budget. This may sound like it will take a lot of time, but once you're in the habit of using an app, it's really quite easy. \r\n\r\nHow to pay down your debts\r\nIf you're holding debt, your budget should include a plan for how to pay it down. If you have more than one source of debt, consider using a debt consolidation service to combine it into a single debt payment. Look for the lowest possible interest rate available to you for this service. A credit counseling service can help you with this task.\r\n\r\nOnce you have a monthly payment plan, make sure it's included in your budget. \r\n\r\nAnother consideration when it comes to your debt is that it can impact your credit score. Remember that reducing your debt and maintaining low credit card balances is a great way to get a positive credit score update, which will make it easier for you to borrow for major future purchases, such as a home. If you are a sole proprietor, your personal credit factors into your ability to obtain credit for your business.\r\nSaving for individual retirement\r\nIt may seem like a distant reality now, but starting a retirement fund as early as possible in your life will help you accumulate a comfortable sum to draw from when you're not earning a salary in retirement. \r\n\r\nThe monthly percentage that you set aside for savings can go into a savings bank account that earns interest for this purpose. You can also explore other investment options that offer higher returns on investment to help reach your long-term goal, such as investing in exchange-traded funds. An online calculator can help you identify what your savings target should be based on your retirement goal and your current financial situation. Avoid dipping into your retirement savings account for anything other than absolute emergencies, and as the years go on you'll be reassured to see the number in your savings account grow. \r\n\r\nAt any income level, a person with good money management skills will have a few traits in common. They are organized and have a solid understanding of their financial situation, contribute to their savings each month, do research before making major purchases, and avoid unnecessary expenses. By implementing these money management tips, you'll be able to enjoy all of the benefits of good money management practices no matter where you are in your career.