Financial Management

Financial management is on everyone’s’ mind because of the recession. The banking and auto industries both took huge blows in recent months. The government-issued bailouts that are meant to spur the economy back into normalcy, but it will take time for these changes to occur. It’s estimated that consumers will see true improvement in the market mid-2010. Until that time, people are left on their own to find ways to pay bills, manage debt and carry out their overall financial management.

   
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The first step to financial management is to take an honest look at your finances. Take one full month to write down everything your family buys. Be sure to enter everything your family spends in a notebook or spreadsheet. Include everything from your morning coffee to gum. At the end of your month, write down exactly how much you have in revenue. This will show you how much of an overage or underage you have at the end of the month. It will also show you how much you’re relying on credit cards and whether or not that’s a good idea.

Next, take a look at your credit card situation. What is your interest rate? For every dollar you spend, how much are you actually spending? For example, if your interest rate is 9% and you find a pair of pants on sale for $29.99, what you are actually paying may surprise you. If you use your credit card to purchase those pants, you’re actually paying $35.30. $2.39 is tax, but the remainder goes to your credit card company as a fee for using their service. If you paid cash, you wouldn’t have that additional fee. Make sure everyone in your family knows how credit really works and what the “actual” payments are for items paid for with credit cards. Sure it’s convenient, but there are strings attached.

Another step to financial management is finding things in your budget that you don’t need to be buying. Saving money doesn’t have to be an immediate cut-off from life as you know it. It’s like dieting. Cutting back here and there can make big changes. If you get coffee every morning, try cutting back to just twice a week. Rely on the office coffee machine or bring coffee from home the other days. If you eat out every day for lunch, start bringing your lunch from home. A fast-food lunch can easily set you back $5 a day. That’s $80 a month.

Financial management is hard, but not impossible. Take an honest look at your finances, see where your money is going and cut back little by little. These are the easiest ways to tighten up your money situation and increase your savings

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