Having excellent money management skills can make or break a person's future in both the long and the short run. Developing money management skills at any point in your life, whether young or old, can help you not only avoid bankruptcy, but live a healthy, thriving financial life.
Money management covers a variety of areas. Budgeting, saving, spending, and investing are just a few of the different areas where good practices can make a world of difference in your life as you see your neighbors or co-workers face the possibility of bankruptcy.
In a sense, budgeting skills are the crux of money management skills. A good budget allocates every portion of your finances, helping you achieve your financial goals with clearly established methods. With a fixed income and fixed expenditures, there's no reason for your saving and spending habits to ever differentiate from your budget. Of course, it's not a perfect world and so this will not be the case every month. As income fluctuates and emergency expenses occur, no one can expect you to hold to a budget with the utmost religiosity. However, creating a budget now can help you avoid bankruptcy in the future.
After you have created a reasonable budget, set aside enough money to cover three to six months of your budgeting needs in case you are unable to work or lose your job. Having this money set aside can give you a secure safety net, not to mention peace of mind.
Determine how much money you want to save, whether it's in an employer-sponsored 401(k), Roth IRA, government bond, or low interest savings account with your bank. Diversifying your savings between a mixture of these might be advantageous for you. Consider your goals and the opportunities available to you, make a savings plan, and stick with it. Having savings can be a wonderful stronghold against bankruptcy.
When it comes to spending, anyone with developed money management skills will tell you: stick to your budget or go for under budget figures. All sides agree, our country is in a spending crisis on both personal and governmental levels. Take responsibility for your spending, keep your credit to a minimum, and stick to the budget!
After you have budgeted, saved, and spent (within reason), you can start thinking about investing your money wisely. The number one rule in money management when it comes to investing is to never invest money you can't afford to lose. Diversifying your investments is also paramount. With a diversified portfolio of conservative to moderate risk investments you can make your money work for you.
Money management skills take time and practice. If at first you don't succeed, don't be discouraged. Stay on track and try again! Proper money management will help you avoid bankruptcy and enjoy your financial future.