10 Steps to Managing Money Effectively[Updated]

First of all, it is assumed in this article that you have some source of income or that you have a banking account with currency.

Now that we got that over with...

Managing money sounds like a pretty straightforward concept, yet, especially with young people, it can be rather challenging to do.

Most young adults think too much in the "now" and forget altogether about the "later." I know, I am one of them.

In order for you to succeed in managing your money and to avoid spending every penny when you get your paychecks, you are going to have to follow some pretty strict rules. These rules will be created by you, however, it is important that once you create them, you stick to them.

Let me give you an example. Say, at your current part-time job, you are earning $200 per week, on average. You know that in 2 years time, you will graduate high-school and plan on attending post-secondary education immediately after the summer you graduate.

Although there are likely student loan options where you live, it's best to avoid those as they can get tricky to pay off once you get your degree. So, it's best to start saving now.

If you are earning $200 a week and have absolutely no expenses, you could easily put 50% of that money into a High-Interest Savings account and still be left with enough to have fun and buy your favorite items.

This means that you are saving approximately $4800 per year. If this number ($200/week) remains constant, you're looking at $9600 saved up by the time university starts!

That is generally enough to pay for you're first years tuition no matter where you are! Below, I will outline a 10-step program to get you on your way to effectively save, manage, and spend your hard earned money.

These steps will help guide you in the right direction and will serve as a platform for the spending/saving guidelines/rules you should begin preparing;

1. What is my Monthly Income?

• Start with an approximate figure. If you have pay stubs from the past, perfect!
• Use the pay stubs to find an average. Take your monthly (or bi-weekly) income from each stub and add these numbers together.
• The result you get after everything has been summed up should now be divided by the number of months (or bi-weeks) you used in calculating the sum. So, for example, if you have 3 months worth of pay stubs and you came to a total of sum of $2000 in those 3 months, you would divide this number by 3 to get you income/month ratio. This is your monthly income average.

• It is also good to include an expected value in your calculations. If you know your schedule and the number of hours that you will work for the next 2 months, you can include those in you income average. Simply enter the number of hours you plan to work in those months and multiply them by your wage. The result will be your earning (taxes not included) for those two months.

2. What are my Monthly Expenses?

• Obviously, if you have none, then this number is zero.
• Include cell phone bills (if you pay them), car loan, etc.
• Come up with a number using the same process as above.
• This will be your expenses/month ratio.
• Take your income/month and expenses/month ratios and subtract the income from the expenses. This new number will be your final earnings/month ratio. (Obviously, if this number turns out to be negative, you are in debt. Future article on dealing with that coming soon!).

3. Figure out How Much Your Willing to Save.

• And stick to it! It is very important, once you come up with a number or percentage of your earnings that you would like to save each month, that you maintain those savings and avoid spending this hard earned money unless ABSOLUTELY NECESSARY!
• Percentages are better to work with since income can fluctuate every moth depending on your hours and whatnot. You can, of course, increase this number as you become more comfortable with less, however, it is important that you never dip below a certain point. The goal here is to save, not find excuses to spend.

4. Create a List

• Create a list of rules to follow. This step is very important. These rules should include guidelines such as the minimum amount/percentage you MUST contribute per month (or every two weeks).
• A few other examples could be things like setting a recuperation plan in case you spend some of your savings (WHICH YOU SHOULD NOT DO, but just in case).

5. Reward Yourself!

• If you have reached a milestone in your savings program, i.e; 1 month, 6 months, 1 year, etc, reward yourself! No, don't take out money from your savings but do give yourself a reason to be proud. Take you and your family out to dinner or buy that new video game. Do something to mark your progress and make you motivated to keep going.

6. Try Getting Your Parents Involved!

• When I started saving and managing my own money, my father offered me a deal. For every penny I saved, he would give me a penny towards my savings! So, when I deposited, say, $200 into my account, so did he! This really started to add up!
• Don't force your parents into doing this. Ask them politely. If times are tough and money isn't something that can be given out as reward, that's okay. You should still be saving, regardless of financial situations.

7. Set Up a Goal or Goals.

• Create a list of goals you would like to achieve. Print a few copies of this list and post them around your room as a reminder of why you're doing what you're doing.
• It feels great once you reach a mark you set a month back! It is a reminder that you are moving forward and staying on track!

8. Take Advantage of Referral Programs Provided by Your Banking Institution!

• ING Direct offers a referral program for it's customers. For every person you refer to set up a savings account with them, they give you x amount of money (can't remember the exact value). This is a bonus! You get your friends to start making money smart decisions and you profit from it!

9. Set a Monthly Spending Limit (On the leftover money you didn't deposit into your savings)!

• Set a spending limit on your available funds per month (this does not include savings!). If you can set a limit, you will likely find funds available to you at the end of the month that you can either add to your savings account or use to save for a larger ticket item (like your first car!).
• Setting limits teaches you to stay within your budget. This is a very valuable skill to have later on in life.

10. Enjoy Your Experience!

• Saving money should not be a chore. Enjoy it and always look to the future. Realize the potential for the money you earn, not for the now, but for the later.
• Learning to save now will help you succeed later on in life, even if you won't be required to save (if you become the CEO of some Fortune 500 Company).
• Save money and more importantly, have fun!

Of course not! The purpose behind saving money is to help you afford the big ticket items when you need them instead of asking the bank for money and ending up with debt.

Again, a good reason for students to save is to help pay for post-secondary education. You may also wish to get a new car. All of these things require a pretty large chunk of money to receive.

Saving also helps you enhance your money managing skills and builds a solid foundation for the future. Feel free to spend you money when required.

Your savings account should be a sort of emergency fund. You will spend it, but at the right time only. It is the purpose of you savings account to help you avoid bad situations with banks. Use the rest of your money to pay bills and entertain yourself.

Trust me, saving money is one of the most intelligent actions a person can take. It give you a feeling of pride and accomplishment. You will spend that money eventually, but, it is their for a reason. It is their for when you need it!

In conclusion, saving money may end up being one of the smartest decisions you have ever made. It won't just help you now, it will help you later. Saving and managing your money will help you gain skills needed for the future when you get a career and start rolling in some real dough! Good luck to all of you! Thanks for reading!