Money Management Basics

The way you spend and manage your money has a significant effect on your entire lifestyle. Unfortunately, critical money management skills aren’t commonly taught in schools, although that’s starting to change.

Money Management Basics

Determine your income sources

Whether you are a student, an employee, a business owner or a retired, you need to list your income sources and determine how much income each source generates. For most of us, the main source of income is the salary or wage we receive from our employer and in the most cases, it is a fixed amount each month. If this money is insufficient, consider additional income sources: you can start a second job, offer some services as a freelancer, sell your own products or declutter your house and organize a garage sale.

Spend less than you make

Once you know how much you expect to make on a monthly basis, add up your expenses. The rule of thumb when it comes to personal finance is to spend less money than you earn. If you spend even a thousand dollars more per year than what you earn, you will end up in a spiral of debt that is hard to come out of. If you spend exactly the same amount as your income, you will never be able to save money and be prepared for unexpected events, good or bad. Spend less than your earnings and put some money aside.

Do this by setting up a budget. You need to know where your money goes. Get in the habit of categorizing your bills and tracking your spending. The easiest way to set up a budget – even a basic one – is with a pen, paper and a calculator to help you determine how much money you can spend on each category. Now that you can see your budget at-a-glance, you can decide on the expenses you can cut – do you really need that new dress? Is it really time to upgrade your car? Can you afford this vacation right now? Set a budget threshold that is below your monthly income and try to stick to it.

Make smart investments

Do you wonder why rich people get richer? The simple answer is because they invest their money. Even if you do not have a lot of money, it is better to invest some, rather than keep all of it under your mattress. If you have no financial education or investment knowledge and experience, you can consult an expert, like a financial adviser or a money management coach. They will help you select the right investment vehicle based on your personal financial situation, risk tolerance and goals. Generally, it is better to have a diversified investment portfolio, rather than put all your eggs in one basket.

Choose the right bank account

Some banks require a minimum balance to open a bank account. Some banks charge monthly fees for maintaining your account or your credit card, or if you write more checks than the limit. Some institutions combine both, while others may have no fees. Some accounts come with handy apps that help you manage money, free transfers, automated bill pay and fee-free ATM.

Use your credit card wisely

It is easy to get a credit card and it is also easy to get into debt using one. Never buy things using a credit card that you can’t afford otherwise. In other words, if you don’t have the amount in your bank account to pay the credit card installments every month, don’t make that purchase. In addition to that, some credit card companies may give you a cash back or points if you make payments on time. There are a number of different credit cards with various rewards options. If you have one and find another that suits you better, you may be able to transfer your balance at 0% interest, so it’s worth looking into. Always pay your credit card bill on time to avoid late fees and extra interest.

How to increase your household income

How to increase your household income

If you are struggling financially, you can’t enjoy life the way you want to. There are several ways to improve your situation. The first one is to cut your expenses to the minimum and work out a budget that you and your family stick to as strictly as possible.

How to increase your household income

In many cases, however, just controlling your expenses is not enough to solve your financial issues. In those cases, you should consider increasing your income. Wondering how? We have a few ideas for you. There are four main assets that you can monetarize to get the extra cash you need: skills, time, property, and the stuff you own.

How to use your skills to increase your household income

One of the best ways to increase your household income is to put the skills you have to use. There are many ways to do it. Here are a few suggestions:

  • Become a freelancer. If you are good at copy-writing, transcribing, book-keeping, design, translations, etc., you can sell your skills and earn a decent extra income. You can look at jobs on the freelance sites that you can do in the evening or during the weekend. You will work from the comfort of your home and at the hours that suit you. Another benefit is that, at a certain point, this freelance job can become your main source of income or your new career path.
  • Become a teacher or mentor. If you are good at playing an instrument or at practicing yoga, you can become a private teacher or organize a group at your home or at another suitable space. The same goes if you have other skills and abilities that you can teach others.
  • Become a tutor. If you are good at math, English, history or any other subject you can become a tutor. You can work online through freelance tutor sites or find students locally.
  • Sell what you make. If you are good at baking, you can ask the local café whether they will agree to sell your muffins. If you have a garden, the local farmers’ market may welcome your produce. You might be a talented carpenter, artist or jeweler and sell your creations locally or online.

Invest your time to increase your household income

One of the other main options to earn more money is if you give more of your time. Here are a few ideas how to do it:

  • Work overtime. If your job offers overtime, take it. Always. Overtime is usually paid at a higher rate, so you will earn more.
  • Find a second job. You should be willing to trade your free time for money. Starting a second job –full or part-time means a lot more responsibilities and workload with less time to relax. This is more of a temporary solution but can also help you find your dream job in case you haven’t found it yet.
  • Start telecommuting. A job that will allow you telecommute from home is excellent for those who want to increase their income. It will not only give you extra money but allow you to save from traveling to work for example. Telecommuting will also add some flexibility to your day.

Time is money, so choose the best way how to utilize this asset.

Can your property help you increase your household income?

The simple answer to this question is, Yes! There are four possibilities how to add some money to your budget using your property:

  • Rent out a room. If you rent out one of the rooms in your house, you will give up some of your space and privacy but add a stable and secure income to your monthly budget.
  • Rent out a parking place or a garage. This is yet another way to increase your income, given that you have a spare garage or parking place and you live in a place where parking is difficult.
  • Rent out your entire house. In some cases, it may be more profitable to move to a smaller home or with relatives and rent out your own property. This is a temporary solution but might be exactly the right one for your current situation.
  • Use your second home for a holiday rental. If you are rich in properties but short in cash, the solution is to turn your second home into a holiday rental property. This means that you will have short-term agreements with tourist in the busiest season and then use again your home when you no longer need additional income.

Giving access to strangers to your property may not feel like the best idea, however, it is an excellent solution for those on a tight budget.

Reduce your possessions to increase your household income

An excellent way to increase your income and declutter your home is to sell some of your stuff, especially the stuff that you are no longer using or have no intention to use in future. There are two main ways to do it:

  • Organize a garage sale. Choose a suitable weekend with good weather, put an ad on Craigslist or Facebook, organize and price your stuff and be sure to have lots of change ready. You will be happy to see your items gone, free up space in your home and earn some cash.
  • Sell your items online. There are several sites, where you can sell second-hand items. eBay is one of the most popular ones, but there are several others you can check out.

Note that you may earn a lot of money by selling valuable antiques such as China, pieces of art or books. If you are dealing with antiques, consult an expert in the field before making the deal to be sure that you are getting the highest possible price for your items.

Giving a boost to your household income is not impossible. Some of the solutions suggested above are only temporary answers, while others can lead to a completely new path in your career. You may end up finding a permanent solution to your financial struggles, while actually doing something you enjoy.