Cash Management That Works

April 6, 2012
According to, financial institutions now charge their customers a bounced-check or non-sufficient funds (NSF) fee that averages $30.83 per transaction. This amount set another record for 2011, up about 1% from 2010. It’s obvious that banks, credit unions, and other financial businesses make a lot of money (that is, profit) from the poor money management skills of many of their customers. If you want to be on the road to financial freedom and hope to live debt-free, one of the most important things you can learn is how to manage your money in a smart way.

Many people see a payday advance as a life-line to help them get through until their next paycheck. But two weeks can pass very quickly and if you don’t have the money to pay off the original amount you borrowed when it’s due, you may get trapped in a vicious cycle of constantly renewing the loan and also paying extremely high interest rates and penalties. By learning how to wisely manage your income, you can avoid these short-term options and focus on your long-term goal of financial stability and debt-free living.

With a little research and practice, almost anyone can learn to be a better money manager. You work hard for your money and you should decide how and when it’s spent. No one wants to pay NSF fees to their bank or have the pressure of quick-fix payday loans being due every two weeks. By focusing on becoming debt-free and learning how to manage your available cash, you can achieve financial independence.

Here we offer some simple debt management techniques and suggestions that can get you started and keep you on track:

The "Balance Sheet"
There are some basic things you need to do when learning how to manage your money. One is to make a “balance sheet”. To get started, you need to list all of your income (money coming in) and all of your expenditures (money going out) on a monthly basis. To be successful, you need to be honest about what you spend. Don’t put down a number which is “wishful thinking”.

This process can be as easy as dividing a piece of paper into two columns. On one side, list your income. This can include your take-home salary, child support, alimony, Social Security, or any other regular payments you receive. On the other side, write down your expenses. This should include your rent or mortgage, any car payments, all utility bills, and regular insurance payments. Also list what you spend on groceries, gas, clothing, entertainment (restaurants, movies) and any other regular monthly expenses.

Set Priorities
Hopefully when you sit down and make your balance sheet, your income will be greater than your expenses. This makes managing your cash a bit easier. But don’t get discouraged if you have more money going out than coming in. There are millions of people in exactly the same position and while it may be a little more difficult and challenging at first, the end result is well worth the effort!

The first step to creating a balanced budget is prioritizing your expenses. Obviously there are some monthly bills which are necessities. These would be your rent or mortgage, all utility bills, any car payments, and food. Once you calculate the amount of money needed for these, you can look at your remaining income and see where some changes can be made with the expenditures you have left. If you have a spouse, partner, or family, it’s important to include everyone in the discussion. If you are going to be successful at cash management, it’s vital that everyone understands the financial situation and works together.

Most people who have never created a balance sheet or actually written down their monthly expenses are shocked to see what they spend on things. Going to restaurants on a regular basis can really add up. Cooking and eating at home is almost always less expensive. If you have a family, include everyone in the food preparation process. After a hectic day, it can be a pleasant time to reconnect with everyone in a relaxed setting. Renting movies can save money also when compared to movie ticket prices at a theatre. There are many ways to cut back on what you spend without sacrificing fun or quality time together. Remember, the important things are to set your priorities and work towards a common goal. Once you make the decision not to overspend, it will get easier to make smart choices.

Tackle Your Debt
Before you jump in and start tackling your outstanding debt, there’s an important point you should be aware of. There is good debt and bad debt. Good debt is money that is spent on something which increases in value over the long-term. Examples of this could be a home improvement loan or money for a college education. Bad debt normally applies to purchases which are consumed quickly or have little or no real worth. Eating out, impulse buying, expensive vacations- these could all fall into this category. This is not to say that no one deserves a holiday or a meal out. It simply means when you are learning to live on a budget and discovering how to manage your money wisely, you have to be aware of where your money is going and how you can decrease what you spend. Having a roof over your head and food on the table trumps going out to eat and frivolous spending every time.

Track Your Spending
You can’t be in control of your financial situation if you don’t know what you are spending. Some of these ideas may sound simple but they are time-proven methods for successfully getting a handle on what you spend every month. Make a shopping list. Whether you are going to the supermarket or the drug store, write down what you need before heading out the door. A list will help you stay focused and prevent impulse purchases which can easily destroy your budget. Start clipping coupons and have them with you when you shop. Check newspapers or online sites to see what’s on sale at specific stores. Save all of your receipts. At the end of the week, go over what you have spent. By knowing specific amounts of what you spend and where, it allows you to make positive changes which can improve your bottom line. You will probably be surprised at what you spend on so-called small items- things you grabbed but didn’t really need, restaurants charges for not-so-great food, all the little things that can add up quickly and undo all your good intentions. Stay focused and in control. It will really pay off!

Start Saving
It may seem like an impossible task, especially if you are struggling to make ends meet every month, but you need to get in the habit of saving. Even if it’s just a small amount, it’s a start. If possible, have a certain amount of your paycheck directly deposited into a savings account. This way, you don’t even miss it or have to think about it. If you receive an unexpected payment, such as a gift or tax refund, immediately put it into your savings. You have to get out of the mindset that says “extra cash equals extra spending money”. Instead, extra cash should be used towards building a “cushion” for those unexpected expenses which always occur. Most financial experts agree that you should have at least six months worth of income tucked away in the event of job loss or major medical bills.

For more information about successfully managing your finances, check out these websites: