Question:   I need to learn how to manage money; what is the best way to get started?

Answer:      The first step in learning how to better manage your money is figuring out where you stand financially.

You need to have a clear and honest picture of all funds coming in and going out. Only then can you begin to create a workable budget for yourself. Sitting down with a piece of paper and a pen is the first step towards wise money management.

To begin the process, start by completing a personal financial statement. This activity will create a detailed representation of your current financial situation. You will make a complete list of all of your assets in one column, your expenses in another, and write a total at the bottom of each column.

Take a complete inventory of all bank accounts and bills. Be honest with yourself and don’t leave anything out, no matter how insignificant it may seem at first. With this information in hand, you can begin to learn how to manage money more effectively.

The first column of the financial statement provides space for you to list all your assets. This includes the current balance in your checking and savings accounts as well as any other accounts like cash deposits or money market accounts.

A space for monthly income is also provided and should include your monthly salary or wages. Don’t include anything that is not dependable monthly income such as gifts or occasional bonuses when filling out this section. Overestimating your income is no way to approach how to manage money. This column should accurately show how much money you have coming in reliably every month.

The next area of the financial statement will reflect all of your present liabilities and your monthly expenses. Be sure to check old bank statements and receipts to calculate and average how much you are spending on variable expenses like groceries, clothes, entertainment, utilities and so forth.

You will include the cost of your rent or your mortgage payment, car payment, insurance and all other bills with fixed amounts. Put your expenses in order of importance while you are listing them, noting essentials like housing and food first and optional items like movies or new clothes last.

When learning how to manage money, the details of understanding your past spending habits and realizing your present and future spending priorities are very important.

Once you have completed your personal financial statement, total each column and take a look at the big picture. You should now have a better understanding of what your available income is and where most of your funds are being spent.

You can now more easily see if your money is going toward high or low priority spending. From this starting point, you need to identify any problem areas and begin to make better choices so that you can begin to win financially.

» The number of student credit card offers that my high school age child receives is mind boggling. How does this happen?
The credit card companies invest heavily in your children. As soon as they turn 18, sometimes earlier, they will start receiving credit card offers in the mail. Card companies know that we tend to be loyal to the first accounts we open

» I’m looking for good Christian debt solutions. My parents are financially irresponsible. I’ve struggled with my own money issues due to their poor example and I’m angry about it. What can I do?
I’m glad you are seeking good positive options that will help you to overcome your anger. Remember, your parents never set out to cause you harm.

» Should I use the envelope system to manage my money? What exactly is it and how does it work?
In a world where we are asked multiple time per day, “Will that be credit or debit?” it’s hard to imagine using a method as simple as the cash-based system to manage your money.

Return to "Main FAQ" Page from.... How to Manage Money page.