HOW TO IMPROVE YOUR MONEY MANAGEMENT SKILLS

By Kelvin Mkwawa, MBA - Seasoned Banker.

Have you ever wondered why our educational system doesn’t teach money management skills? I have. How you manage, spend, and invest your money can have a profound impact on your life, yet very few of our schools teach these important skills. You would have thought that our education system will include what is considered to be the most important skill one can have but this is not the case. As the result, the majority of us have no money management skills but it’s never too late to learn. Just because you didn’t learn good financial skills in school doesn’t mean that you can’t learn them now. Learning and working on your money management skills is like trying to lose weight. You have to know your weaknesses and work on them relentlessly to overcome the deficient in order to reach your financial goals.

Being able to manage your money effectively is very important to your future since neglecting financial management tasks often leads to overspending, lack of saving, and the accumulation of significant amounts of debt. Life is much easier when you have good financial skills so it’s imperative you acquire good personal financial habits. Here are tips to improve your money management skills.

• Learn to Create a Budget – If you want to learn and acquire good money management skills, the first thing you need to do is to learn how to create a budget and stick to it! Do you know where your money goes? If you don’t, that’s a problem but don’t worry it’s not too late to learn. A budget is all about being intentional. It helps you create a plan to see where your money is going and how much you can save each month. Getting into the habit of tracking your expenses through a budget will help prevent a lot of financial problems for you. If you have never made a budget before, it is easier to start with a pen, paper, and a calculator and create something simple that you can remember and follow. Start creating a budget by calculating how much you make in a month – from your salary or your businesses. Then write down all your necessary expenses for every month and keep track of all your expenses for the next month (it is advised to do this up to three months) to give you an idea of your average monthly expenses. Ideally, the amount you spend in a month should be lower than the amount you earn and if that is not the case, then go over your list and see which expenses you can cut down to ensure that you have positive monthly cash flow. To manage your budget effectively, you must make time to do it correctly. Designating a set time each week to sit down and go over your budget helps to make it routine and increases your likelihood of doing it regularly.

• Think Before You Spend – Make a habit to think before you decide to spend your money and don’t assume you can afford it. This habit of thinking before you spend will make you conscious of your expenses and develop your money management skills. I have put together some of the questions that will help you think before you spend; Do you really need it or do you just want to buy it for fun? Can you afford it? Can you get it for less? Always try to remember that just because the money is there doesn't mean you can spend it and buy things. 

• Learn to Save - Depositing money into a savings account each month can help you build healthy money management habits. You can even set it up automatically for the money to be transferred from your checking account into your saving account. Your savings goal should be between 20-30% of your income every month. I realized this might not be easy but you can start small by tweaking your daily routine to yield small savings that can add up over time. For example, you can start emptying your pockets each day and start collecting that extra change and take that collection to the bank and deposit it into your savings account; you can cut down the number of days you eat out by packing your lunch and you can cut down the amount you spend on your entertainment activities. 

To summarize, being good with money takes practice. In the beginning, you may not be used to planning ahead, saving, and putting off purchases until you can afford them but, the more you make these habits part of your daily life, the more you will develop money management skills. The easier it is to manage your money, the better off your finances will be.

Written by Kelvin Mkwawa, MBA
Seasoned Banker
Email address: Kelvin.e.mkwawa@gmail.com