I was reading a comment on My Open Wallet and it got me to thinking. What does good money management mean to you? As I’ve talked to people that have struggled with money I never realized that their definition of good money management and mine were completely different. My definition of good money management is that you have a plan, you know how much money you make, and how much money you spend, and you have goals. For example, I track how much income we have, what our standard expenses are, and what our net worth is. (as well as a bunch of other things that I track, mostly for my own entertainment). To me, that feels like pretty good money management. Obviously, people are all over the spectrum on this. There are those people who like to track things at a much more detailed level, and then there are those who people who shove their bills in a drawer when they come in the mail because they know that they don’t have enough money to cover them. That was probably one of the most surprising things to me from watching Oprah’s debt diet. I was amazed that there was a family on the show who didn’t even open their bills. I just didn’t know anyone did that.
So, where was I? Some people I know think I’m frugal. I’d bet a few others consider me a “miser”. I can promise you that if a self declared miser or frugal person ever watched our spending habits and walked through our house, they’d sorely disagree with those labels for me. We spend money. We also save money. To make sure that we are meeting our long term goals, we simply “pay ourselves first” like all the personal finance books tell you to do. By doing this, we know that we’ve hit all of our targets for the month. After all of our bills are paid, and the investments are made, we have money left over. This is where the misers and the frugal folks would chew me up. We are pretty free wheeling with this money. We still keep an eye on it, but not a close eye. We usually have some of this money left over each month and it just helps us build our savings further. Normally, something comes up and we find that we need to spend some of this. It could be a dead washing machine, a new window for the house, or the next major expense that we are going to have to face within the next couple of years, a new roof.
Bottom line. There is no one authoritative definition of good money management. for those people that think good money management means being frugal, or a miser, I urge you to look further. When you practice good money management, you can still have many of the things you want, you just have to take a slightly different path to get them. (Pay yourself first, pay your bills and then look at what you’ve got left)
“If you aren’t working towards a goal then you’re just working for the man”
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All the good money management in the world won’t help you if you don’t do something with the money you’re managing, so your advice is very smart!
I would also add that a key aspect of good money management is being ready for contingencies. While I hope nobody ever faces an unexpected financial crisis, they can seriously damage years of hard money management work. Still, if one does everything else right when caring for their personal finances, it shouldn’t be difficult to weather even the harshest of financial storms.
I’ve gone through periods when I haven’t open my bills. I know it’s ridiculous but it can be too overwhelming to deal with. I am trying to drop this habit and am 95 percent there.
Good to hear that you are trying to change that Elle. I can imagine that would be rather hard on your credit score. Once you get out of that monthly debt cycle you will be a million times happier!!
I totally agree, we are exactly the same with our money. We save and invest first and then we spend the rest on whatever.
RS. Good to see that you do the same thing. I think it’s a great way to make sure you are investing for the future, and also living for the day!
my sister is one that never opens her mail. Bills included. They are all over the place, not even in a drawer. Makes me close to crazy just to know this………. I have to open bills the minute they come in and then make a mental note of it, file the bill in the “bill folder” & it’s ready to pay when I go to my online bank site the next time.
I’m always amazed at my sister & my different ways of handling money. Same parents, same situation, only a couple years difference………and it is like she is from a different planet. My parents are frugal, paid for everything with cash, even their home they built. Sis………..now, there is a different story!