Only the rich need to worry about having people manage their money, right?
Wrong!
With a handful of credit cards, checking, savings and retirement accounts - and lots of different bills to pay - we all need money managers. The difference is if we aren't wealthy, the money management responsibility usually falls on our own shoulders, rather than someone else's.
While most of us think money management is just paying the bills and staying one step ahead, there are actually nine key components to managing money well.
Follow these steps and you'll be right up there with the pros!
#1 Read Your Statements
When you get your bank or credit card statements, do you read them? Or do you just look at the bottom line to see how much you have or owe? You should be reading them carefully to make sure you've actually made all the charges listed.
Credit and debit card fraud costs us all billions of dollars each year. Unfortunately, some people pay for fraudulent charges without even realizing it.
One company, for example, placed small charges of just £19.95 on people's accounts for merchandise they never ordered or received. Many people didn't even notice and the company made millions before it was caught.
Double billing, incorrect charges or altered checks can cost you a small fortune if you are not careful.
Check your bank statement and compare it with the checks you've written to make sure it is accurate. If you find any mistakes on your credit card or bank statements, dispute them immediately and put your complaint in writing.
#2 Pay Your Bills on Time
It wasn't too long ago that late fees on credit card payments were rare. Those few banks that did charge them usually gave people at least 10 days after the due date before a fee would be assessed.
Boy, have times changed!
Now, you can get hit with a significant late fee if you're just one hour late with a payment. You may also pay expensive fees if your mortgage, car payment or utility bills are late.
Even worse, your late payments may be reported to a credit reporting agency and stay on your credit report for up to seven years! These days, most credit card companies monitor their customers' credit reports and a history of late payments can trigger many of your unsecured creditors to raise the interest rates they are currently charging you.
Many of us lead busy lives, however, and it's easy to fall behind a few days - no matter how good your intentions are. When it comes to paying your bills on time, it's the date your payment is received that counts, not the postmark date.
Be on the safe side and mail bills as soon as possible - at least six days before they are due - to make sure they arrive on time. Better safe than sorry.
#3 Make Sure You Have Funds Available
Bounced checks can cost a small fortune by the time you pay the merchant a bounced check fee and your bank another fee. And you will still have to come up with the amount of the check.
If you bounce a payment to a lender, such as a credit card issuer, you will have to pay the interest that continues to build up as well as the bounced check fee and, probably, a late charge.
Even overdraft lines of credit, designed to protect against overdrafts, can be expensive at interest rates of 18 percent or more.
Make sure you have the funds available to cover your checks and enough to pay your bills. That means keeping track of your bills, your spending and your available funds.
And simply checking your balance at the ATM or online doesn't cut it: it may not reflect checks or withdrawals that haven't cleared yet.
#4 Balance Your Checkbook
When it comes to bank accounts, we at Myvesta have heard all kinds of creative ways to "manage" them - from rounding up every check to the nearest dollar, to closing and starting a new account every year. Some people never record any check they write because they think the bank will contact them if they run out of money!
Unless you take the time to reconcile your account, you'll never know exactly where you stand and you risk bounced checks or even fraud on your account.
The good news is that online banking has made it much easier for people to balance their accounts. An up-to-date statement can be available at the click of the mouse, making it easier to reconcile your account when you want or need to - not just when the bank sends you a statement.
#5 Plan Your Spending
The biggest trap people fall into is not knowing how much they can spend after all the bills are paid.
To figure this out, take the time to create a realistic spending plan - one that takes into account all your usual monthly expenses plus expenses that occur occasionally.
Your plan will work best if you approach it as something that gives you the opportunity to decide how to spend your money and not something that restricts or limits your life. To be accurate, you need to keep track of how much you spend and what you spend it on, so you don't leave out important items or categories when you create your plan.
Simply keep a notepad handy and use that to jot down purchases as you make them. Categorize your spending at the end of the day or week and use that to help create your spending plan.
The best part of creating and sticking to a plan is that once you've taken into account all the bills and regular expenses, plus some savings (see Step #8), you don't have to feel guilty about spending whatever is left over.
