By Verdell Wright
MoneyMix Contributor 

Money. It can make things easier, and it can also drive you crazy. And getting more of it is not necessarily the answer to keeping you on easy street. How you manage your money is what counts.

Why? Because managing your money well leaves you prepared to easily handle expected and unexpected costs while keeping you on track to meet larger goals like buying a house.  Otherwise, you're left scrambling to make ends meet.

a tale of two guys

Meet Tim and Stephen. Stephen is a 28-year-old city planner and graduate student that lives in Washington, D.C. Tim is a 23-year-old financial analyst from Hyattsville, MD.  

Both Tim and Stephen have figured out that managing your cash well enables you to deal with expected and unexpected costs in the future. "Spending wisely has given me a cushion in tight situations," said Tim.

Tim's roommate recently moved out. While living with his roommate, Tim split the rent payment and only paid $404.50. Once his roommate unexpectedly moved out, Tim's rent payment skyrocketed to $859 per month.

"When my roommate moved out, all of a sudden, my budget no longer fit my living situation," said Tim.  

By effectively managing his money, he's been able to weather the storm. "If I hadn't had my emergency savings in place," Tim said, "I would've had to cut a lot out of my budget to make ends meet."

This lesson came earlier in life for Stephen.

"I first realized the importance of monitoring my spending at 18 when my car died and I didn't have enough money to fix it. Needless to say, I resorted to walking for a few months." 

See the difference? Unlike Stephen, Tim was able to handle a financial emergency because he managed to spend wisely and save money along the way.

the "b" word: budget

Tim and Stephen both agree that having a budget is vital to helping you spend wisely.

It's easy to discover a budget that's right for you. As Stephen puts it, "It's income minus spending and debt." The trick is to stay on top of your spending and stick to your budget.

A good way to figure out how much you are spending is to track expenses and income for a month. Blogger Trent Hamm of The Simple Dollar offers a good way to track expenses. He suggests keeping all receipts in a box or envelope. Then at the end of the month, separate the receipts and bills into different categories such as clothing, food, rent, electricity, etc. Look at how much you are spending compared to what you are earning to determine where you need to cut down or where you can save or spend more. Once you have determined a month's expenses and income, start planning for the next month. After that month, see how well you followed your budget and make changes from there.

MoneyMix offers a great budgeting tool to help you figure out a basic budget to follow. Try it here.

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