How to manage your money and become wealthy.

Managing your money well means spending less than your income, so that you create a surplus. You can then save the surplus, always looking for the best rates of interest, one day you can invest this money and make it work for you.

The first place to start is discretionary spending (money that you can choose to spend) as this is the most wasteful area of spending. Work out how much you spend each day and see how much you can save by changing your habits. I have just done this and found that I could easily save £300 per month and I consider myself to be very frugal already.

Most people do not recognise the benefits from going to work! When you go to work you are not only earning extra money, but you are dramatically reducing your discretionary spending as you usually cannot be spending while you are working. The extra benefit that most people do not consider is that while you are at work you are using the firm’s utilities while yours are turned off at home, and this is a big factor now that utilities are so expensive.

Have a look at your utilities to see if you can save money by switching. Some of the comparison sites leave a lot to be desired as they earn money by recommending you to change even if you are already with the best as they get their income from people making a switch. Better to use ‘Which’ reports that act in the interest of the consumer or ask some of your friends and neighbours and compare your bills.

You can often save money by switching bank accounts as some banks are now offering to pay interest on your current account and in a recent example I looked at I could make up to £280 per annum in interest. If you are a taxpayer use ISA’s for your savings and try and put the maximum in each year and do your level best to not draw money out. Be prepared to review where you place your ISA’s each year and switch to find the best rates of interest.

After a while you will find that your savings are growing and you begin to wonder what to do with the money. Don’t make the mistake of thinking that you need to reward yourself by then spending it all. You need to make the money work for you first. There are dangers ahead now as there are whole industries out there that exist to separate fools from their money. Be very careful how you invest your hard earned wealth. But that is another topic for another time, take things a step at a time.