Unless you're expecting a big inheritance someday, the only way to accumulate a net worth worthy of the label is to make a habit of spending less money than you're taking in. Budgeting is a good way to practice this particular religion. But whether you budget or not, the money that flows through your hands on a regular basis is the key to getting ahead. On a modest income, the difference between half-hearted money management and smart money management can be hundreds of dollars a year - cash in your pocket or cash down the drain. As the years go by, the difference can amount to thousands and thousands of dollars.
How to reach this blessed state? Start with four simple, common-sense principles of smart money management.
1. Don't surround yourself with cash.
Do you keep large amounts of cash around the house instead of putting in the bank, where it will earn interest, or in an investment plan, where it can grow? Do you neglect to cash traveler's checks after a trip? All these lackadaisical habits deprive you of chances to let your money make more money.
2. Don't pay your bills early.
Paying your bills before they due won't improve your credit standing. It's the persistently late payers who bother the banks and credit card companies. Prepaying reduces the time your money can be earning interest for you and gains you absolutely nothing in return.\
3. Don't have more taxes withheld than you owe.
Many people deliberately have too much taken out of their salaries to avoid a large tax bill in April or to accumulate a refund. Those excess withholdings could be put to work earning interest, leaving you with even more left over after your taxes are paid.
4. Get the max from your taxes are paid.
This fourth step is the one that the other three have been leading up to. For most people, the difference between depositing a check today and depositing it next week amounts to nickels and dimes in lost interest, and nickels and dimes aren't going to make you rich. The real aim here is to establish good money management habits. As your income grows, the payoff will grow along with it.
