Money management: 4 tips to take control of your finances

What exactly is money management? It’s a plan for your money so you can get the most out of it. This plan usually involves budgeting and saving money, avoiding or reducing debt, and investing in your future.

If learning to manage your money seems daunting or stressful, take it one step at a time. Below are some money management tips to help you take control and, most importantly, gain peace of mind.

How to manage your money

1. Take stock of your finances

Money management isn’t just about doing mathematical calculations. It’s also about adjusting your state of mind.

Take a mental inventory of your current position.

  • Are you constantly overspending?

  • Do you have enough savings to survive an unexpected expense?

  • Are you living paycheck to paycheck?

  • Do you feel overwhelmed by the financial jargon?

Be honest with yourself about your weaknesses. You may have taken some missteps in the past, but you don’t have to continue on this path. Here’s how to manage your money now, while planning for the future.

2. Develop a money management plan

How do you put your plan into action?

Follow the steps below to create a plan that works for your finances.

Start with a budget

If you are not sure how to budget, start by choosing a system that you will stick with. We love the 50/30/20 budget plan, which allocates 50% of your income to needs, 30% to needs, and 20% to savings and debt repayment. This 30/30/20 budget calculator divides your income into these categories.

If the 50/30/20 rules don’t work for you, there are plenty more types of budgets to choose. You may also find that a free budget app helps you stay in control of your finances.

Track your spending

Through expense tracking, you can see exactly where your money is going. This can prompt you to adjust your spending habits so that they better match your goals.

Money saved is money

Track spending across all of your accounts to see where you can cut or save.

Find ways to save

As you pay more attention to your finances, you will likely find opportunities to save. Here is how to save moneyfrom changing daily habits to negotiating bills and making long-term changes.

Ideally, over time, saving money will become part of your lifestyle. If you want to learn more about saving money with coupons, freebies, and DIY tips, check out our guide to frugal life.

Use designated accounts for your spending and savings

One way to make money management easier is to separate the money allocated to invoices and budgeted expenses from your emergency fund. This will reduce the temptation to dive into it for non-emergencies. Saving for a house, a vacation or a new car? Store these funds in separate accounts so you can see the progress towards each goal.

Make a plan to pay off your debt

A strategic approach to debt repayment will help you reach the debt-free finish line faster. We recommend that you tackle your most expensive debt first – the accounts with the highest interest rates – while making minimum payments on the rest. Then go through any low interest debt until it is fully paid off.

Develop good credit habits

Your credit can determine whether you are able to get loans and the rates you pay on them, as well as many other aspects of your financial life. A credit check can be part of getting a cell phone plan, an apartment, or car insurance.

To stay on top of your score, focus on the two main factors that influence it: payment history and use of credit (how many of your credit limits are you using). Try to pay everything on time, as a single missed payment can hurt your score and use up less than 30% of your credit limits on each card and overall.

Invest in your financial future

Put some money aside now, in a 401 (k) or IRA, and let compound interest work its magic. The ultimate goal is long-term financial freedom and stability. Don’t know how much to save? Try our retirement calculator.

3. Make the most of your savings

Money management is about more than spending less than what you earn. A real sign of financial prowess is saving enough to live comfortably both long and short term.

You can achieve this in four steps:

Piggy bank

Save

Start raising extra money to build an emergency fund. Ideally, you should have six months of living expenses available to you in case the unthinkable happens. If that sounds too ambitious, start small. A reserve of $ 500 is a great first goal.

Investment portfolio icon

Invest

Invest extra money for your future. Prepare for retirement by contributing to a 401 (k). If your business offers a match, contribute enough to get the most.

Pay off the debt

Whether it’s a loan or an impending credit card bill, you are likely in debt. Always make at least the minimum monthly payments so as not to suffer credit damage due to late payment. If you have extra money for bills, pay off high-interest debt first.

Wallet icon

Repeat

Continue to build that emergency fund, invest for retirement, and reduce debt.

4. Be persistent

Despite their good intentions, many people fall on the financial bandwagon. Sticking to a budget that is too restrictive can suffocate. Navigating through investing lingo can be confusing. But don’t be discouraged.

You didn’t get into the financial situation you find yourself in overnight, and you won’t get out of it overnight. Give yourself time to learn and grow. With hard work and dedication, you can manage your money with confidence.


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About Rachel Gooch

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