Top 10 Money Management Tips

Top 10 Money Management Tips

1: Know your money priorities

Before budgeting, you need to determine your priorities. If you skip this crucial step, you won’t buy into your financial plan.

You need to focus on aligning your money goals with your money habits. That focus is most important in your life, right now. Do you have credit card debt that just makes your stomach churn at the thought of it? Paying it off may be your number 1 priority.

Patrice Washington, a leading authority on personal finance, entrepreneurship and more, advises that money priorities align with your personal values. “The biggest categories should reflect what’s most important to you,” whether you value international travel or taking care of your body. You can then narrow down other categories to “save at maximum capacity” for your true priorities.

Maybe it’s a wedding or a vacation you want to save. Or, maybe you want to set up an emergency fund so that you’re not “up the creek without a pedal” when your car needs an engine overhaul or your pet needs surgery.

Whatever worries you the most, make it your priority, at least to begin with.

2: Determine your monthly salary

As the saying goes, “What gets measured, gets managed.” How can you manage your money without knowing what you earn every month? If you don’t have an exact number, determine your monthly income after taxes. This will be easier if you are a salaried employee with a regular paycheck. Freelancers have to estimate their monthly income.

Once you have the number, add any extra side gig money. Maybe you babysit sporadically or have a blog that earns ad revenue or you teach a weekly fitness class. Add whatever extra income you earn to your monthly take-home pay.

3: Track where you spend your money

Time to play detective with your own money. To get a complete picture of your spending habits, you’ll need to do some financial forensics on yourself. If that seems overwhelming, limit yourself to one month’s worth of expenses.

Pull out your credit card statements, housing and utility bills, bank statements including ATM withdrawals, and any electronic payment records like Venmo or PayPal. Either open a spreadsheet or get out some good old fashioned paper and pen – it’s time to total up your expenses.

It helps to categorize your expenses as you analyze them. For example, you can label purchases as needs, wants, or savings/debt. Or, you can get more detailed and add categories like entertainment, food expenses, travel and transportation. It’s up to you how much you want to get into weed.

After you’ve compiled expenses in one place, total each category to see where most of your money goes. You’d be surprised how much you spend eating out. Or, how high a percentage of your housing costs are compared to your income.

4: Make a plan

Now that you know how much you earn, as well as how much you spend, it’s time to make a plan. The best financial plans align your priorities with your spending habits (Money Management Tip #1).

Let’s say you’re a fitness buff. When you add up your expenses, you find that in an average month you spend money on gym memberships, yoga class cards, and new athletic gear. If it’s important to you, you don’t need to cut it. But, to meet whatever priority you’ve set — let’s say it’s an emergency fund — you’ll need to cut costs elsewhere. That might mean shopping at a discount grocery store or brown-bagging your lunch instead of ordering takeout with your coworkers.

To meet your financial goals, perhaps you set up automatic deposits into a special “emergency fund” savings account. When your paycheck is deposited, the money is gone before you can count it as spending money.

Whether you pay for a budget program like YNAB, or opt for a simple Excel spreadsheet, is up to you.

5: Stick to the plan 

Once you choose a plan, try it for at least a month. You need that long to see if it works for you. Anything less, and you won’t see the benefit of keeping track of your finances.

So find a budget you want to try, get started and stick with it. It’s simple. If you want to, Washington recommends that you “surround yourself with visual representations” of your goals. So if you’re saving for your next international trip, you can put pictures of your dream trip to keep your goal fresh in your mind.

6: Anticipate emergencies

Regardless of what your priority is, you’ll want to have some easily accessible liquid funds.

Maybe you’re focused on paying off your student loans, and you’re not worried about building a hefty emergency fund. That’s fine, you don’t need to save six months of expenses. But you should save for at least three.

You never know what can happen. You or a partner may lose a job, or have a medical emergency or any number of circumstances. Whether you like it or not, life happens.

Having money to deal with problems will help you feel more secure and a little more prepared. Most crises add enough stress as it is. Eliminate the element of worry with a financial cushion.

How you put money away for an emergency is up to you. Maybe you funnel all of your side gig money into an account that you only touch in an absolute emergency. Or, it’s where any birthday or any gift money goes. It can be as simple as a small, monthly auto-deposit. It’s up to you.

7: Save early and often

This rule holds true regardless of your current priority. The sooner you save, the sooner you can build interest. You don’t even need an investment account to earn interest. Most of the best savings accounts earn interest and those accounts are FDIC insured. That means you don’t risk losing your money like in a brokerage account.

This rule also applies to retirement. The sooner you start putting money into an IRA or 401(k), the better. Even if you are years away from retirement, you still need to consider the future. Your money will grow the most if you start as soon as possible.

8: Take advantage of free money

You don’t want to overlook what assets are available to you. If your employer offers 401(k) matching, you should definitely take advantage of the benefit. It’s free money.

Another place to look is your health insurance plan. Are you paying for glasses or contacts out of pocket when some of those costs are covered by your plan? Maybe your job offers a discounted gym membership. Take advantage of all the benefits your job offers; You can save some serious cash.

9: Look at your debt

Take a look at your total debt (money management tip #2). Can you refinance for a lower rate? Maybe it’s transferring the balance to a credit card with lower interest. Or, it’s consolidating student loans. It’s worth combing your debt with a fine-tooth comb to see if you can find a way to save.

10: Find what works – and keep doing it

Another common maxim that applies to money management is “if it ain’t broke, don’t fix it.” Once you find a system that works, don’t get distracted by new apps or conflicting financial advice.

It’s tempting to try the next best thing, especially if it promises to be easy, simple, or quick. However, if you’re in a rhythm that works you’re saving money, meeting financial goals, and building security, stick with it. Your attention will pay off.

Top 10 Money Management Tips

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