Money management and personal finance are touchy topics. Everyone’s financial situation is unique, and what works for one person may not work for another. Many people experience a lot of anxiety when they think about their finances, both as they are today and in the future. Making a plan to address financial worries can help reduce stress and anxiety about money.
Maybe you didn’t start saving for retirement as early as you wanted or maybe you ended up in debt because you didn’t have an emergency fund in place. Regardless of your financial situation, there are still steps you can take to improve it and make sure that your future is secure. Taking control of your situation now is always the best choice.
You can follow a few key steps and be on your way. Gathering all the necessary materials and organizing them in an easy-to-access location is how to start.
How to Manage Your Money
It is easy to manage money and learn how to do it. Anyone can do it with the right tools and knowledge.
Here are some of the best money management tips to help you win on the personal finance front. Make a budget and stick to it.
- Start budgeting
- Build an emergency fund
- Get out of debt
- Improve your credit
- Maximize your income
- Start a side hustle
- Get insurance in order
- Stay consistent
1. Start Budgeting
Budgeting often reinforces a scarcity mindset. People think they have to stop buying things that bring them joy. By making small adjustments to their budget and spending strategically, they can still enjoy the little things that make life worth living. But if you take a balanced approach, once you learn how to budget, it can be a helpful tool for reaching your financial goals. And there are a handful of helpful budgeting apps out there to help.
If you want a simpler version of budgeting, focus on your three biggest expenses: housing, transportation, and food. It’s possible to cut unnecessary expenses to free up more money for your main expenses. Small purchases can add up, but you can save the most where you spend the most. If you want to reach your savings goals, you need to take a hard look at your budget and examine where you can make bigger cuts.
- Housing: Through house hacking (a form of real estate investing), you can easily save 30% percent or more of your income. Reducing your rent and investing the savings will add up quickly. Consider speaking with your landlord or mortgage lender to see if they have any special programs or discounts that can help you save money on rent or mortgage payments.
- It almost always makes sense to buy a used car instead of a new one if you want to save money. Public transportation is a great option if you’re able to pass on a car purchase.
- Food: It’s also worth taking the time to reduce your food expenses and work hard to save money eating out.
2. Build an Emergency Fund
Major appliance malfunction, car breakdown, medical emergencies, and job losses all have one thing in common: they can come out of nowhere. These life-changing events can be challenging if you don’t have enough money. That’s why having an emergency fund is crucial.
It is recommended that you save enough money to cover at least three to six months of expenses. Creating an emergency fund is a great way to make sure you have the money available should you ever need it. To start an emergency fund, calculate your expenses, set savings goals, and make routine deposits to your account.
You can deposit your money into several types of accounts, but I recommend a high-yield savings account. Check out my emergency fund calculator for help determining how much to save.
3. Get Out of Debt
Being in debt can cause a lot of stress. If you’re in debt, it’s important to take proactive steps to address the situation and get back on track. But don’t worry—people get out of debt every day. It’s just a numbers game when it comes to becoming debt-free. There are many strategies for debt repayment, like paying off your smallest balance first then moving on to your next biggest debt (aka debt snowball) or paying down your biggest debt first (debt avalanche).
In most cases, I recommend paying down your debt with the highest interest rate first to save the most money.
- Credit cards: Credit card debt usually carries the highest interest rates. Paying off high-interest credit card debt with a personal loan can be a smart move. It is important to consider the pros and cons of this strategy before making a decision. You get a predictable interest rate with your payments. It’s a great choice for budgeting and financial planning.
- Student loans: If you’ve already taken out student loans and the interest rate is above 5%, consider student loan refinancing and other ways to reduce student loan debt.
- It’s a good idea to keep your mortgage and put your extra money into investments. I had a 2.3% mortgage rate for five years. It saved me a lot of money, so I was happy to have that rate. I could have paid off my mortgage. I was able to save enough money to make it happen. I used the bank’s money to buy my home and invest in the stock market. The bank’s generous loan allowed me to pursue my dream of owning a home. I made over $100,000 on my investments. I am proud of the decisions I have made with my money. 10% is better than 2.3%.
4. Improve Your Credit
Your credit report and score are very important to your financial life. It’s important to check your credit report every now and then to make sure that no one else is using your credit. By monitoring your credit, including your credit score, you can make decisions that improve your situation, both today and in the future.
Paying your bills on time will keep your credit score in good standing. Keep your debt-to-credit ratio low by only using a small percentage of the credit available to you. Don’t max out your available credit, and work to build up a long credit history with multiple types of credit
It is important to monitor your credit. You can protect yourself from identity theft by doing this. Credit Sesame is a credit monitoring app that helps you keep an eye on your report and score for free. The app can help you improve your credit score. You will receive tailored recommendations and access to helpful tools that can help you get and maintain a good credit score, empowering you to make better choices every day. You can take control of your finances with these recommendations.
5. Maximize Your Income
One way to speed up your journey to financial freedom is to maximize your income. There are a few ways to increase your earnings. Keeping up-to-date on industry trends is one of the most important strategies for increasing your earnings.
- Ask for a raise: Most people are underpaid but they’re afraid of getting fired or don’t know how to get a raise. Employers may have had the upper hand in the past, but the power dynamic has changed and employees now have the leverage. The shift in power has created a more equal playing field for both employers and employees, allowing for a more productive working relationship.
- Establish relationships with at least two recruiters in your industry. Recruiters live close to the market, so they know what you should be getting paid and can recommend skills to learn or recommend a higher-paying job.
- Build passive income: With the right passive income ideas and some determination, you can succeed. Instead of trading your own time, focus on brokering other people’s time. You can monetize your expertise by offering services that will help others save time and money. Hire dog walkers instead of walking dogs for a company that limits hours and rates. You can set your own rates for dog walking services with this method. You aren’t limited by the hours you have in a day if you set your rates. It’s a great way to make money on your own.
- If you make purchases online, you need to create an account with a site that gives you free money. Start with one of our best cashback apps. They are easy to use. One of the best money management tips is to make sure your credit card provides rewards. It’s important to make sure you pay off your credit card balance in full every month to avoid interest charges. Don’t use the rewards points as an excuse for overspending. When using rewards points, be aware of your spending habits and use them in a way that makes financial sense.
6. Start a Side Hustle
Diversifying your income is just as important as your investment portfolio. Financial security and stability can be provided by having multiple sources of income. By starting a side hustle, you can bring cash in and give yourself additional financial security.
A side hustle is anything you do to make money outside of your full-time job. If you enjoy doing side hustles where you set your own fees and hours, you are most likely to have success.
There are limitations with these types of side hustles. Before committing to driving for one of these services, it is important to be aware of the limitations. Side hustles where you manage your own time and decide what you charge has the potential to make you more money.
Some of the Best Side Hustles:
- Blogging: Read my guide on how to start a blog with Bluehost and get my FREE 7-day blogging side hustle email course, where I share the step-by-step blueprint thousands of people have used to start a blog that makes money)
- You can earn money by sharing your opinion in online surveys. It is possible to make some extra money in your spare time. If you want to make a little extra cash, check out the best survey sites.
- Become a virtual assistant? It’s a great way to work from home and still have a stable job. Find out how to become a virtual assistant.
- Starting a YouTube channel: If you think you’re worth watching, here’s how much Youtubers make.
To learn more about side hustling, check out Chapter 10, More Money in Less Time: How to Launch A Profitable Side Hustle in my book
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Some pointers to help you invest, from what apps to use to retirement planning. Investing is a long-term strategy and it takes time and consistent effort to build a successful portfolio.
- Get started: If you haven’t started investing yet, the most important step is to simply start today using one of the best investing apps.
- One easy way to increase your investment contribution is to talk to your human resources department or 401(k) provider. It is possible to increase your savings without feeling the pinch of a large increase at once. If you prefer dollars over percentages, invest an extra $50, $100, or $1,000 each month. As your financial situation improves, you can increase the amount you invest. Every dollar adds up.
- Get educated: If you need a crash course on investing, check out my posts on how to start investing and investing strategies to get started.
- You need to save for retirement. Setting aside a portion of each paycheck towards retirement can help you build a secure financial future. Pensions are on the decline and Social Security only goes so far. To ensure financial security later in life, it’s important to plan ahead and save for retirement. So it’s crucial to invest in your financial future by saving for retirement. A tax-advantaged retirement account, like a 401(k) or IRA, can be used to set your future self up for financial success.
- Do you want to change your portfolio? Try investing in real estate. It is possible to build wealth and financial stability by investing in real estate. Today, anyone can get into real estate investing with real estate crowdfunding. Fundrise can be used if you don’t have a lot of money to start. Fundrise provides access to eREITs and eFunds, a form of real estate portfolio with a level of diversification.
8. Get Insurance in Order
Some insurance products are more important than others. Health insurance can help protect you in the event of a medical emergency. If anyone depends on you financially, you have shared debts, or you don’t have money saved for a funeral, you need life insurance. It will give you peace of mind that your family will be taken care of in the event of your death. There are multiple types of life insurance, and term life is a solid affordable option for millennials that can give you peace of mind at a low cost.
Car insurance is one of the key insurance products people don’t reexamine often. It’s important to compare car insurance rates at least once a year to make sure you get the best coverage for the lowest price. Even if you don’t change carriers, you might not need full coverage anymore if you paid off your car recently. If there are any discounts available for paying off your car loan, it’s important to check with your insurance provider.
When it comes to life, car, or any other type of insurance, doing a little comparison shopping is always wise. You can get quotes from competitors for nothing, and you can find an option that costs less than what your current provider charges. You can often negotiate for better deals if you compare quotes from different providers.
9. Stay Consistent
It is important to take steps to stay in control of your finances once you learn how to manage your money. Tracking your spending and creating a budget are two ways to stay in control of your finances. There are a few things you can do to stay on track. Make sure to reward yourself when you meet your daily goals.
- Track your money: it’s important to set up an easy way to track your money. Tracking how much you spend, save, and invest along with the performance of your investments and net worth is the most important thing. This can help you plan for the future and reach your financial goals. Although I use many of the best money apps, the free one I use daily is Personal Capital review.
- Housing is the biggest monthly expense for nearly every family. You can reduce your housing costs by downsizing to a smaller home. Reducing your housing costs can help you with your finances. To maintain financial stability, you need to make sure your housing costs fit within your budget. Whether you choose to move to a more affordable home or rent out a room with Airbnb, making your housing more affordable can make a big difference in your life.
- It’s a good idea to avoid impulse purchases. Before making a purchase, it is a good idea to consider whether you really need the item. If you spot something that isn’t on your list, wait at least 24 hours to see if you need it or not. Do you have something similar that could be used instead? To be safe, you may want to have a 7- or 30-day waiting period for big purchases. Ensure that you make a well-thought out decision before committing to the purchase with this. It is possible to get your spending habits in check. By making small changes to your spending habits, you can make a big difference.
- Make your checking/savings work for you: When you combine a high-yield savings account and a high-interest checking account, all of your money is always working for you instead of just sitting there. Discover Bank has great checking and savings accounts. You can easily keep track of your finances with Discover Bank’s budgeting and mobile banking tools. Free options can help you make the most of your money. Read our Discover Bank review.
- The average American pays over 20% of their income to taxes, so finding ways to save money can really add up over time. It pays to know the rules and regulations of filing taxes, so make sure you are familiar with the tax code, and look for any potential tax deductions or credits that may apply to your situation. You don’t have to become an expert on tax laws, but it’s worth taking the time to understand your own taxes each year, even if you’re using a service like H&R Block, TaxAct, or an accountant. Whether it’s Block, TaxAct, or an accountant, there is an option that can help you file your taxes correctly and efficiently.
- Not all costs are set in stone. You can negotiate for lower bills and fees. If you want to lower your monthly expenses, Rocket Money (formerly Truebill) can handle the negotiations for you. The fee is set at 40 percent of what you save, so you always come out ahead, and you only pay if they secure you a discount. This means that you could potentially save a lot of money on your purchases.
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