Turbo Takeaways

Without money management, you’ll always feel like you’re one step away from a financial disaster. Money management can bring you financial freedom, which will give you a sense of security and ease your stress.

A staggering 74% of working Americans feel stressed about their personal finances. More than half say inflation is their biggest stressor.

If you want to avoid challenging financial situations such as these, prioritize learning how to manage your money well. Once you’re no longer stressed about money, you’ll have more time to enjoy the most important things in your life.

Start taking control of your finances today with these practical money management tips. A few smart changes can make a big difference in your financial security and peace of mind.

What Is Money Management?

Money management involves strategies like budgeting, saving, investing, and debt relief to ensure you’re financially prepared, both now and in the future. Building financial confidence and reducing anxiety starts with setting smart financial goals.

Learning how to better manage your financial mindset and money can be done in a number of ways. Some of the most important money management skills include budgeting, future planning, financial protection and risk management, banking, managing assets, managing debt, and using credit wisely. 

7 Tips To Manage Your Money Better

Money management skills don’t come naturally to a lot of people. Life can throw you some curveballs. But with these skills, you’ll be better prepared for any financial upheavals in your life.

1. Set Clear Goals

The only way to know if you’re managing your finances successfully is by first setting some clear goals. To know how well you’re doing at any given moment, it’s always best to have a “yardstick” to measure your progress with.  When you make progress towards your goals, you’ll have more confidence to do better.

Think about what is most important to you. Whether it’s paying off credit card debt, creating an emergency fund, funding your retirement, or saving for a home, having clear financial goals can help you.

Write down your short and long-term goals and prioritize them, by thinking about which one is the most important right now. Then think about the next most essential goal, and then the next.  Pretty soon, you’ll have a plan written out and ready to put in place, right away.

2. Make a Budget

People who don’t make a budget tend to spend money more impulsively, feel less in control, and risk having a negative bank balance.

Learning how to create a budget is a great way to develop healthy money habits. It ensures that you have enough funds for the things you need right now, while saving for your future. Create a budget to see how much you’ll be able to allocate toward each of your goals, and then fund them, in the order of priority you determined when you set them.  

Use a budgeting Excel worksheet or a free budgeting app and follow these steps to create a monthly budget:

  • List your monthly income. Other than your salary, add tax refunds, bonuses, and income from side gigs if applicable.
  • Write down all your monthly expenses. Start with your fixed expenses such as transportation, rent or mortgage, loans, and utilities. For variable expenses such as food, use an average from the last three months.
  • Understand the maturity date on your loans to determine when you’ll make your final payment.
  • Subtract your expenses from your monthly income. Anything that is leftover can be allocated towards your financial goals, such as retirement savings or a down payment on a home or a new vehicle. 

If you find that your expenses are more than your income, look for ways to cut expenses, such as subscriptions to multiple streaming video and audio services, premium cable channels, unnecessary discretionary purchases, especially on luxury items.

Cut back on unnecessary travel and vacation expenses, at least temporarily, until your finances improve. And of course, cut back on dining out.  

Try popular approaches like the 50/30/20 budgeting technique. With this technique, allocate 50% of your income to your needs, 30% to your wants, and 20% to your savings. Look at your budget on a regular basis and make adjustments as needed.

3. Track Your Spending

Tracking your expenses can help you stay within your budget and avoid overspending. You don't want to incur additional charges if you start to live above your means. Plus, you will not want to deal with the repercussions of what happens if you stop paying your credit card.

There are many apps available to digitally record your expenses every day. Your bank may also offer free digital resources that help you track expenses. You can always use a simple college-ruled spiral-bound notebook if you prefer.

Split your expenses into different categories. This will make it easier for you to see exactly where you are spending the most. Review your expenses at the end of each month to see where you may be able to reduce spending.

4. Pay Off Debt

Paying off your debt can reduce your anxiety and free up funds that can be allocated toward your savings. An alarming 33% of Americans have more credit card debt than emergency funds.

Whether you have student loans, personal loans, or credit card balances, having a plan in place to pay it off often helps reduce your debt-related stress tremendously. If you have accumulated a lot of debt over time, consider these debt relief options:

  • Debt Snowball: Focus on paying off your smallest debt balance first. Make minimum payments on all other debts. Once you pay it off, use the extra money to pay off the second-smallest balance until you’ve paid off all your debts.
  • Debt Avalanche: Start by paying off the debt with the highest interest rate. Once you pay off the balance, use those funds to pay off the next-highest-interest debt on your list. Continue to make minimum payments on all other debts while you allocate any extra payments to these high-interest debts.
  • Debt Management: Enroll your debts in a debt management program. A debt relief company can negotiate with lenders to reduce your monthly payment, interest rates, and many of the fees your credit card company charges you (e.g., late fees, cash advance fees, etc.). You’ll only have to make a single payment each month. 
  • Debt Consolidation: If you have multiple loans and credit cards, combine them into a single debt consolidation loan at a low-interest rate. This will make repayment easier and allow you to save on interest charges.
  • Debt Settlement: If your debt is overwhelming, consider debt settlement. This allows you to negotiate with your lender and settle your account for significantly less than what you owe, oftentimes for as little as 50% of your current balance.  

5. Create an Emergency Fund

Create an emergency fund to be better equipped for unexpected events such as a hospital emergency room visit or unexpected home repairs.

Having enough money in an emergency fund will ensure that you don’t have to take on any debt in case of an unexpected event. Shop around to compare interest rates offered by different savings accounts. Even a little interest can add up to a lot over time. 

Anytime you receive a bonus, tax refund, or another windfall, deposit it in your savings account. You can also automate savings to your bank account so you won’t be tempted to spend any extra cash. 

6. Establish Good Credit Habits

Work towards establishing good habits that will allow you to repair your credit and improve your finances. Good credit scores can impact many areas of your life, such as getting lower interest rates on loans for homes or automobiles.

Here’s how to improve your credit score:

  • Pay all your bills on time 
  • Keep your credit utilization ratio as low as possible (under 30% is ideal)
  • Set up autopay for all your bills to avoid late payment fees and penalty APRs on any future charges or balances
  • Monitor your credit report regularly
  • Dispute any errors you find on your credit report 
  • Avoiding taking on a lot of new debt 

Annualcreditreport.com offers a free credit report annually from each of the major credit reporting bureaus–Experian, Equifax, and TransUnion.

7. Save for Retirement

Another important money management strategy is saving for your retirement, even if it seems like a long time away. Think about how much you need to retire and start saving as early as possible to maximize your savings. 

If your employer offers a retirement plan with matching contributions, like 401(k) and 403(b) accounts, take advantage of them.

If you don’t have an employer matching option, you can contribute to a Traditional or Roth Individual Retirement Account (aka, an IRA or Roth IRA). Contribute to this kind of account each month to meet your retirement savings goals.

How To Improve Money Management

Improving your money management skills requires time and patience. Once you put the tips listed above into practice, here are a few other ways you can improve your skills:

Work on Your Money Mindset

How you think about money can be as important as what you do with that money. Develop a positive mindset by focusing on solutions and always striving to make the highest and best use of every dollar you earn. Keep your sights on your goals, such as getting your spending habits under control and paying off your debt.

Live Within Your Means

Only spend the money that you have. This means not exceeding your credit limit and keeping your income greater than your expenses. Once you have made a budget, manage your expenses so that you are spending less compared to your income.

Put aside a part of your income to save for bigger expenses in the future. This will help prevent you from falling into an unmanageable financial lifestyle.

Be on the lookout for ways you can save money. Use coupons, make your own coffee at home, pack your lunch every day, and take advantage of sales whenever you shop. These small habits can add up to big savings in the future.

Organize Your Finances

If your bills and statements are not organized, you may end up missing deadlines, paying expensive fees, and hurting your credit. Keep all the documents related to your personal finances in one spot in your home or in a digital file.

Organize your paperwork with a simple filing system or scan documents and keep a digital copy of each of them on your computer. Mark all your due dates on your calendar or set up reminders on your phone to keep track of them.

Work With a Professional

If budgeting and money management strategies seem challenging, you can work with a financial advisor or a credit counselor. 

An advisor can help you set goals, create a budget, come up with a financial plan, and prepare for financial milestones in your life. 

Build Your Personal Finance Knowledge

Continue to work on your financial education. Use the information you learn to make adjustments to your money management plan. There are countless resources available to learn from, such as books, blogs, and podcasts.

Find resources that will help you learn more about your specific financial needs. You’ll find many tips on how to optimize your finances online.

Find an Accountability Partner

Find an accountability partner with similar financial goals. Check on each other regularly to discuss progress and any difficulties you are facing.

Having someone to talk to can help. You can motivate each other and ensure you stay on track to achieve your goals.

Monitor Regularly

Continue to monitor your progress regularly. Set aside time each week and each month to keep track of your expenses, savings, and budget.

Regular monitoring will also ensure that you catch any inaccuracies or wayward spending habits early on. This will help you get things back under control before your financial situation gets any worse. 

Money Management Vs. Budgeting

Money management is a collection of strategies and skills that help you handle every aspect of your finances. It involves goal setting, budgeting, saving, and investing.

Budgeting is a part of money management. A budget provides you with a snapshot of your regular monthly (or quarterly/annual) income and expenses. Creating a budget will ensure that you don’t end up in a lot of debt, help you curb your expenses, and make sure you will be able to consistently put aside savings for your future.

Money Management Can Improve Every Area of Your Life

Money management is an essential skill that can have a profound impact on every area of your life. Financial literacy can ensure that you spend less time worrying about money and more time doing things you truly enjoy.

TurboDebt can help you meet your financial goals through effective debt relief programs. Our consultations, counseling, and strategic planning services are designed to help you achieve your dream of a debt-free life.

Get in touch with us today for a free consultation. Browse over 18,000+ 5-star TurboDebt reviews and see why thousands of satisfied clients recommend our debt relief services.