10 Ways to Make Managing Your Money Easier
Managing your money might seem like a daunting task, but there are ways to make it easier. One of the most discouraging parts of money management is that it’s not a set-it-and-forget-it project, it’s an ongoing process. Your money management techniques might change and develop as your income changes, as your lifestyle changes, or as you continue to set more advanced financial goals. By creating habits and processes for managing your money, you can reduce financial stress and find peace of mind. Below are 10 ways to make managing your money easier.
#1: Create a Budget
Budgets don’t have to be a negative thing. Many people think of budgets as restrictive, or as the thing non-wealthy people have to stick to because they are “on a budget”. In reality, a budget is simply the term for allocating income for different expenses. Most wealthy people follow a budget, which is how they were able to become, and remain, wealthy.
To create a budget, determine what expenses you have, including wants and needs, then allocate a portion of monthly income for each expense category. To stick to the budget, make sure none of the expenses exceed their allocated portion for that month. By creating a budget, you give yourself control of your money and you get to determine how you spend it. This means you can still treat yourself to a manicure or go on that vacation, as long as the cost fits within the allocated amount. Your budget doesn’t have to be restrictive if your income allows for flexibility. In fact, it’s important to include “fun money” in your budget. Even in hard times, a small amount of fun money can help alleviate stress by allowing you to indulge in something fun or relaxing.
#2: Prepare for Taxes
Managing taxes is a big part of managing money. Many workers look forward to their tax refund check every year, and some even intentionally withhold more than they need to, but this is not the ideal way to pay taxes. In order to get a tax refund, you have to overpay the government throughout the year. The goal of tax planning should be to pay the exact amount you owe. If you overpay the government in taxes, you are allowing the government to use your money interest-free and you get no benefit from it.
Instead, you can use your tax money to work for you throughout the year. If you are disciplined, you can choose to have $0 withheld from your paycheck, then diligently set aside a designated portion of income every paycheck for taxes. Put this amount into a high-interest-earning account so you earn something on your money throughout the year. If you set aside enough, you can still give yourself a tax refund after you pay the taxes you owe.
#3: Track Your Expenses
It’s important to be aware of all the money coming into and going out of your accounts. Check your credit cards and checking account regularly so you know how much you’re spending. It also helps you make sure no one is making unauthorized charges.
By tracking your expenses, you’ll have a better idea of where your money is going and when. You might find patterns and habits within your spending that encourage you to make a change, or you might be proud of yourself for staying within your budget. Either way, tracking your expenses is a vital part of managing your money. If you have a hard time tracking the expenses on your own, there are many options for free or low-cost accounting softwares designed to help manage a personal budget.
#4: Reduce Unnecessary Spending
Following right along with tracking your expenses, look for expenses you don’t need to pay for. This doesn’t mean you have to cut fun out, but it does mean be aware of where your money is going, and look for areas where you spend money you don’t need to spend. Is there anything you are paying for but not using? Did you sign up for a free trial that has since expired and now charges you monthly? Many people find they are unknowingly paying for gym memberships, magazine subscriptions, and streaming services they are not using. There’s a reason subscription services are such a popular business model: you forget you’re paying for their service, but they regularly collect your money and send you products or vouchers you don’t use. Once you’ve tracked your expenses, focus on paying only for things you actively use.
#5: Use Debt to Your Advantage
The “debt disease” can be crippling. Credit cards, mortgages, auto loans, lines of credit – debt in all forms can easily overwhelm consumers. But if you understand how to take advantage of debt, you can make your money work for you. And even better than that, you can make the bank’s money work for you. Learn methods to control your money and use debt as leverage to grow your wealth instead of letting the debt control you. Find out how 101 Financial can help you use debt to your advantage.
#6: Build an Emergency Fund
If you attempt to manage your money without building an emergency fund, chances are you’ll have to start all over again once an emergency comes up. An emergency fund is essential for money management and it allows you to have peace of mind in the event of the unexpected.
There are two primary types of emergency funds. The first type is for living expenses in the event you lose your job or experience an interruption in income. For this emergency fund, set aside 3-6 months worth of income for living expenses. The second type of emergency fund is for unexpected one-time expenses. Have a reserve of funds to cover events such as damage from a flood or fire, medical expenses, or even a necessary household appliance that needs to be replaced.
Emergencies are less stressful when you have the funds ready, and being prepared grants you peace of mind. Add to your emergency fund regularly and only withdraw from your fund when you absolutely have to. Determine ahead of time what qualifies as an emergency so you avoid overusing your emergency fund. Keep in mind you might have two emergencies at once.
#7: Pay Yourself First
Prioritize building your savings and retirement funds. Before you pay any bills or spend any of your paycheck, pay yourself. If you have regular income, such as a W-2 job, automate savings deposits so you’re not tempted to spend the money before you save it. Take advantage of any retirement account matching offered by your employer. Consider investing some of your savings. You can’t save your way to being a millionaire, but you also can’t become a millionaire if you don’t save.
#8: Know Your Numbers
One of the most important keys to managing your money is knowing your numbers, and there are a lot of numbers to know. Ignorance may be bliss, but ignorance also means you’re not in control. Take control of your finances and make sure you know your numbers.
Regularly check your credit score. Make sure all the information on your credit report is accurate. Make note of what improvements you could make to increase your credit score.
Know what your expenses are and know what your income is. Set financial goals for the future and know what income figure you want to achieve, then work toward it. Know what you’re paying in interest and know what you’re earning in interest.
#9: Have a Wealthy Mindset
Focus on the future and your goals. With a wealthy mindset, you can enjoy the journey to reach those goals without settling for less than you want. Distinguish between wants and needs, then forego instant gratification for the wants. Instant gratification holds you back from goals and views of the future.
Think positively and empower yourself. Give yourself control of your money and situation. Instead of thinking, “I can’t afford that”, think, “I choose not to pay for that”. Maybe you could afford it, but it would be unwise. Instead, you are choosing to be wise and live within your means.
#10: Use Advanced Techniques
Once you have basic budgeting under control, utilize more advanced techniques to manage and grow your money.
Basic techniques suggest you have to have money to make money. Advanced techniques show you how to invest without putting any money down. Learn how to use the bank’s money, not your own money, as leverage to invest and grow your own wealth.
Learn advanced tax strategies to get more in tax credits and deductions and therefore pay less. One way wealthy people become wealthy is by learning how to keep more of the money they make. Take advantage of these strategies to manage your own money. Find out how 101 Financial teaches advanced money management strategies.
Proper money management is the key to a life free from financial stress. Whether you want to employ only the basics of budgeting and expense tracking, or you want to utilize advanced strategies of tax planning and investing, there are many ways to make managing your money easier. The important thing is to take control of your money and not let it control you.
Find out how 101 Financial’s Workplace Wellness program teaches money management.