Follow These 7 Tips To Manage Your Money Wisely (2024)

You don’t have to be an expert in personal finance or have a big investment portfolio to be financially secure. It is important to understand the basics of financial planning, however. Adopt these seven habits of the financially savvy and you’ll become smarter with every dollar.

1. Make a plan.

Having a financial plan is about more than figuring out how much of your paycheck is left after the bills are paid. Your plan starts with thinking about what you really want to do. What goals do you have? Do you want to travel? Buy a house? Own a business?

Being successful, whatever that means to you, starts with having a clear idea of where you want to go and then making a plan to get there. Creating a budget is a key part of any financial plan and will help you achieve your goals and stay focused. If necessary, look for resources that provide budgeting or other money management tips.

2. Save for the short term.

Don’t put yourself in a situation where you have to rely on credit for unexpected expenses. One of your top priorities should be building up your emergency savings. As a guide, experts recommend saving at least three to six months’ worth of living expenses.

If you are planning any larger financial purchases like a home or car, consider setting up a separate savings account for those. Big-ticket items like a Disney vacation are much more enjoyable if the whole thing is already paid for and you aren’t racking up credit card debt.

3. Invest for the long term.

Saving for retirement should be another top priority. When investing long-term, you’ll want to consider putting your money in something other than a standard savings account that has tax benefits. The most popular accounts that can allow your money to grow tax-free until you are older (hint: age of withdrawal without penalty is 59.5) are 401(k)s and Individual Retirement Accounts (IRAs). You may want to get financial tips and guidance from a professional advisor.

You’ll also want to start saving as much as you can as early as you can to maximize the compound interest you can make, which is basically interest you’ve made on the amount you’ve invested also earning interest.

4. Use credit wisely.

Using credit responsibly is an important part of a sound financial plan because your credit score impacts your ability to make almost any big financial purchases. Be sure to pay your bills on time, every time, and try to keep your balance well below the limit of the card. Pay attention to the ratio of how much debt you currently have to how much you can borrow. This number should stay below 30 percent or it can negatively impact your credit score.

5. Choose a reasonable rent or mortgage payment.

Housing costs are generally the most significant part of everyone's budget, as well as a major emotional investment. The search for the "perfect" home can easily extend your budget beyond what's really comfortable.

When setting a housing budget, be sure to include all fixed costs and consider what amount you really want to pay. Keep in mind if you are buying a home that just because a lender approves you for a certain home loan amount does not mean that amount is ideal for your budget. The lender is looking out for their best interests — not yours.

You may also want to make a list of features you "need to have" and ones that are "nice to have" so that when decision time comes, you can make a thoughtful and financially sound decision. Being realistic about what you want and what you can afford upfront can save a lot of financial stress later on.

6. Treat yourself.

One of the biggest mistakes people make when getting their finances in order is becoming too strict. If we constantly deny ourselves the things we love the most, we will eventually cave into the pressure and make mistakes.

Studies have shown that willpower is a limited resource — you can only resist so many temptations before you will give in. If you were dieting and decided you would never again eat your favorite cookies, you’d probably last all of a few days before you broke down and gorged on two entire boxes. This applies not only to temptations of food but also financial temptations as well.

When considering how to manage money, the most savvy financial minds will tell you that you have to make room for indulgence in the budget to stay on track. Set yourself up for success. Add in a date night or a vacation here and there. Reward yourself when you hit a savings goal with a night out or a movie.

7. Never stop learning.

The world of finance is complicated, but money is a necessary part of life. You don't have to understand everything, but in order to stay financially secure, you need to keep learning about tools and resources you can take advantage of to make what you have work hard for you.

Take stock of what you already understand; then build on that with books, classes or savings advice from a professional. Before you know it, you’ll be sharing your expertise on how to manage money effectively with friends and family.

All company names and trademarks are the property of their respective owners.

Follow These 7 Tips To Manage Your Money Wisely (2024)

FAQs

How to manage your money wisely? ›

7 Money Management Tips to Improve Your Finances
  1. Track your spending to improve your finances. ...
  2. Create a realistic monthly budget. ...
  3. Build up your savings—even if it takes time. ...
  4. Pay your bills on time every month. ...
  5. Cut back on recurring charges. ...
  6. Save up cash to afford big purchases. ...
  7. Start an investment strategy.
Jun 27, 2023

What is the 70 20 10 rule with regards to money management? ›

The 70-20-10 budget formula divides your after-tax income into three buckets: 70% for living expenses, 20% for savings and debt, and 10% for additional savings and donations. By allocating your available income into these three distinct categories, you can better manage your money on a daily basis.

What are 3 ways you can spend money wisely? ›

In this article:
  • Create and Stick to a Budget.
  • Prioritize Needs Over Wants.
  • Use Your Credit Card—but Pay It Off Each Month.
  • Know Your Values—and Your Triggers.
  • Reduce Spending Where It Makes Sense.
  • Consider Long-Term Costs.
  • Limit Your Payment Options.
Mar 23, 2024

What are the 3 basic steps to better money management? ›

Understanding how to create a realistic budget, track your spending, and set attainable savings goals are essential steps in the process. It can be overwhelming to take on all these tasks at once, but when broken down into smaller steps, money management success is achievable.

What is the 50 30 20 rule? ›

The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.

How to be financially smart? ›

5 steps for getting smarter about everyday finances
  1. Get a clear picture of your financials—now and down the road. ...
  2. Tomorrow's plans start with today's budget. ...
  3. Make your money work smarter, not harder. ...
  4. Remember that monthly bills can impact future goals. ...
  5. Use a banking app to save time and stay on top of your finances, 24/7.

What is the golden rule of money management? ›

Golden Rule #1: Don't spend more than you earn

If you always spend less than you earn, your finances will always be in good shape.

What is the number one rule of money management? ›

Golden Rule #1: Don't Spend More Than You Make

Basic money management starts with this rule. If you spend less than you earn, your finances will always be in good shape. Understand the difference between needs and wants, live within your income, and don't incur unnecessary debt.

What is the 10 rule of money? ›

Save for periodic expenses, such as car and home maintenance. Save 5%-10% of your net income. Accumulate at least 3 to 6 months' salary in an emergency fund. Make saving a habit, and never break it; always have a planned, written goal that you're saving toward.

How to be a wise spender? ›

How to Manage Your Money Wisely
  1. Make a plan. Having a financial plan is about more than figuring out how much of your paycheck is left after the bills are paid. ...
  2. Save for the short term. ...
  3. Invest for the long term. ...
  4. Use credit wisely. ...
  5. Choose a reasonable rent or mortgage payment. ...
  6. Treat yourself. ...
  7. Never stop learning.

How to live below your means? ›

These seven tips may be able to help.
  1. Understand your current financial habits. Not sure how to start spending less? ...
  2. Create an effective budget and stick to it. ...
  3. Look for ways to reduce spending. ...
  4. Set financial goals for future success. ...
  5. Save for emergencies or major purchases. ...
  6. Pay down debt. ...
  7. Stay aware of lifestyle creep.

How can I grow money wisely? ›

Instead, try diversifying your portfolio by investing in different types of assets, such as stocks and bonds, or sectors like technology and healthcare. Diversification will help minimize risk while allowing for potential gains from other asset classes or sectors.

What are the three 3 key activities of financial managers? ›

Financial managers create financial reports, direct investment activities, and develop plans for the long-term financial goals of their organization.

What are the three 3 elements of financial management? ›

Most financial management plans will break them down into four elements commonly recognised in financial management. These four elements are planning, controlling, organising & directing, and decision making. With a structure and plan that follows this, a business may find that it isn't as overwhelming as it seems.

What is 3 way budgeting? ›

A three-way forecast, also known as the 3 financial statements is a financial model combining three key reports into one consolidated forecast. It links your Profit & Loss (income statement), balance sheet and cashflow projections together so you can forecast your future cash position and financial health.

What is the right way to manage money? ›

How to manage your money better
  1. Make a budget. According to the Capital One Mind Over Money study, people dealing with financial stress struggle more with budgeting. ...
  2. Track your spending. ...
  3. Save for retirement. ...
  4. Save for emergencies. ...
  5. Plan to pay off debt. ...
  6. Establish good credit habits. ...
  7. Monitor your credit.

What is the best way to organize your money? ›

Here are five easy steps to help organize your finances and keep them that way.
  1. Create a budget. Take a serious look at where your money goes. ...
  2. Track your spending. ...
  3. Pay bills on time to avoid late fees. ...
  4. Keep joint accounts balanced. ...
  5. Set a savings goal.

Where should I be financially at 25? ›

“Ideally, your savings should reach $20,000 by the time you turn 25,” says Bill Ryze, a certified Chartered Financial Consultant (ChFC) and board advisor at Fiona. The national average for Americans between 25 and 30 years of age is $20,540.

References

Top Articles
Latest Posts
Recommended Articles
Article information

Author: Dan Stracke

Last Updated:

Views: 6311

Rating: 4.2 / 5 (63 voted)

Reviews: 94% of readers found this page helpful

Author information

Name: Dan Stracke

Birthday: 1992-08-25

Address: 2253 Brown Springs, East Alla, OH 38634-0309

Phone: +398735162064

Job: Investor Government Associate

Hobby: Shopping, LARPing, Scrapbooking, Surfing, Slacklining, Dance, Glassblowing

Introduction: My name is Dan Stracke, I am a homely, gleaming, glamorous, inquisitive, homely, gorgeous, light person who loves writing and wants to share my knowledge and understanding with you.