How to Manage Your Money Like a Pro

If you want to start managing your money like a pro, then you need to start by creating a budget. This may seem daunting at first, but it's not as hard as it seems. Plenty of online resources and apps can help make the process easy.

man showing son how to manage your money
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By taking the time to create a budget and stick to it, you'll be amazed at how much easier it is to stay on top of your finances. And over time, this will help you build wealth and achieve your financial goals. So don't wait any longer – get started today!

What is meant by Money Management?

Money management is the process of overseeing and controlling your financial situation. This includes setting goals, tracking spending, and making financial decisions aligned with your goals.

One of the main benefits of money management is that it can help you stay on track with your financial goals.

By tracking your spending and making mindful financial decisions, you can ensure that your money is being spent in ways that align with your goals. This can help you save money, pay off debt, and build financial security. Money management is a critical skill for anyone who wants to take control of their personal finances.

Why is Managing Money Important?

Many think managing money is only important for businesses and wealthy individuals. However, everyone can benefit from learning how to manage their finances effectively. Money management skills can help you make the most of your income, whether living paycheck to paycheck or saving up for a major purchase.

They can also help you avoid debt and build up your savings. In addition, effective money management can help reduce stress and give you a greater sense of control over your life. Consequently, there are many good reasons to learn how to manage your money effectively. With a little practice, it can be easy to see real results in a healthy financial future.

How to Manage Your Money Better: What Are Some Money Management Tips?

Anyone who has ever struggled to make ends meet knows that money management skills are essential. But what exactly does it mean to manage your money? Money management skills can be divided into three main categories: earn, save, and spend.

To earn money, you need to have a steady income. This can come from a job, investments, or other sources. Once you have a steady income, you can start saving.

Savings can be used for emergencies, big purchases, or retirement.

Finally, you need to be mindful of your spending. This means creating a budget and sticking to it. It also means only buying what you need and not succumbing to impulse purchases.

By mastering these three money management skills, you will be on your way to financial stability.

15 Tips To Manage Your Money Better

Below you’ll find a short crash course on the most vital money management topics. I focus on practical things that you can start applying today.

I’ve ordered the tips in a logical progression. You can even think of them as chronological steps that lead you out of the financial wilderness to an oasis of financial peace. Some of the suggestions might already be in place in your life. If so, great! Focus on those that still need work.

If you still need to implement the bulk of these steps, you can start at number one and patiently work your way through. Don’t be in a hurry. 70% of people never do these things, so even if it takes you years to implement them, you’re still way ahead of the pack.

couple looking at their personal finances
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1. Create a Monthly Budget

Some people are so terrified of their finances that they’re too scared to look. They know deep down that they’re spending too much, and they’re going deeper into debt every month. Yet, somehow, they ignore their finances. They don’t even open their bank statements or their credit card bills.

I did this for many years. And I can tell you now if you do this you need to stop. If you don’t, you’ll soon find yourself in a hole too deep to get out. The best way to avoid this comfortable, yet stupid ignorance is to create a budget.

Sit down, open a spreadsheet, and record your income at the top of the page. Now, open your bank statements and credit card bills, and list everything you spent over the last calendar month. Then add up your expenses.

How does it look? Did you spend more than you earned? Or do you perhaps have some money left that you can save or invest? Either way, create a new list of expenses. What are you anticipating spending in the coming month?

Once you complete your anticipated list of expenses, ensure that the total adds up to less than what you earn. Well done! You have now created a personal budget.

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2. Change Spending Habits To Reduce Expenses

But wait. We won’t stop there. You now need to look at your expenses with a more relentless focus and see where you can be ruthless in reducing them. Cutting down your expenses is where true future freedom is born. Having the discipline to spend less than you earn should be your number one priority. So go through your list of budgeted expenses with a fine comb. For each one ask:

  • Do I really need this?
  • Can I reduce this in any way?
  • Is there any way I can get by without this product, service, or subscription?

Think creatively of solutions to bring some of your costs down. Perhaps shopping at a different grocery store can bring you some financial respite? Or maybe you can cancel a subscription you don’t use regularly.

Consider ways to avoid fees on things like atm withdraws, instead look for ways to get cash back on your debit card without fees. Please take this task very seriously. Every tip/step following this one will benefit from you being thorough and fierce here. 

3. Stick to Your Budget To Achieve Financial Success

Sticking to your budget is an excellent exercise in self-discipline. And trust me, it’s harder than it sounds. You now have a simple way to control your financial future if you can stick to your budget.

In any area of your life where you’re trying to make positive changes, you’ll face resistance. It would be best if you were ready for this, anticipated it, and were truly committed to sticking it out. Spending less money every day than you budgeted for is where the rubber meets the road. And it’s the third of the three core, primary tips/steps that can bring you financial freedom.

If you do only these three steps well, you’ll be well on your way to a wealthier future.

4. Track Your Spending On Everyday Expenses

Find some way to track your daily spending. I have a credit card that I use for all spending. It shows all my expenses on a useful app immediately after my card gets charged. I then look back at some point during the day and enter my expenses in my budget.

Maybe that’s a little too disciplinarian for you. You don’t have to do the same. The important thing is to find some way of tracking that works for you. You need to be able to reign yourself in immediately when your spending gets out of hand.

Know beforehand what you’re allowed to spend according to your budget. Track what you spend and stick to your limits. As an example, whenever I get ill-disciplined, I spend too much on books. So I need to steer clear of the Amazon and Audible websites at all times!

Perhaps you have an allowance for coffee for the week. If you purchase two cups at Starbucks today, you might need to cut down for the rest of the week. And recording your daily expenses helps you to stay within your protective limits.

5. Don’t Create Any New Debt 

“Compound interest is the 8th wonder of the world. He who understands it earns it; he who doesn’t pays it.” — Albert Einstein

One of the core principles of wise money management is to allow your money to work for you. You need to build up assets. The opposite of this is to build up liabilities that cost you money. So, please don’t incur any new debt.

If you summarized all the popular personal finance books in one sentence, it would read like this: Don’t spend too much, eradicate your debt and start investing more of your income.”

So, please start thinking of debt as the enemy of your future power and freedom. And steer well clear of it!

6. Pay Off Existing Debt

One of the smartest things you can do with your money is to pay off existing debt. Not only does this free up more of your income each month, but it also can save you money in the long run.

When you have debt, you are typically required to pay interest on that debt. The interest rate can be fixed or variable, but either way, it means that you are paying more for the purchase than you would have if you had paid in cash.

In addition, paying off debt can help to improve your credit score. A high credit score can save you money on future loans and help you to qualify for better terms. So, if you're looking to get your finances in order, focus on paying off existing debt. It's one of the best things you can do for your financial health.

7. Negotiate for the Best Rates

To make speedy progress towards debt freedom, you’ll be well advised to negotiate lower interest rates. Approach the issuers of credit cards or other outstanding debt, and inquire about your interest rate. If you tell them you’re trying desperately to pay off all your debt and ask for a lower interest rate, chances are that you’ll get a lower rate.

The lower your interest rate, the more of your monthly payments every month cover outstanding capital. And that speeds up the time it takes to pay off your debt nicely.

8. Create an Emergency Fund

Most financial experts recommend that you have an emergency fund to cover unexpected expenses. An emergency fund is a savings account that you use for unexpected expenses, like a car repair or a medical bill. Ideally, your emergency fund should have enough money to cover three to six months of living expenses.

Building up an emergency fund can take some time, but it's worth it in the long run. Start by setting aside a small amount of money each month. Once you have a thousand dollars saved, you can start tapering off your contributions. The key is to make sure that your emergency fund is easily accessible in case you need it. A good way to do this is to open high-yield savings account that you can transfer money out of quickly if needed.

An emergency fund is an important part of financial security. By setting aside money each month, you can rest assured knowing that you have a cushion to fall back on if something unexpected comes up.

9. Choose The Right Bank Account

When it comes to financial success, the foundation is key. That's why it's so important to set up the right bank accounts from the start.

A checking account is essential for day-to-day expenses, a savings account provides a cushion for unexpected costs, and an investment account is key for long-term growth. By taking the time to set up these accounts early on, you'll be laying the groundwork for a solid financial future.

Of course, it's not enough to just set up the bank accounts – you also need to keep them in good standing. That means making regular deposits, staying within your budget, and monitoring your investment portfolio. But if you can stay on top of these things, you'll be well on your way to financial success.

10. Use Credit Cards Responsibly

Living free of the burden of debt doesn’t mean you shouldn’t have credit cards. Nor does it mean that you shouldn’t use your credit cards. Some credit card companies have incredible rewards programs that you can use to your benefit.

Cheaper flights, discounts on online purchases, and other great rewards add up to spending less of your hard-earned money. If you use a credit card for day-to-day expenses and online purchases, you can still earn such rewards. But be careful not to overspend and go back into debt.

Ensure that whatever credit card expenses you incur are paid off fully every month.

11. Improve Your Credit Score

By following the advice in this post, you’re already doing much to improve your credit score. Some simple ways you can ensure that you keep a good credit score include:

  1. Not applying for new credit too frequently,
  2. Paying off your debt,
  3. Keeping low outstanding balances on all lines of credit,
  4. Keeping unused credit cards open, and 
  5. Paying all your bills on time.
  6. Check your credit report annually.

We have already covered numbers 1 to 4 in the above tips. So, ensure that you pay all your bills on time, and you’ll be golden in terms of credit score!

12. Save and Invest

If you’ve applied the ten preceding steps diligently, you’ll now have a nice little cushion between what you’re earning and what you’re spending. But don’t get ahead of yourself. Saving and investment is the most critical part. Now you need to build some monetary assets!

A significant part of the surplus of inflow over outflow in your finances should now be directed toward smart investments.

In his enlightening book Money: Master the Game, Tony Robbins shares the wisdom of some of the wisest wealth builders on our planet today. It all boils down to simple investment advice: Invest in low-cost, index-tracking passive funds.

So, speak to your financial advisor, or get your hands on the book. You need to find and invest in an index fund that is a good fit for you. This investment strategy is the best way to avoid the eradication of excessive investment fees on your portfolio. It also ensures that you earn a return that is consistently in alignment with the overall market.

Another useful resource you can study for this type of saving and investment strategy is Mr. Money Mustache.

13. Plan for Big Purchases

At this stage, having implemented the previous tips/steps, you’re a money management ninja! Well done. Now, you can start planning big purchases. Maybe your family needs a bigger home or a new vehicle. Or perhaps it’s time for one of your kids to go to college.

The wise way to make these purchases is to plan for them over the preceding months or years and to save up sufficient money to pay in cash. Paying in cash will ensure that you really want or need what you’re purchasing. Parting with a large amount of saved-up money is a difficult thing to do.

It also ensures that you’re acting inside your wise money management strategy — you earn compound interest instead of paying it. If you get to the stage of purchasing your family something life-enhancing with saved-up money, it’s time to congratulate yourself. You’re part of a genuinely elite minority who acts with complete money wisdom!

Keep it up! You’re well poised to leave a great financial legacy to your dependants. You also serve as an impressive example to them of how to manage money.

14. Set Financial Goals

When it comes to financial goal setting, there are a few key things to keep in mind.

First, make sure your goals are specific and measurable. It's not enough to simply say you want to save money–you need to set a specific amount that you want to save, and a timeframe in which you want to save it.

Second, make sure your goals are realistic. It's important to be ambitious with your goals, but if they're too unrealistic, you're likely to become discouraged and give up.

Finally, make sure your goals are actionable. In other words, they should be something that you can actually do, like setting up a budget or automating your savings. By following these simple guidelines, you'll be well on your way to setting financial goals that work for you.

15. Increase Your Income

When it comes to financial planning, it is always a good idea to take a close look at your income. This will help you to make sure that you are on track to meet your long-term financial goals. There are a few things that you can do in order to ensure that you are bringing in enough money.

First, you may want to consider ways to increase your income. This could involve asking for a raise at work or finding a new, higher-paying job. You may also want to look into ways to supplement your income, such as starting a side hustle or investing in passive income strategies.

In addition to increasing your income, you may also want to focus on reducing your expenses. This can be accomplished by cutting back on unnecessary spending, automating your finances, and taking advantage of discounts and coupons. By taking these steps, you can help to ensure that you are on track to reach your financial goals.

Frequently Asked Questions (FAQ)

What is the 50 30 20 rule with money?

The 50 30 20 rule is a simple way to budget your money.

The rule states that you should spend 50% of your income on essential expenses, 30% on non-essential expenses, and 20% on savings or debt repayment.

While the exact percentages may vary depending on your individual circumstances, the 50 30 20 rule is a good starting point for creating a budget.

  • Essential expenses include items like housing, food, transportation, and healthcare.
  • Non-essential expenses include things like entertainment, vacations, and luxury items.
  • Savings and debt repayment should be given priority so that you can build up your financial security over time.

By following the 50 30 20 rule, you can ensure that you are spending your money in a way that is both responsible and sustainable.

What is the 70 20 10 budget rule?

The 70 20 10 budget rule is a simple way to manage your finances.

The rule suggests that you should use 70% of your income for monthly spending, set 20% aside for saving and investing, and earmark 10% of your take-home pay for debt or donating.

While there is no one-size-fits-all approach to budgeting, the 70 20 10 budget rule can be a helpful starting point. If you find that you are struggling to make ends meet each month, you may need to reassess your spending habits.

Likewise, if you find yourself with a large amount of money left over at the end of the month, you may want to consider increasing your savings rate. No matter what your financial situation, the 70 20 10 budget rule can help you develop sensible spending and saving habits.

How do I keep control of my money?

Anyone who has ever struggled with managing their money knows how difficult it can be to get control of your finances. However, there are some basic steps that can make a big difference.

  • First, it is important to educate yourself about personal finance and budgeting. There is a lot of helpful information available, whether you read books or articles, listen to podcasts, or take classes.
  • Once you have a better understanding of your financial situation, you can start setting goals. What do you want to save for? How much debt do you want to pay off? Having specific goals will help you stay motivated and on track.
  • Next, get organized and create a system that works for you. This may involve setting up a budget, tracking your spending, or automating your bill payments.

Finally, don't be afraid to ask for help if you need it. There are many resources available, whether you talk to a financial planner or join a support group.

By taking these steps, you can gain control of your money and improve your financial wellbeing.

It’s Never Too Late To Learn How To Manage Money Better

Money management can be a confusing topic. And it’s easy to feel daunted or inferior. It’s easy to feel trapped and overwhelmed, not sure where to start. Thankfully for you, you now have a roadmap. You have some smart tips which form the basis of a solid money management plan.

All you now have to do is to decide to stick with this, and then to start. Imagine for a second that the future you, the person you’ll be in 20 years, can chat with the current you. What would you say to your younger self?

I’m sure that whatever you say, it will include some encouragement to stick to the financial wisdom in this post. Society considers those who manage their money well as great people – people to emulate.

It’s one of the unspoken truths of our culture. If you want to be regarded as great, show the world that you can manage your money with wisdom and restraint. Please don’t be the guy who 20 years down the line is filled with regret. Commit to getting there, looking back, and feeling proud of how well you managed your money.

Every second of your life, you have an opportunity to turn things around. All you need is a firm decision and a new course of action. If you decide to implement wise money management going forward, you will:

  • Build true financial power,
  • Have assets that produce income for the rest of your life,
  • Be ready for anything life throws at you, and 
  • Be a real pillar of support for your dependents.

Society will consider you as someone who succeeded in life. You’ll be regarded as great because everyone knows how much discipline it takes to manage your money with wisdom. Right now, while you’re feeling motivated, make your decision. And then use the course of action laid out for you above. Start managing your money with wisdom today!