Not everyone needs to be a financial wizard, but everyone should be armed with the best — and simplest — money management tips.
And these straightforward items do not require you to be a genius or some math connoisseur either.
Instead, these tips about money are things anyone can apply and become quite comprehensive with.
These areas below are also what got me on track to eliminating $50,000 in debt and achieving a 65% savings rate without becoming extremely frugal or having a six-figure salary.
This doesn’t mean you won’t get confused at times or be unsure about something, but that’s part of the learning process of financial literacy!
However, the goal of these tips below is to help you feel less stressed and more at peace with your finances. Let’s dive in!
Don’t Get Lost In the Spreadsheets and Numbers
I’m the guy who really dislikes budgeting and staring at numbers daily to see what was spent. But, I still think it’s important to know how to budget and create one if you are truly just getting started.
The trick is to not get caught up in fancy spreadsheets and obsessing over the numbers daily. It can be a distraction from the real financial work and can cause you to get frustrated.
Create a simple budget (monthly expenses, monthly income), stick to it, put it away, review monthly or yearly, adjust, and repeat.
No need to complicate it or be obsessing over every cent.
Master Your Credit Score For Future Endeavors
Whether you know it or not, your credit scores play a huge role in your current and future finances.
This is especially true when you try to get a mortgage with low interest, applying for an apartment, getting approved for credit cards, etc.
Having a poor score can make your life more challenging (like getting approved for loans), so it’s good to start monitoring your scores for free, while correcting and improving your scores.
If you are looking to monitor your scores and get free recommendations, I’d recommend trying Credit Sesame or Credit Karma. It won’t harm your scores to check, and you can learn how to get the highest score possible.
Make Your Savings and “Life Happens” Funds Work For You
We all know the importance of saving money and having a “life happens” fund (you may call them emergency funds, but not everything is an emergency).
And although saving money is great, you also want to put that money to work for you a bit.
This doesn’t mean investing in stocks or index funds (you could later once you have a good buffer saved), but you should still collect some interest on that money. That way, you’re building some extra cash while it is sitting in savings.
Most banks have pretty dismal interest rate these days, but there are many banks improving that. Some are high-yield online savings accounts, which can average higher than 2%.
It doesn’t sound like much, but most banks have fractional percent interest rates or maybe around 1%.
Plan for Retirement ASAP (Even If You Can’t Contribute Much)
“I’ll worry about it later” is a classic excuse, especially for younger people just starting their professional careers.
But this mentality is what creates future headaches when you do get closer to retirement or when planning for it.
Your company 401k (or if you use an individual IRA), should be started as soon as possible. Even if you can’t afford to put much in or you don’t really understand how it works, just get started.
You can always adjust, learn, and contribute more as time goes on.
Compound interest goes to work for you the longer your money is invested and the more you put in.
By worrying about it later, you may have to contribute 2x, 3x, or maybe even more to catch up to where you should be had you started early. Too many times older people have said, “I wish I started sooner.”
Use A Debt Payoff Strategy And Stick To It
The debt crisis in American only continues, whether from student loans or high interest credit card debt, most people will have some in their lifetime. The best thing you can do is start to pay your debt down with a payoff strategy you choose.
By this, there are different payoff methods like debt snowball, debt avalanche, balance transfers, etc.
The goal is to find the one that best fits your situation and appeals to you the most, then stick to a consistent payoff.
If you are looking for more information about debt payoff strategies, this article is pretty good. It may focus more towards credit card debt, but some of these can apply to student loan debt as well.
Prioritize Your Spending, But Don’t Cut Out All Life’s Enjoyments
You know the advice many financial guru’s tout, “Cut out your daily latte and you’ll be rich in 5 years!” False.
Yes, it can save you some money every year if you do cut that out, but if it’s something you enjoy, then don’t feel ashamed for your small purchases.
I’m all for prioritizing your spending, but small purchases are not going to be financially life altering.
Instead, you want to focus on cutting housing costs, food costs, and other large purchases. Those areas will keep larger sums of money in your pockets in the long run.
Note: If you are living paycheck to paycheck or are struggling to get by, then yes definitely try to cut back on small purchases for a while to get some breathing room.
Downsize your apartment or house if need. Start couponing, buying in bulk, or looking for ways to save money on food (like cooking and less going out to eat).
If you see something you want that is a big purchase, really think if it is necessary (like buying a new TV, getting a new car, etc).
Ask For The Raise That You Probably Deserve
If you are working hard and are doing awesome work for your company, you deserve a raise.
And sure, you probably get that small annual raise. But what good does that really do on your finances? Most likely, it keeps up with rising costs of bills and inflation.
However, if you would ask for a raise (like 5-10% more), this could elevate your financial life a bit further.
Maybe that helps you pay down debt faster, increases your savings, or helps you contribute more to your retirement investments.
And a lot of times, your manager is willing to give you a higher raise if you simply ask and present your reasons as to why you deserve it.
Start Automating Your Savings If Need
Going to start this one off with some honesty. I do not currently automate my savings. Oh yes, you are probably thinking, “Hypocrite!”
Before you leave an angry comment to call me out, I use to automate my savings but I no longer do this.
Over the years, I’ve developed good financial habits and discipline that I do not schedule automatic savings.
Instead I manually do this, but I never miss my bi-weekly contributions. I like having more control and some weeks I’m switching up what goes where.
But, if you are just getting started or know you have challenges remembering to save first, then automate. Your savings and retirement contributions will be systematic and you don’t have to login or remember too.
Net Worth Management is Not Just For The Wealthy
Most people do not want to look at their net worth, either because they are scared of the results or think it only matters for wealthy people.
But, monitoring your net worth is actually a great influencer for your money management, no matter what level of wealth you have.
Your net worth is important because:
- It can help you identify where you spend too much
- Helps you review your assets (investments) and liabilities (debt)
- Shows your goals, if you are on track, and encourages saving more
Manage your net worth for free and keep track of your spending by utilizing Personal Capital. It organizes the big picture of your finances in one place.
Don’t Let Credit Cards Control Your Spending
When it comes to debt and high interest, credit cards can get a bad rep. But, they also are great for when you need to make a purchase, establishing credit, getting cash back, and other rewards.
The real challenge is, you should be in control of your credit card(s), not letting them control you.
Credit cards can quickly become your worst enemy because you can turn to credit when you don’t have the cash. It’s okay from time to time, as long as you can pay off the balance.
A common scenerio: when you run out of cash, you turn to your credit cards without considering whether you can afford to pay the balance. This is how your high interest debt can snowball.
Train yourself to not use credit cards on purchases you do not have the money for, especially when they are only for items that provide temporary instant gratification.
Final Thoughts
Like most things in life that you want to get good at, you have to practice and work towards your goals consistently.
Managing your money and finances is exactly the same thing, you get better and learn more as you build good habits.
Many of the above money management tips will feel weird or will force you to think differently at first. That may lead to some frustrations in the beginning, but your future will be better off.
Just picture how it will feel getting the above organized and it becoming second nature to you.
Now, instead of stressing and getting anxious about finances, you’ll feel more at financial peace.
What are some of your favorite money management tips? How did you start managing your money and what work for you? Let me know in the comments below.