10 Money Management Tips to Know (2024)

10 Money Management Tips to Know (1)

Money management is a tricky subject. For many, the topic is accompanied by a feeling of apprehension. Maybe you’ve put off saving for retirement for a bit too long. Or, perhaps you’re worried about not having an emergency savings cushion. Whatever your concerns may be, there’s no time like the present to get a handle on your finances. It’s best to get started – as soon as possible – on good financial habits. Luckily, we have 10 money management tips to get you started.

A financial advisor could help you create a financial plan for your wealth management needs and goals.

Tip #1: Know Your Money Priorities

Before budgeting, you need to determine your priorities. If you skip this crucial step, you won’t buy into your financial plan. You need a focus to align your money goals with your money habits. That focus is what’s most important in your life, right now. Do you have credit card debt that makes your stomach churn just thinking about it? Paying that down might be your No. 1 priority.

Patrice Washington, a leading authority in personal finance, entrepreneurship and more, advises that money priorities align with your personal values. “The largest categories should reflect what matters most to you,” whether you value international travel or taking care of your body. Then you can cut back on other categories to “save at maximum capacity” for your true priorities.

Maybe it’s a wedding or a vacation you want to save for. Or, perhaps you want to establish an emergency fund so you’re not “up a creek without a paddle” when your car needs an engine overhaul or your pet needs surgery. Whatever concerns you most, make that your priority, at least to start.

Tip #2: Determine Your Monthly Pay

As the saying goes, “What gets measured, gets managed.” How can you manage your money without knowing what you earn each month? If you don’t have a concrete number, determineyour monthly incomeafter taxes. This will be easier if you’re a salaried employee with a regular paycheck. Freelancers may have to estimate their monthly income.

Once you have a number, add in any extra side gig money. Maybe you babysit sporadically or have a blog that earns ad revenue, or teach a weekly fitness class. Whatever extra income you earn, add it to your monthly take-home pay.

Tip #3: Track Where You Spend Your Money

Time to play detective with your own finances. In order to get the full picture of your spending habits, you’ll need to do some financial forensics on yourself. If it seems overwhelming, limit yourself to one month’s worth of expenses.

Pull out your credit card statements, housing and utility bills, bank statements including ATM withdrawals and any electronic payment records, such as Venmo or PayPal. Either open a spreadsheet or get out old-fashioned paper and pen – it’s time to total your expenses.

It helps to categorize as you parse your spending. For example, you might label purchases as needs, wants or savings/debt. Or, you can get more detailed and add categories such as entertainment, food costs, travel and transportation. It’s up to you how much in the weeds you want to get.

After you compile expenses into one spot, total each category to see where the bulk of your money goes. You might be surprised at how much you spend eating out. Or, how high of a percentage your housing costs are compared to your income.

Tip #4: Have a Plan

Now that you know how much you earn, as well as how much you spend, it’s time to make a plan. The best financial plans align your priority (money management tip No. 1) with your spending habits.

Let’s say you’re a fitness buff. When you total your expenses, you find that in an average month, you spend money on a gym membership, yoga class card and new athletic gear. If that’s important to you, you won’t have to cut it out. But, in order to meet whatever priority you’ve set — let’s say it’s an emergency fund — you’ll need to cut expenses elsewhere. That could mean shopping at a discount grocery store or brown-bagging your lunch instead of ordering takeout with your coworkers.

To meet your financial goal, maybe you set up auto-deposit to a special “emergency fund” savings account. When your paycheck is deposited, that money disappears before you can count it as spending money.

Whether you pay for a budget program like YNAB or prefer a simple Excel spreadsheet, that’s up to you.

Tip #5: Stick to the Plan

Once you pick a plan, give it a try for at least a month. You need that long to see if it works for you. Anything less, and you won’t see the benefit of keeping an eye on your finances.

So find a budget you want to try, get started and stay with it. It’s that simple. If you want, Washington recommends you “surround yourself with visual representations” of your goals. So if you’re saving for your next international trip, you can put up pictures of your dream trip to keep your goal fresh in your mind.

Tip #6: Expect Emergencies

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Regardless of what your priority is, you’ll want to have some easily accessible liquid funds. Maybe you’re focusing on paying down your student loans, and you’re not concerned with building a heftyemergency fund. That’s fine, you don’t have to save six months of expenses. But you should save for at least three.

You never know what might happen. You or a partner could lose a job, or have a medical emergency or any number of circ*mstances. Whether you like it or not, life happens.

Having money to deal with problems as they come up will help you feel more secure, and a little more prepared. Most emergencies add enough stress as it is. Take away an element of worry with a financial cushion.

How you put money away for emergencies is up to you. Maybe you funnel all of your side gig money to an account you only touch in an absolute emergency. Or, it’s where any birthday or any gift money goes. It could be as simple as a small, monthly auto-deposit. It’s up to you.

Tip #7: Save Early and Often

This rule holds true regardless of your current priority. The sooner you save, the sooner you can build interest. You don’t even need an investment account to start earning interest. Most of the best savings accounts generate interest, and those accounts are FDIC-insured. That means you don’t have the risk of losing your money, as with a brokerage account.

This rule also applies to retirement.The sooner you start putting money away in an IRA or 401(k), the better. Even if you’re years away from retiring, you still need to consider the future. Your money stands to grow the most if you start as soon as possible.

Tip #8: Take Advantage of Free Money

You don’t want to overlook what assets are available to you. If your employer offers 401(k) matching, you should absolutely take advantage of the benefit. It’s free money.

Another place to look is your health insurance plan. Are you paying for glasses or contact out-of-pocket when some of those costs are covered through your plan? Maybe your job offers a discounted gym membership. Take advantage of all the benefits your job offers; youmight save some serious cash.

Tip #9: Relook Your Debt

Take a look at your total debt (money management tip No. 2). Is there anything you can refinance for a lower rate? Maybe it’s transferring a balance to a credit card with lower interest. Or, it’s consolidating student loans. It’s worth combing through your debt with a fine toothcomb to see if you can find a way to save.

Tip #10: Find What Works – and Keep Doing It

Another common maxim that applies to money management is “if it’s not broke, don’t fix it.” Once you find a system that works, don’t get distracted by new apps or conflicting financial advice.

It’s tempting to try the next best thing, especially if it promises to be easier, simpler or faster. However, if you’re in a rhythm that works — you’re saving money, meeting financial goals and building security — keep chugging along. Your focus will pay off.

Bottom Line

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As financial expert Dave Ramsey says, “You will either manage money or the lack of it will always manage you.” The best way to build financial security is to get a grip on how and where you’re spending your income, and then make a plan — and stick to it! Of course, life can throw you off track sometimes, but that’s OK. As long as you get back on budget, a hiccup here or there won’t destroy your future financial success.

Tips forMaking the Most of Your Money

  • A financial advisor could help set you up for long-term financial success. Finding a financial advisor doesn’t have to be hard.SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • If your savings account isn’t earning you interest, you may want to compare interest rates. Here’s a roundup of the best interest rates in 2022.

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10 Money Management Tips to Know (2024)

FAQs

What is the 10 rule of money? ›

It involves budgeting, saving, investing, and making informed decisions about income and expenses. Essential aspects include creating a budget to allocate funds wisely, establishing an emergency fund for unforeseen circ*mstances, and strategically managing debt.

What is the 10 10 20 rule in finance? ›

It says your total debt shouldn't equal more than 20% of your annual income, and that your monthly debt payments shouldn't be more than 10% of your monthly income. While the 20/10 rule can be a useful way to make conscious decisions about borrowing, it's not necessarily a useful approach to debt for everyone.

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 is the 20 rule for money? ›

Budget 20% for savings

In the 50/30/20 rule, the remaining 20% of your after-tax income should go toward your savings, which is used for heftier long-term goals. You can save for things you want or need, and you might use more than one savings account.

What is the golden rule of money? ›

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

Basic money management starts with this rule. If you always 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 take on any unnecessary debt. Simples.

What are the 50 30 20 rules of money? ›

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.

What is the 8020 rule in finance? ›

YOUR BUDGET

In the 50/30/20 budget, you spend 50% of your income on needs, 30% on wants, and 20% on savings. The 80/20 budget is a simpler version of it. Using the 80/20 budgeting method, 80% of your income goes toward monthly expenses and spending, while the other 20% goes toward savings and investments.

What is the rule of 69 in financial management? ›

It's used to calculate the doubling time or growth rate of investment or business metrics. This helps accountants to predict how long it will take for a value to double. The rule of 69 is simple: divide 69 by the growth rate percentage. It will then tell you how many periods it'll take for the value to double.

What is the 10 savings rule? ›

Key Takeaways:

The 60/30/10 budgeting method says you should put 60% of your monthly income toward your needs, 30% towards your wants and 10% towards your savings. It's trending as an alternative to the longer-standing 50/30/20 method. Experts warn that putting just 10% of your income into savings may not be enough.

Can you live off $1000 a month after bills? ›

Living on $1,000 per month is a challenge. From the high costs of housing, transportation and food, plus trying to keep your bills to a minimum, it would be difficult for anyone living alone to make this work. But with some creativity, roommates and strategy, you might be able to pull it off.

How much savings should I have at 50? ›

By age 50, you'll want to have around six times your salary saved. If you're behind on saving in your 40s and 50s, aim to pay down your debt to free up funds each month. Also, be sure to take advantage of retirement plans and high-interest savings accounts.

What are the four walls? ›

In a series of tweets, Ramsey suggested budgeting for food, utilities, shelter and transportation — in that specific order. “I call these budget categories the 'Four Walls. ' Focus on taking care of these FIRST, and in this specific order… especially if you're going through a tough financial season,” the tweet read.

What is the 10 rule for wealth? ›

Save 10% and Invest 20% of Your Gross Annual Income

If your goal is to save 10% and invest 20% — for a total of 30% — you would simply swap the 30% and 20% categories, and allocate 20% for your discretionary spending. You can manage your money on a monthly basis by organizing your expenses in this manner.

How does the 10 rule work? ›

What is the 10 rule? The ten percent rule of energy transfer states that each level in an ecosystem only gives 10% of its energy to the levels above it. This law explains much of the structural dynamics of ecosystems including why there are more organisms at the bottom of the ecosystem pyramid compared to the top.

What is the 10 rule for saving money? ›

The 10% rule is not an actual rule per se. It is simply an idea people leverage where you save 10% of everything you earn towards your different financial goals. For instance, towards your emergency fund, saving for retirement, or investing. It's a common rule of thumb when it comes to savings.

What is the 10X rule in finance? ›

Cordone's method is called the 10X Rule. The basic premise is this: think bigger, do more and never settle for average. Cordone says that by applying these principles to your finances, anything is possible in your financial life. Here are five ways to make Cardone's 10X Rule work for you.

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