How to Manage Your Money | 18 Legit Personal Finance Tips
Money management and personal finance can be touchy subjects. Many people experience a lot of anxiety when they think about their financial lives, both as they are today and how they may look in the future.
Maybe you didn’t start saving for retirement as early as you’d hoped or perhaps you didn’t get an emergency fund in place and ended up in debt. Whatever your circumstances, deciding to take control of your situation now is always the best choice.
You simply have to follow a few key steps and you’ll be well on your way.
How to Manage Your Money
There are three important money management levers, all of which you can control:
- Making Money
- Saving Money
- Investing Money
While each of these is important, when you manage all of them well, you’re going to be making the most of your money and your time.
See, the sum is much greater than the parts. It’s like a formula, where the more things that you do right the more money you’ll be making and the faster you’ll reach financial freedom.
It’s also important to track everything using a simple free app like Personal Capital.
When you manage your money well, it’s like making money in your sleep.
Now let’s dive into how to manage your money well.
18 Money Management Tips to Improve Your Finances
Managing money and learning how to manage money is easier than you think. If you aren’t sure where to begin, here are some of the most amazing money management tips to help you win on the personal finance front.
- Maximize Your Income
- Start a Side-Hustle
- Start Budgeting
- Get Out of Debt
- Build a Passive Income
- Checking/Saving Accounts
- Plan for Emergencies
- Improve Your Credit
- Optimize Your Taxes
- Find Cheap Car Insurance
- Get Life Insurance
- Plan for Retirement
- Negotiate for Better Rates
- Get Free Money
- Reduce Expenses
- Avoid Impulse Purchases
- Track Your Money
1. Make the Most of Your Full-Time Job
Even if you don’t like your full time job or dream of launching your own company, today it is the most immediate place where you can probably make more money.
The simple fact is most people are underpaid but they accept the amount of money they’re getting paid because they’re either afraid of getting fired if they ask or they don’t know how to get a raise.
You have the power. Don’t be afraid of your boss.
For many years employers had the upper hand and have been taking advantage of their employees, but this power dynamic has shifted and in many company’s and industries, employees now have the leverage.
There are too many open jobs in the economy right now to get filled and talent is in high demand. Don’t settle for the status quo.
Most people spend more time planning for their vacations each year than they do optimizing their careers. If you’re not making the most of it your full time job and making as much money as you can from it, you’re selling yourself short.
Figure out how much you should be getting paid by analyzing your current market rate for someone with your skills and experience by using websites like Indeed and Glassdoor.
You should also contact and build relationships with at least two recruiters in your industry.
Because recruiters live so close to the market they not only know what you should be getting paid, but they can also recommend additional skills you can develop (check out my post on best skills to learn), and potentially even recommend a new higher paying job or company.
2. Start A Side Hustle
Diversifying your income can be just as important as diversifying your investment portfolio. By starting a side hustle, you can bring cash in and give yourself additional financial security.
A side hustle is anything you do to make money outside of your full time job.
While you can side hustle doing anything, you’re more likely to have success if you start a side hustle you enjoy doing and one where you set your own fee and hours.
While it’s not bad to drive for Lyft or Uber, there are real limitations with these types of side hustles because you are limited by the hours you can drive in a day and how much you get paid is set by the company, not you.
Any side hustle where you manage your own time and decide what you can charge has the potential to make you more money.
Some of the best side hustles:
- Blogging: Read my guide on how to start a blog with Bluehost and get my FREE 7 day blogging side hustle email course – where I share the step by step blueprint thousands of people have used to start a blog that makes money)
- Online Surveys: While you can’t necessarily earn a living by doing online surveys, you can earn some quick cash by sharing your opinion. If you want to make a little extra money, checkout the best survey sites.
- Becoming a virtual assistant: Sound interesting? Find out how to become a virtual assistant.
- Start a YouTube channel: If you think you’re worth watching, here’s how much youtubers make.
For more side hustle ideas, check out our series on side hustle success stories.
To learn more about side hustling check out Chapter 10, More Money in Less Time: How to Launch A Profitable Side Hustle in my book Financial Freedom: A Proven Path to All The Money You Will Ever Need.
In the chapter I lay out a very detailed step by step strategy to picking, launching, and growing a side hustle.
3. Start Budgeting
There are two types of people: those who like budgeting and those who don’t. I’m in the latter camp. I’m definitely not a fan of budgeting.
I find that budgeting often reinforces a scarcity mindset where you spend so much time cutting back on the small purchases that often bring you the most joy.
You track every penny going in and going out and it just takes so much time. But if you’re the type of person who thinks they might be into budgeting, then you should learn how to budget.
Instead of budgeting I simply focus on optimizing my three biggest expenses, housing, transportation, and food.
The average American family spends almost 72% of their incomes on those three expense categories.
While small purchases like daily lattes, glasses of wine, or your Netflix subscription can add up, you’re going to be able to save the most amount of money where you spend the most money.
Through house hacking (a form of real estate investing), you can easily save 30% percent or more of your income. Your rent or mortgage is likely your biggest expense each month so reducing it as much as possible and investing the savings will add up quickly.
In addition to your housing expense, it almost always makes the most economic sense to buy a used car instead of a new one and investing the savings.
It’s also worth taking the time to reduce your food expenses and work hard to save money eating out.
There you have it: save on your homeownership, car ownership, and food. It’s the only budget you’ll ever need. Then instead of budgeting, you can spend your time going out and making more money.
4. Get Out of Debt
Whether its student loans, credit card, or mortgage debt, being in debt often keeps us up at night and is incredibly stressful.
But don’t worry a lot of people get out of debt every day and you can too. Also, all debt is not created equal.
To learn more check out my post on good debt vs bad debt, but the basics are pretty simple.
Managing debt is just a numbers game. Always pay down your debt with the highest interest rate first.
In almost all cases, credit card debt carries the highest interest rates, followed by private loans, student loans, and mortgages.
While there are many strategies for paying down your debt, like paying off your smallest balance first and then moving onto your next biggest debt (aka debt snowball) or paying down your biggest debt first (debt avalanche), these aren’t great debt repayment strategies because they don’t focus on saving you the most money.
Pay off Credit Card Debt
You save the most money by paying down your highest interest rate debt first, no matter what type of debt that it is.
Credit card debt is bad debt because the interest rates are typically so high, often 20%+ or more. Credit cards make financial institutions a lot of money because most people don’t pay off their debt each month, so the debt grows.
Take the Sting Out of Student Loans
Student loan debt is somewhere between good debt and bad debt depending on 1) the interest rate 2) if you’ve used student loans to fund a degree that helped you get a job or a more lucrative career.
If you haven’t yet taken out student loans, it’s worth thinking really hard about whether or not they’re worth it. If you’ve already taken out student loans and the interest rate if above 5% then you should consider student loan refinancing and other ways for you to reduce student loan debt.
There are many types of student loans, so it’s also important to figure out what types of student loans you have before refinancing.
Over the life of an average student loan, borrowers can save up to $20,000 if they choose to refinance. By refinancing your student loans, you can secure lower rates and consolidate your debt, making your payments more affordable and convenient at the same time.
Pay off Your Mortgage Debt
Mortgage loans are another popular form of debt. It’s very common when buying a home or investing in real estate to take out a mortgage from a bank or lender to help pay for the home.
Mortgage rates vary widely so it’s worth taking the time to shop for a good mortgage rate if you haven’t bought a home yet.
If you already have a mortgage, you might be wondering whether it makes sense to pay off your mortgage rate as quickly as possible.
In most cases, it probably makes sense to keep your mortgage and invest any additional money you have into the stock market, especially if your mortgage rate is low.
For five years I had a 2.3% mortgage rate even though I could have paid off my mortgage entirely, it was a better financial decision to keep using the banks’ money and investing my money in the stock market instead.
I ended up making over $100,000 on my investments because they grew over 10% each year (10% is a lot better than 2.3%).
Pay Off High-Interest Debt with a Personal Loan
If you’re plagued by high-interest credit card debt, paying it off with a personal loan can be a smart move. Not only will you get a fixed interest rate, but the finite nature of the loan also makes your payments predictable. Plus, you’ll know exactly how long it will take to wipe out your debt, and may even see a credit score boost after paying off your card.
5. Build Passive Income
When it comes to making money, building a passive income lifestyle business is the holy grail. But there are a lot of myths about passive income ideas and a lot of shady products being sold online that promise to help you build passive income sources.
Is it actually possible to build passive income streams? Absolutely.
But does this mean that you can make money doing nothing? We’ll not exactly Most passive income businesses actually take quite a bit of time to set up, but if you find the right one, then the time investment is totally worth it.
Best Ways to Build a Passive Income
Other ways to build a passive income business include: starting any side hustle or business where instead of trading your own time for money, you broker other people’s time.
I call this becoming the “uber of your life,” because Uber doesn’t own or drive cars, they simply connect people who need a ride with people who will give you a ride.
They’re actually a connector between supply and demand. You can do this in any industry. For example, instead of walking dogs for a dog walking company where you’re going to be limited by both the hours you have in a day to walk dogs and your dog walking rates are set by a company like Wag.
Instead of walking dogs for someone else, start your own dog walking company and focus on getting clients, so you can hire other people to walk the dogs instead of always walking them yourself.
Then you can set your own rates and you’re not limited by the hours you have in a day because you can hire other people to walk the dogs.
6. Make Your Checking and Savings Accounts Work for You
As I’ve discussed before in a post on how to start investing, there is a direct relationship between the percentage of your income that you’re saving (your savings rate) and the number of years it takes you to retire early.
When you combine a high yield savings account and a high-interest checking account, you make sure that all of your money is always working for you instead of just sitting there.
If you are looking for great high-interest checking and savings accounts, check out Discover Bank at 1.60% APY. They offer free options that can help you make the most of your money. Discover Bank Review
If you need to build a cash nest egg, automating your savings makes it simple. Decide how much you want to add every month or paycheck and schedule a deposit to move the money every time, ensuring you won’t forget to pay yourself first.
7. Invest Early, Often, and As Much As You Can
While you can invest in literally anything, the three most dependable investment classes are:
- Real Estate
The reason they’re the most dependable is that we have a lot of historical data about how they perform, and you’re able to control a number of the key variables to maximize your investment returns while minimizing your risk.
But the basics are simple and in fact, the best investment strategies are actually simple.
Invest in index funds, like VTSAX, which has low fees and incredible diversification. Instead of buying individual stocks, buy the entire stock market. Stick with what works.
Once you’ve settled on an investment strategy, the next step is to invest as much money as you can.
The more money you invest the faster and more your money can grow due to compounding.
Here’s a simple example of investing $100 if we keep it invested at 10 percent annual growth for forty years, without adding any more money to it. Just simply because of time the $100 has turned into $5,370 in forty years.
If you haven’t started investing yet the most important step is to simply start today using one of the best investing apps, which allow you to invest your spare change automatically.
If you’ve already started investing then you should try to increase how much you’re investing every month by as much as you can.
One easy way is to increase your investment contribution amount 1% every 30 days by talking with your human resources department or 401(k) provider.
Trust me, you won’t notice the extra 1% and within a year you’ll be saving 12% more of your money.
If you prefer to think in terms of dollars instead of percentages, then try to invest an extra $50, $100, $1,000 or more each month over the next few months. Every dollar adds up.
Try Real Estate Crowdfunding
Until 2012, real estate investing was the domain of the wealthy. Now, thanks to the JOBS Act, anyone can get into the game with real estate crowdfunding.
If you’re looking for a portal and don’t have a lot to get started, consider trying Fundrise.
Fundrise provides access to eREITs and eFunds, a form of real estate portfolio with a level of diversification.
By using the money management tips above, you can gain control over your financial future. Try one (or several) of them today and see if you can’t get headed in the right direction.
8. Plan for Emergencies
If you own your home, house repairs like roof replacements can easily cost $10,000 or more, depending on where you live. Similarly, if an appliance like your refrigerator fails, getting another one usually can’t wait and can quickly set you back hundreds or more. This is why an emergency fund is crucial.
Even if you don’t own a home, that doesn’t mean there aren’t major costs on the horizon. Replacing your vehicle usually costs several thousand, if not tens of thousands. Home computers can be as expensive as a major appliance and are deemed necessities in many households.
If you have something big you can’t live without or face regular maintenance costs, make sure to plan for them. Break down the expense by how many months you usually have before it hits (you can look up average lifespans for most things online) and set the cash aside to make sure it’s there when you need it.
Prepare for Medical Emergencies
Even if you have insurance, a broken arm, head injury, heart attack, or similar medical emergency will still be expensive. Ideally, you need to maintain an emergency fund that can not only cover your portion of medical costs but also handle a few months of living expenses. That way, if you miss work, you can pay your bill and keep up with your bills until you heal.
If you do not have an in case of emergency binder yet, make one now!
9. Take Control of Your Credit
Your credit report and score play a massive role in your financial life. By monitoring your credit, including your score, you can make decisions that improve your situation, both today and in the future.
While there are tons of credit monitoring apps out there, Credit Sesame helps you keep an eye on your report and score for free. You’ll receive customized recommendations and access to helpful tools, empowering you to make better choices every day.
10. Optimize Your Taxes
The average American pays over 20% of their income to taxes, so finding ways to save money on your taxes can really add up over time.
While you might think taxes are boring, it’s definitely worth learning the basics of tax optimization because it can not only save you money, but it also gives you more money to invest.
You don’t have to become an expert on tax laws, but it’s worth taking the time to really understand your own taxes each year, even if you’re using a service like H&R Block, TaxAct, or using an accountant, getting to know your own tax situation at a detailed level is an important step in managing your money well.
Over time as you do your taxes each year it gets easier to spot where you can save money next year, what new deductions you can take, and more.
Also, if you’re a side hustler you should consider launching an LLC so you have more opportunities to deduct your side hustle expenses from your taxes.
A big benefit of launching any lifestyle type of business is that you can actually reduce your tax bill in many ways as your business gets more integrated with your life.
11. Get Cheaper Car Insurance
Many people don’t reevaluate their car insurance regularly, and they pay a penalty for not taking a look. For example, if you recently paid off a car, you might not need full coverage anymore, presenting an opportunity to save, even if you don’t change carriers.
However, doing a little comparison shopping is always wise. You can get quotes from competitors for absolutely nothing, and might discover an option that costs much less than what your current provider charges.
If you don’t put a lot of miles on your car each year, you very well could be overpaying simply because most traditional insurance isn’t ideal for incredibly low mileage drivers. For those who barely take their car out of park, Metromile, a pay-per-mile option, could help you save a ton.
12. Get Life Insurance
No matter what stage of life you are in, life insurance should be viewed as a must. Otherwise, you saddle your loved ones with your expenses if you pass away, or leave them unsupported if you are the primary breadwinner.
If you want to compare life insurance options, check out our instant quoter below.
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13. Optimize Your 401(K) Retirement Plan
Figuring out how to make the most of your 401(k) can be daunting, especially if you have lofty retirement goals. Luckily, there are paths that can help you achieve greater success.
If you optimize your 401(k) with Blooom, you’ll get custom reallocations to help your retirement account reach its maximum potential.
14. Negotiate Your Bills
Not all services have costs that are set in stone. In fact, there are many bills with rates that are actually negotiable, thanks to hidden discounts and barely advertised promo rates.
If you want to lower your monthly expenses, Truebill can handle the negotiations for you. Plus, you only pay for the service is they actually secure you a discount, with the fee being set at 40 percent of what you save, so you always come out ahead.
15. Get Free Money with Cash Back, Rewards & Rebates
There are a multitude of cash back and rebate apps out there today. Not only are they convenient to use, but you can also get money for the same purchase from multiple apps, helping you earn even more. If you make purchases online, creating an account with a rebates site is a must. For example, if you shop through Rakuten (Ebates), you can earn cash back at thousands of popular stores every time you make a purchase. Since Rakuten is free to use, there’s no reason not to give it a try.
If you haven’t tried a rebate or cash back app, consider starting with one of our best cashback apps. They are all incredibly easy to use and very reputable.
Find a Credit Card with Rewards
If you use a credit card, one of the best money management tips around is to make sure it provides rewards. By finding the best credit card rewards points option based on your needs you can earn cash back, gift cards, and more on purchases you’re going to make anyway.
Just make sure you don’t use the rewards points as an excuse for unnecessary spending. Credit card interest almost always wipes out any rewards you earn, from a financial perspective, so it’s best to stick to what you would normally buy and pay off the card in full every month.
16. Reduce Your Biggest Expenses
For nearly every family, housing is their biggest monthly expense. By reducing your housing costs, you can make significant headway in mastering your finances.
Whether you choose to move to a more affordable home or rent out room with Airbnb, making your housing more affordable can make a big difference in your life.
17. Avoid Impulse Purchases
Impulse purchases can quickly destroy any budget. If you spot something you want that isn’t on your list, wait at least 24 hours before you buy. This allows you to assess whether you were enticed at the moment or if it’s something you actually need.
For bigger purchases, you may want to instill a 7- or 30-day waiting period, just to be safe.
Another tactic is to monitor your cash flow every day.
18. Track Your Money, Net-Worth, & Investments
Now that you’ve taken the time to learn how to manage money, it’s important for you to set up an easy way to track your money. While your income, your savings rate, your investment returns are important when managing your money, the single most important metric that you should be tracking is your net-worth.
Your net-worth measures how much money you are worth by subtracting your liabilities (debt/what you owe) from your assets (what you own that has value, your cash, and investments).
What’s most important is tracking how much you’re spending, saving, and investing, the performance of your investments, and finally your net-worth.
Back in the day, people used to do this all by pen and paper, and then later using spreadsheets, but I prefer to have it all tracked for me on my phone.
Although I use many of the best money apps, the free one I use daily is a net-worth and investment tracker called Personal Capital. Another popular money tracking app is Mint, which I used to use, but switched to Personal Capital because it has much more robust features (to dive deeper into both check out my Personal Capital vs Mint review).
For a step by step blueprint of how I use it, check out my Personal Capital review. No matter where you are in your financial journey it’s incredibly important to track your money and I highly recommend checking out Personal Capital because it’s the best free tracking app available and they keep adding new features.
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That’s how you manage money. You got this! How do you manage your money?