Money management is one of the hardest things to master and it can take years to become financially stable. While there are countless articles and books available today that show you how to manage money, it can be overwhelming to know where to start.
Adults should be putting money towards savings, investments, bills, and other expenses each month. Unfortunately, many do not understand how to budget their finances and become quickly overwhelmed with debt. By keeping income higher than spending, adults can better manage their spending and put money towards long term goals.
If you are struggling with your finances, it can make daily life challenging. However, better managing your money and knowing what to do with your finances can help. We will break down how you can better manage your money and reach financial stability.
How to Budget, Spend, and Save Your Money
When it comes to your finances, reaching financial freedom is not always easy. However, the way you spend your money and save it each week, month, and year can help you reach financial freedom more easily. By following some simple steps and managing your income, you can better handle your finances and feel more secure with your money.
Start by Making a Budget
Even if your current income is no where near where you hope it will once be, it is important to start by budgeting what you have. By having a set budget, you can manage what you are spending your money on and see which areas need improvement. Learning to better manage the money you are making is the first step to getting your money in order.
We will further jump into other important budgeting aspects, but some great ways to start managing your finances are by:
- Write down your income and all of your current expenses.
- Subtract your total expenses from your income, this will give you the amount of extra money you have each month for spending, investing, or saving.
- Track your spending for an entire month. Write down how much you spend and where you spend it. At the end of the month decide if you have stuck to a budget and where your spending can improve.
- If you ever spend more than you make, it is important to fix these spending habits. You should either cut unnecessary spending or find additional sources of income.
- Revise and update your budget regularly to ensure you meet new spending or earning goals.
Budgeting can be more detailed than this or even simpler. The main goal is to recognize what you earn and what you spend, then ensure these equal out in way that helps you grow.
Set Realistic Goals for Your Income
When it comes to budgeting and managing your money, setting realistic goals is key. You want to set financial goals that you can achieve, or it can be very overwhelming. You should work to set realistic goals that help you get to where you hope in life.
Some goals to keep in mind that you should work towards financially are:
- Always set realistic goals. Take your overall income and decide what percentage you want to put towards savings, towards paying off debt, and towards other expenses.
- Writing down your goals and a realistic timeline of these goals can keep you accountable. This also helps you stay accountable and motivated.
- If you hope to purchase a new car, a home, or another large expense in the upcoming years, realistically decide how much you can set aside for this. Begin saving towards these goals.
- You should be writing down both shorter term goals, such as paying off a debt and long-term goals, such as building a home.
Overall, decide why you want to become financially secure and work towards what you hope to achieve with this financial freedom.
Reduce Your Monthly Bills When Possible
If you are finding that your monthly bills are higher than what you earn, this can be a major issue. The main reason why individuals struggle with their finances is because they simply do not earn what they need to spend. By reducing your monthly bills where possible, you can save substantial money each month.
While some expenses are not possible to lower, many expenses can be easily lowered by seeking new options. Some examples of this are:
- Lower your utility costs by choosing new providers. This goes for life insurance, home insurance, and practically any other similar expenses. Comparing providers can help you save on the expenses you already have.
- By cutting out cable, many households have saved hundreds each month. If you already subscribe to streaming services or have smart televisions with internet access, cable is unnecessary.
- Compare phone providers to ensure that your smartphone is not costing you more than necessary. Some providers offer plans that are lower in cost for the same or very similar benefits.
- Look for ways to make your home more energy efficient, turn off lights when not in use, do not overuse heating or air. All of these options can drop your utility bills substantially.
While it is truly impossible to live without some monthly costs and bills, lowering those you do have can make it easier to live within your income.
Stop Wasting Money on Food
Clearly, food is needed to survive but it is also a major expense to most families. While even cooking at home can become expensive, it is also important that you are budgeting this aspect. Some go as far as to cut coupons for their household food and goods needs, but this is not always necessary with some basic budgeting.
Some ways that you can begin saving money on your monthly food costs are:
- Stop eating out at restaurants! Families can spend an excessive amount of cash each month at restaurants alone. Limiting your trip to restaurants and only going for special occasions or twice a month can save you hundreds each month.
- Try packing your lunch for work. By packing lunch or breakfast each day rather than purchasing out, you can save $10 or more a day. While this may not seem like much, it can quickly add up if you work a full-time schedule.
- Make your own coffee. By brewing your own pot of coffee each morning, you can save substantially. When purchasing a coffee at a local shop or Starbucks, you are spending between $5 and $10 a day.
- Make a grocery budget. Decide how much you believe you can spend each month on groceries and stick to this budget. By creating a weekly menu for your home, you can ensure you are purchasing what you need and can better stick to your grocery budget.
Clearly food is a necessity and a way to spend time with your family; however, it should not be breaking your budget each month!
Begin Paying Off Your Debt
Depending on your age, you may have little debt, or it may feel like you are drowning in it. While debt can be easy to stack up in a quick matter of time, it can also be eliminated with some work. When you become debt free, you are able to feel more comfortable with your income and spending.
While you may need to start small paying off your debt is not impossible and can be done on almost any budget. Some ways to begin this process are:
- Start by taking an inventory of your current debt. Add up all credit cards, student loans, car loans, etc. By recognizing what you owe, you can better understand where to start with this process.
- You are likely paying the minimum payment on each of these debts, which will not pay off your debt quick enough. See which credit cards, loans, or other expenses you can pay more on.
- Look over your current budget and see where you can begin putting money towards these debts.
- If possible, lower your interest rates and consider consolidating debts. By combining debts, it can be easier to make one lump sum payment.
- Stop using your credit cards and stop taking out new ones. The best way to lower your debt is to avoid adding new debt to your credit.
Paying off debt is not an easy process and can be quite overwhelming. However, by taking small steps to lower your debt and paying towards what you owe, you can become financially free.
Better Manage Student Loan Debt
It can be hard to become financially stable without an education but getting a college degree often means taking out student loans. While many have these loans, few actually understand how to manage them properly. If this debt from university is weighing you down, it is time to begin chopping away at this debt.
Some ways to begin lowering your student loan debt are:
- You must remain proactive when it comes to paying off your student loans. By continuously deferring them, you are adding interest and not attacking the real problem.
- Work with the loan company to work through refinancing or consolidating your loans if possible. This can make paying off your debt simpler.
- Look into qualifying for student loan forgiveness. Some companies offer this, and some professions will allow you to qualify. This is the easiest way to pay off your loans.
- If you do nothing to your current loans, try paying more each month. When possible pay double of your loan payment each month and this will lower your overall loans drastically each month.
Paying off your student loan debt can help you feel a huge weight lifted from your shoulders. By doing the simple steps above, you can easily reach this milestone more quickly.
Begin Saving Money if Possible
If you are dealing with a very limited income, it can be challenging to find extra money to put towards savings. However, as you become more financially stable and better manage your income, it is time to begin putting money towards savings. Having savings can help you be prepared for an emergency and begin putting money towards larger goals.
Some of the ways you can begin the savings process are:
- Start by opening an interest-bearing savings account. Put what you can into this account each week, month, or during a certain time each year. If you receive tax returns each year, this is a great time to delegate towards savings.
- No matter how little you save each month, it can quickly make a difference. As little as $10 a week can add up each month and especially each year.
- Once you put money towards savings, do not touch this money unless absolutely necessary. The whole point of saving is to put money you do not need for monthly finances into savings. Once in savings, do not take this money out.
- If you truly want to save this money for a longer period of time, opening a CD is a great way to protect your savings from yourself. This makes it impossible to easily get the money.
- If you are putting money towards a larger expense, such as a home, you can open a separate account. This will keep you from using money that you need to save to reach your goals.
- When saving money, do not forget to put money aside for retirement and future needs. Having a small emergency money fund is important. It is also important that you are putting money towards a 401(k) plan or similar retirement fund.
No matter how much you are able to save, it is never too early to start. By putting money towards a savings account, you will be able to reach new goals and be better prepared for emergencies or future needs.
Increase Your Income if Possible
Of course, one of the best ways to improve your finances and live more fully is to make more money. This is not always easy and does require you to put in a lot of work on your part. However, it is not impossible to make more at your current job, get a new job, or better your skills.
Some ways that you can increase your income and lower your financial stress are:
- While some financial issues come from overspending, low income is one of the leading financial stressors.
- Once you have your budget in place, if you are still falling short, it could simply be because you are not making enough. This can be challenging at certain times when the job market is low. However, there are often ways to increase income.
- Start by seeing if there is opportunity at your current workplace to increase your overall pay. Maybe taking on overtime hours, applying for a raise, or furthering your education to get a raise at your job.
- If your job is not paying you what you need, begin seeking income elsewhere. You may begin a side hustle to add to your income or seek new employment entirely.
- It is never too late to further your education, and this is a great way to increase your overall income.
- It is also important to keep in mind that households with more than one income make more money. If one adult in the household is not working regularly, this could be a major reason for your lowered income.
There is never a perfect income number and it is important that you do not focus primarily on how much you make. However, if making ends meet is a regular struggle, increasing income is key.
Think Through Large Purchases
When it comes to spending your money, it is important that you are not purchasing items on a whim. Smaller purchases are not as critical to do your research but anything over $100, $500, or $1,000 should be thought through fully. Before you make any major purchases, you should really put thought into what you can afford and if the purchase is beneficial.
Some things to think about when making major purchases are:
- Research every major purchase that you make. Whether this is as simple as new technology or as large as a new home.
- Compare pricing on similar items and ensure that you are getting the best deal. Even a larger purchase can be beneficial if you save a bit of money.
- Never make a major purchase on a whim. Always give it thought and spend at least a few days thinking things over.
- Always talk over any very large purchases, such as homes, with a financial advisor, spouse, or trusted friend. Having an outside opinion can put these purchases into perspective.
While large purchases are sure to arise throughout your lifetime, they should be well thought out. You never want to purchase an expensive item without much consideration.
Build Your Financial Knowledge
Though this article has given you many ideas on what to do with your money, you should never stop building your financial knowledge. Once you become more financially secure, you may want to invest money into stocks, open your own business, hire employees, or a variety of other endeavors. This will require you to do much deeper research.
You should never stop learning about your finances and managing money. In fact, the more financially secure you become and the larger investments you make, the more important this becomes. By doing your own research, you can guarantee you are using your money correctly and remaining prepared for the future.