4 Tips for Mastering Your Finances

What is it called? It's a way to manage your finances so you can make the most of them. This plan usually entails budgeting and saving money, eliminating debt, and investing in the future. Learning to manage your money can seem complicated or stressful, but try not to feel overwhelmed if you take things one step at a time. Here are some money management tips to help you gain control.

How to manage your money

1. Build a money management blueprint

How can you put your budget into action? Use the steps below to come up with a plan that will work for your finances. Start with a fixed budget.

We recommend the 50 30 20 budget plan, which allots 50 percent of your income for needs, 30 percent for wants, and 20 percent for savings and debt repayment. You can use this 50 30 20 budget calculator to divide your income into these categories. If the 50 30 20 budget rules aren t for you, there are plenty of other options to choose from.

Track your spending

By monitoring your expenditures, you can see where your money is going. It may inspire you to reduce how much you spend in a specific category or adjust your spending habits so they better align with your goals.

Find ways to save

As you spend more time monitoring your finances, you can find ways to save. Here s how to save money, from tweaking your daily routine, to negotiations with service providers, to making lasting alterations to your budget. Over time, saving will become an ingrained part of your regular routine. If you want to learn more about finding savings with coupons, freebies and do-it-yourself hacks, check out our guide on frugal living.

Use designated accounts for spending and savings

Another effective way to make money management simpler is to designate funds earmarked for bills and monthly expenses separate from your emergency fund. This will reduce your urge to use that money for nonemergencies. Saving for a home, vacation, or new car? Stash that money in separate accounts to help you visualize progress for each goal.

Make a plan to pay off debt

A strategic approach toward paying off outstanding debt will help you reach your goal of a debt-free finish line more quickly. We advise tackling the account with the highest interest rate first, while making minimum payments on the others. Then, work back down to any lower interest rate debt until it is paid off completely.

Develop good credit habits

Your credit score could determine whether you're able to get loans, as well as how much you're charged for those loans, along with other aspects of your financial position. A credit check is often a requirement for obtaining a mobile phone plan, apartment, or auto insurance.

Before investing time into either of those, think about how payment history and credit utilization (how much of your credit limits you use) affect your credit score. Pick and pay everything on time so that your credit score doesn't suffer, and make sure you use no more than 30% of your credit limits on each card.

Invest in your financial future

Start setting aside money today, in a 401(k) or IRA, and let compound interest work its magic to accrue significant wealth over a long period of time. Not sure how much you need to save? Try our retirement calculator for tips.

2. Take inventory of your finances

Money management is about more than just making the math work out. It's about getting a mental inventory of your current position as well.

Are you consistently overspending? Are you saving enough to cover an unexpected expense? Do you live paycheck to paycheck? Do you feel overwhelmed by economic issues? Be honest with yourself about your financial health. You might have made some missteps in the past, but you don't have to be stuck with that path. Here's what you need to know about your finances now, so you can make better decisions in the future.

3. Make the most of your savings

Money management goes past merely spending less than you make. A true indicator of financial acumen is saving enough to have a comfortable life in the long term as well as the short term. You can make this goal in four simple steps.

Start socking away money to build an emergency fund by setting aside as much as possible. Ideally, with plastic wraps, you should be able to arrange six months worth of living expenses. If that seems like a significant plan, start small with a $500 reserve.

Invest extra money for your future. Contribute to a 401(k) in order to plan for your retirement. If your company offers a match, contribute enough to receive the maximum.

Whether it s a debt or a credit card bill, you might have some debt obligations. As long as the minimum amount of your payment is met each month, your credit score won't be adversely affected. If you have extra money for bills, pay off the high-interest debt first.

Keep building that emergency fund, investing for retirement and getting rid of debt.

4. Be persistent

Unfortunately, many people fall prey to restrictive budgets. Being too strict with your budget can make you miserable. Investment jargon is complicated, so be sure to be patient. You didn't get to the financial position you're in overnight, and you can't manage to get out of it overnight either. Give yourself time to learn and develop. With hard work and perseverance, you will get there.