Learning important money management skills will help you attain a financially stable future and prevent certain financial distress. Saving for retirement, minimizing debts, and creating a realistic budget are a few of the essential skills you need to master. We spoke with the experts who shared their best money management tips for you to get started.
Here are the top 27 money management tips from the pros:
1. Don’t Get Easily Scared with Market Fluctuations
Christopher Walsh, Wealth Manager, Wealth Wise
Don’t get caught up in “investment pornography.” Mainstream media can scare even the most disciplined investor. Make sure to focus on what you can control and have self-discipline—be consistent and patient. Diversify your funds and ensure your investment portfolio is properly balanced. Also, do your best to avoid listening to and being affected by the day-to-day noise.
2. Use Cash Instead of Cards
Chris Whitlow, CEO, Edukate
Paying with credit and debit cards can make spending too easy. If you want something, all you have to do is to swipe your card and it’s yours. Unless your bank account is at zero, you never really “run out of money.” An easy way to stick to a budget and manage your spending is to switch to cash. Use your debit card to get cash from your bank account—maybe it’s $50 or $75 for the week. That’s all the money you have and once it’s gone, you’re done spending for the week.
3. Split Up Some Direct Deposits into a High-Yield Savings Account
Adrian Huether, Head of Financial Success, Evisions
If you’re employed, find out if you can split up your direct deposits, so that a percentage of your paycheck can go into a high-yield savings account. If you never see the money in the account you use daily, there will be no temptation to spend. If you’re new to saving money, then saving $1,000 per month may sound unrealistic right now. Instead of starting big, start small and work your way up. A great amount is to start by saving at least $100 to $500 per month.
4. Plan to Invest in Your Future
Jacob Dayan, CEO & Co-Founder, Community Tax, LLC
Surprise yourself with planning out a strong investment for your future. Making these calculated decisions will help you prioritize what you really want for yourself. It’s okay to not benefit from your investment immediately. You need to be prepared to invest in a promising investment and not expect instant gratification right away. Your financial foundation will be strong and healthy spending habits will follow. The ability to control your impulsive spending will build up your financial foundation, so you’re able to invest in your future.
5. Spend Less Than What You Make
Jennifer Hayes, Owner, Smarty Pants Finance
Spending less than what you make is a surefire way to managing your money wisely. If spending is outpacing earning, one of two things needs to change: expenditures need to decrease or income needs to increase. Cutting back on spending is simple. Write down what you spend each week and examine what can be cut out. Morning trip to the coffee shop? Coffee made at home costs a fraction of what it costs from the barista. Need cable TV? Opt for Netflix instead. To increase income, think about skills you have that can be turned into your new side-hustle. Or, go to your employer and negotiate a raise. Sell things in the attic that are collecting dust. Money needs to be managed or it ends up managing us and robbing us of the life we really want to live.
6. Search for the Tax Credits Available to You
Anthony E. Parent, Founding Partner, Parent & Parent LLP
Understand all the tax credits that are available for you and your business. Search for them. For instance, most tax professionals will tell business owners not to bother with the Research and Development (R&D) tax credit because the risk of an audit is greatly increased if you use it. But might it be a better move to claim the R&D credit, and wait to see if you are audited? If you are, it’s not like you can’t resolve it with the IRS or use it as a negotiating tool to get the IRS to relax about another claim you made. In the end, you’ll fare better if you’re less cautious and try for the opportunities available to you.
7. Perform a Financial Audit
Alayna Pehrson, Financial Blog Content Manager, Best Company
If you want to have solid money management habits, one thing you should do is perform a financial audit. Dive deep into what makes up your current financial standing, what your financial responsibilities look like, what your current budget looks like, where your money is going (savings, emergency fund, 401(k)). Staying on top of your finances by performing a financial audit on a yearly or monthly basis can really help you develop a strong money management system. You should perform a financial audit if you get a new job, lose a job, have a child, or have other unexpected life changes. The more thorough you are with your audit, the better off you will be managing your money in the future.
8. Implement a Profit-First Cash Management System
Jennifer Dawn, Owner, Jennifer Dawn Coaching
If you want to manage the money in your business, work to stay profitable from the beginning. Too often, the focus is only on “top line sales”—which are important—but it leaves the bottom line unattended and can easily lead to massive debt and cash flow problems. Get on a cash management system like “profit first” from the beginning and stick to it. It will serve you well at all stages of business growth and make money management so much easier. You’ll always know how much to spend on overhead, payroll, marketing and more. No skills are needed other than the ability to do basic math. Even better, you can manage every penny without having to look at confusing financial statements.
9. Keep Your Paper Trail
Deborah Sweeney, CEO, MyCorporation
The best money management is built on your records. This gives you an understanding of how much you are spending and saving, which then allows you to set a budget and stick to it. You need to be organized in order to manage money effectively and efficiently. Make sure to keep your paper trail, such as receipts and other income and expense documents, all in one place that is easy to find. Also, ask for receipts for every purchase you make, whenever possible.
10. Have Self-Discipline When It Comes to Spending
James Duren, Personal Finance Analyst, HighYa
Discipline is one of the most important money management skills that you should learn to leverage a budget and create financial wealth. Discipline allows you to follow a financial plan, to save when you need to save, and to make smart choices about where to invest your money. Another benefit of discipline is that you’ll be able to weather the ups and downs of everything, from the stock market to your home value to your income, knowing that you’ve got a plan, you’ve got a budget, and you’ve got the focus to push on.
11. Eliminate Recurring & Unnecessary Expenses
Janice S. Lintz, Consumer Education & Travel Writer, JaniceLintz.com
Review your monthly bills thoroughly to ensure you are only paying for what you need. Eliminate unnecessary and recurring expenses no matter how small you think they are. For instance, check your cable bill and make sure all the channels that you are paying are only those which you use or watch regularly. Be diligent, persistent, and organized. Know where your money is going and make sure it’s for expenses you need or want.
12. Learn Proper Money Management Strategies
Benny Ganatra, CEO, Americor
Small business owners succeed when they know how to manage their finances wisely. Begin with establishing budgets and spending strategies, safeguard cash, and always keep track of expenditures and revenues. Optimize your credit use by determining whether loans or lines of credit are right for you and your business. If you use a credit card for large purchases, always pay off the balance in full by the end of the month to avoid getting over your head in debt. Once you have the basics down, invest in growth opportunities to further advance your business.
13. Have More Than One Checking Account
Joyce Blue, Money Relationship Expert, Empowering You Life Enhancement Coaching LLC
If all your money is going into one account, it takes much more effort to keep track of everything. Make sure to have a minimum of two accounts—one for bills and one for discretionary spending. Figure out what your monthly bills are and divide that by the number of times you get paid in a month. If your bills are $8,000 a month and you get paid twice a month, then your direct deposit to the bills account would be a minimum of $4,000 each paycheck, and the remainder would go into your discretionary spending account.
14. Track Your Saving Rate, Not Just Your Net Worth
Tom Blake, Owner, This Online World
Tracking your net worth can be immensely satisfying as a young adult because, most likely, you probably don’t have a lot of wealth at the start, so any progress you make is significant. However, tracking your net worth can be a misleading practice when beginning your investment career because it doesn’t accurately depict the entire story.
Markets fluctuate and that’s normal. However, if all you track is your net worth, a rough few weeks in the market might make you believe you are failing as an investor. New investors should consider tracking both their net worth and their saving rate, or how much money they keep at the end of the day after taxes and expenses. Your saving rate will tell you if you are living within your means, playing some defense, and gaining the ability to accumulate wealth (which you can then invest). Track this percentage religiously, and don’t track net worth every waking moment.
15. Be Emotionally Stable
Dan Connerty, Business Associate & Group Benefits Specialist, IG Wealth Management
One of the most crucial money management skills that every person needs to master is being emotionally stable. Emotionally stable individuals have the ability to see the bigger picture and will not be easily swayed by sudden market changes. If you are emotionally stable, you will not easily make a knee-jerk judgment on your long-term investments, which is essential in attaining financial stability.
16. Create a Budget for Your Expenses
Yuko Kawamoto, Finance Staff, Founder’s Guide
In order to manage your funds properly, one of the first steps you need to do is to set a realistic budget for every expense you need. You also need to set a budget for leisure and recreation aside from your regular day-to-day expenses. Further, a budget for savings and investment is equally (or even more) important, so make sure you don’t miss out on that.
17. Understand the Opportunity Cost of Money
Jay Morrison, CEO & Founder, Jay Morrison Academy
Many of us have never given this particular tip any thought at all. We’ve parked our money in low interest-bearing checking or savings accounts because that’s all we knew. Or, we maximized our 401(k) for the last 10 years on a job because our HR department promoted that behavior, never realizing that you have a right to park your money in whatever investment vehicle will allow you the greatest return on investment (ROI) for your capital. That same money sitting in a 401(k) or IRA earning 3 percent or $2,100 per year could be moved or directed into a more profitable, productive investment to bring your earnings, savings, budget and credit strategies full circle, which all begins with maximizing how much you keep.
Set financial goals that are realistic and achievable. The Practical Saver also suggests writing these goals down to avoid getting distracted and forgetting to accomplish such goals. However, do not be afraid to adjust your goals as necessary, especially in the case of life-changing events such as pregnancy, divorce, or death in the family
According to Personal Capital, making an honest assessment of your current financial situation is essential in order to achieve your goals. By knowing where you are now financially, you will also be able to analyze what changes you need to make in order to reach your goals.
When it comes to investing, do not ever put all your eggs in one basket. Policy Genius recommends keeping your portfolio well-balanced and diversified. Make sure to have an appropriate balance of stocks, bonds, real estate, and other investments to help mitigate the risk of loss.
Make sure to have an emergency fund that can cover at least three to six months’ worth of your income in case an unexpected, unfavorable event happens. American Consumer Credit Counseling recommends young people save at least 15 percent to 20 percent of their gross income. This allows them to live a decent and comfortable lifestyle during retirement.
According to Bank of America, one of the simplest ways to manage your funds and build your savings is to make use of automated transfers between your bank accounts. Most banks offer this kind of service and it’s a great way to save money regularly without thinking much about it.
Fidelity suggests that every person build their credit as soon as they can and make sure to take care of it. In order to build credit, you need to borrow money. You may opt for a secured credit card to start with, make a few purchases every month, and pay in full on time.
Brian Tracy International recommends saving money by using a long-term perspective. It’s important to develop a long-term attitude toward yourself and your financial future and to set a long-term financial goal. This perspective will impact your spending and saving habit, and will have a positive effect on your finances in the long run.
Huffington Post advises consumers to be aware of every single penny they spend. For instance, make sure you know what to buy from a grocery store by preparing a list of what you actually need. Also, check and compare prices and be a wise buyer. A simple money management skill, such as being meticulous with what you buy, will help you save on cost.
Paying off your debt is a way to regain your independence, according to Money Inc. This is because you will no longer be dependent on the people or entity you owe money to. Once you manage your debts, you will also learn to control your finances and gradually be able to save or invest more for your future.
According to National Debt Relief, forgetting about the seasonal expenses is one of the biggest money mistakes most people make. Focusing only on the regular expenses is not a great way to manage your finances. You have to understand that you have different expenses each month and consider the seasonal expenses. Make sure to include them in your budget.
If you want to achieve your financial goals and live a financially healthy lifestyle, you need to learn and master certain money management skills. It takes a lot of patience, discipline, and consistency to build wealth and finally become financially independent. To get started, use the above money management tips from the pros as a guide.