How to Manage Money Better and Improve Your Financial Wellbeing
Managing money can be stressful and quite overwhelming, but it doesn’t have to be.
If you’re feeling out of control with money, then you’re at the right place to improve your relationship with money and gain control and peace of mind.
This is your comprehensive guide to help you manage your money better.
Start with your mindset
In order to change our habits and behaviors, we’ll need to get to the root cause of why we relate and use money in a specific way. It may sound bizarre to discuss mindset, beliefs, and habits with money but they do inform our behaviors.
There’s a reason why we save or spend money in a way that creates the life we love or keeps us trap in a life we dream of leaving behind.
Again, the one thing that may hold you back is a belief you’re destined to live in a state of financial stress for the rest of your life.
In my book, You Only Live Once, I asked the readers to complete this sentence:
Money is ______________.
The words used to complete the sentence says a lot about your relationship with money. It’s a good starting point to begin your journey to shift your money beliefs.
Then, ask yourself questions like:
- If money wasn’t an issue, how would I spend my time?
- Does the thought of money stress me?
- Do I avoid looking at my bank accounts, paycheck, and credit statements?
- How am I spending my money and why am I choosing those things?
- Do I work solely to make income to keep up a lifestyle?
Become Financially Aware
Many believe the first step in managing money is to create a budget. What they really mean is to become aware of your finances by completing a financial analysis.
You need to know where you are today before you can create a plan to get to where you want to be. And certainly, you must know how you’re money is used currently before creating a budget to allocate your money to future goals.
Consider things like:
- How much is your actual income?
- How much debt do you hold?
- How much are you spending monthly? And what are you spending money on?
Create Your Goals
After analyzing your current finances, you’ll then want to set financial goals based on what you’ve uncovered.
- List your income and sources
- List your debts
- List your monthly fixed expenses
- List your savings and balances
- List your investments and assets
Based on your lists and analysis, start thinking about the financial goals you’d like to achieve.
Is it to increase income? payoff debt? Move to a new neighborhood? Buy a home or a new car? Go on that dream vacation? Save more for retirement or a child’s college education?
Goals can be things like:
Allocate your Money
The next step is to allocate the money you currently make and have the goals you’ve identified. This is a true budget or spending plan. You’re spending or allocating money for living expenses and financial goals.
Many people believe budgets are done once but they are actually living and breathing tools that must be tracked and adjusted.
You can use a variety of methods to track your finances. Consider the following:
- Spreadsheet budget
- Budgeting apps
Create your strategy
It’s now time to build your plan. Once you’ve identified the state of your finances and future goals, it’s time to draft a financial plan. A financial plan will help you stay focused on the big picture along with the tactical aspects of money.
This is where you envision your state of living based on financial goals. For instance, your goal to own a home may include a financial plan to save enough for a down payment.
Tactical aspects would include things like:
- Side hustles to supplement income
- Ways to lower monthly expenses
- Reduce the cost of borrowing
- Improve credit for better rates
Track your money and finances
Many budgeting apps are actually financial tracking apps that show you how much was spent and what it was spent on. You’ll need a financial tracking app to help you progress towards your goals and stick with your budget.
If you discover you’re spending more than planned, adjust your budget according (taking dollars from one expense or goal and allocate to another).