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Budgeting

5 budgeting tips for smart money management

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You don’t need a large salary to responsibly manage your money and reduce your debt. In fact, learning the basics of budgeting is probably a lot easier than you think, and there are a number of simple tips and tricks for making the most of your hard-earned money.

Don’t just take it from us, however—here are 5 smart money management tips from some seasoned experts in the field.

1. Automate your savings

Kate Anania was “super broke” and living in a trailer in Alabama when she first started researching how best to manage the money she was finally earning from her first steady job.

“I wanted to make sure I wasn’t wasting all my time working without knowing what to do with the money I was earning,” she said. “I started reading about personal finance, but found it pretty dry and also targeted at people who actually had money.”

Anania discovered that the best personal finance tips don’t always come from wealth managers who spend their days trading other people’s nest eggs. So, she took it upon herself to find a smarter way to manage her money earned from a job in a fisheries lab. Using what she learned, Anania created a successful blog about her experiences called Twenties in Your Pocket, followed by a popular book of the same name.  

Anania started saving just $50 a week to kickstart a good habit that would pay off down the road. “I started reading about how to structure my finances,” she said. “I made some great choices early on, like opening a Roth IRA at 25, even though I only put in $50 a month.”

Learning quickly that putting aside money before she even had time to miss it was an effective way to save, Anania took advantage of automated savings tools that made it easy. This not only allowed her to reach her financial goals, but handle any unexpected expenses in the meantime.

“If you don’t put money aside, you’ll only suddenly have the money if you get lucky,” she said. “Most of the time, setting a goal, automating savings and then letting it grow is the best way to reach your goals.”

Looking for a savings account that does the work for you? The Varo Savings Account uses savings tools like Save Your Pay and Save Your Change to automatically transfer money from your Varo Bank Account to your online Savings Account.

2. Be guided by your own unique financial values

Figure out what budgeting priorities work for you and your life, not what society or traditional money managers say they should be. Let what makes the most sense to you be your guide to spending and saving.

“You have to look at what you really enjoy and value,” said Veneta Lusk, the family finance expert behind BecomingLifeSmart.com. “This is where you should put your money.”

It may sound like a simple task, but it can require some soul searching to determine what you want and how to get it. “Whether you love travel or you really would love to have a nice big house, or you would like to pay for your kid’s college in full, or maybe you want to put them in private school, what are your values?” she asked.

Once you have a better idea of what your financial values entail, set a budget to start making those dreams a reality.

3. Don’t deprive yourself of fun—but don’t go crazy either

When it comes to smart money management, there needs to be a happy medium between responsible spending and enjoying yourself. If you focus too much on depriving yourself of what you can’t have, spend, or do, it may deter you from making the right decisions in the long run.

“Don’t think about what you cannot spend money on, but think about how you can spend your money and improve your life. Focusing too much on what they can’t have makes people miserable,” Lusk said. “And a constant state of deprivation is not a sustainable way to grow your financial portfolio.”

People think “they can’t have a coffee every morning or they can’t go out to eat or they can’t have fun. It’s not about that,” she said. “It is about balance…It’s important to set some money aside and still enjoy yourself, maybe in smaller ways.”

It also pays to be creative in terms of finding ways to enjoy yourself without taking on a financial burden. Lusk, her husband, and their 2 kids put this notion into practice by using credit card rewards and travel points to vacation all over the world. They also put $200 per month into a savings account earmarked for travel and use that cash to pay for food and activities not covered by their rewards points.“We love to travel and we didn’t want to spend thousands of dollars on it,” she said.

4. Tackle your debt in a way that works for you

“There is no one right way to pay down your debt. I think paying down debt is personal,” Lusk said, noting that some people prefer to eliminate smaller debts first so they can see their progress, while others tackle the biggest debts that are weighing heavily on them.

“Whatever fires you up,” she stated, adding that although she and her husband chose to pay off their 30-year mortgage in just 5 years, they are still carrying student loan debt. “The right way to do it financially would be to go after the one with the highest interest rate. But humans are not logical and that is the point of all the different ways to pay down debt.”

Kate Anania steadily worked her way up from that first job in the fisheries lab while putting herself through graduate school. But, her masters degree in Coastal Management came with a student loan debt of more than $50,000.

“Student loan debt is a huge stressor for so many people,” Anania said, “and getting out from underneath it frees you up for everything else you want from your life.”

While she admits now that she should have more carefully considered whether or not she could pay for the loans before she began school, Anania budgeted carefully. “My loans from graduate school were entirely paid off within 4 years of graduating.”

5. Invest early and often, and automate your portfolio

Investing money doesn’t have to be risky or scary, and you don’t need to have thousands of dollars to get started.

“Automating your investments with a reliable company is a great way to watch your money grow without having to keep a constant eye on the stock market,” according to Yoni Dayan, Chief Editor of Money Under 30.

“There’s a lot that people think they have to know,” he said, from following market trends to the geopolitical affairs that can affect trading. “I think in this day and age we don’t need to get into that.”

Instead, Dayan recommends using a robo-advisor that can rebalance your portfolio when the market swings, and ensure you are investing optimally.

“There’s so many ways to put your money on autopilot,” he stated. “These are major companies that have a long history with investing and are going to make sure you are properly diversified, so if one part of the market drops, it’s not like you have all your money in that segment. They automatically ensure that you are properly diversified”

Smart money management no longer relies on one method alone. At the end of the day, you still want more money coming in than going out. But, with a changing job market, advancing technology, and a younger generation of workers with different values than their parents and grandparents, the options for investing in a brighter financial future are more adaptable to each person’s needs than ever.

Unless otherwise noted above, opinions, advice, services, or other information or content expressed or contributed by customers or non-Varo contributors do not necessarily state or reflect those of Varo Bank, N.A. Member FDIC (“Bank”). Bank is not responsible for the accuracy of any content provided by author(s) or contributor(s) other than Varo.

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