Are you consistently overspending? Do you feel overwhelmed by financial jargon? Do you have enough saved up to survive an unexpected expense?
Managing your money can be stressful. From budget spreadsheets and credit card statements to student loans and 401(k)s, it’s no wonder that fully understanding your personal finances might seem daunting and an uphill struggle.
A recent Varo survey found 85% of American adults sometimes feel stressed out about money, and 30% feel stressed out about money constantly. Yikes. We want to help.
Fortunately, there are simple ways to manage money better and to improve your financial — and mental — health. And learning how to manage money doesn’t mean you have to sit down with a spreadsheet on a regular basis or get a math tutor.
Here are some simple and realistic strategies you can use to manage your money better.
The first step to managing your money better is figuring out where your money is going. You don’t need to start balancing a checkbook, but start saving your receipts or use an app such as Mint or PocketGuard. Or even just make a note after every purchase on your phone.
When you start accounting for each and every purchase you make, you can more easily start to see how small purchases here and there add up and where you might be overspending.
One way LearnVest Founder and CEO Alexa von Tobel tracks her spending is by setting aside one minute each day to check on her financial transactions. By taking a daily “money minute,” you can review your transactions and see where your money is going. As a bonus, it’s also a great time to catch any errors made by your bank, such as fees or incorrect withdrawals, and catch fraud or identity theft.
Look at what you can cut
Now that you know where your money is going, can you identify any places where you can save money without drastically changing your lifestyle? Do you have any memberships, subscriptions, or accounts that you are paying for but could live without?
For example, if you have a gym membership that you’ve always had but never use, consider canceling it. If you buy a Venti Starbucks latte every day, maybe it’s time to start brewing your own blend at home. If you make a lot of impulse purchases at the grocery store, make a list before you go to the store next time and avoid picking up extra items you don’t need.
Learning how to manage money doesn’t always have to mean taking out big chunks of your budget all at once. By slashing small expenses, especially ones that don’t affect your life to a great extent, you can save more of your hard-earned dollars and cents.
Write bill due dates on your calendar
If you’ve gotten hit with late fees more than once, make a bills calendar showing when each bill is due. In addition to keeping track of bills, you can also set appointment reminders for when your quarterly taxes are due or when you should check your credit report again.
Understand your credit report
Speaking of your credit report, if you want to manage money better, it’s a good idea to review your credit report regularly. Your credit report is a snapshot of your credit activity and current credit situation, such as loan-paying history and the status of your credit accounts.
Your credit score — which typically ranges from 300 to 850 — predicts the likelihood of you paying your bill on time. A high credit score means you have good credit and are less of a risk. A low credit score means you have poor credit and are a much riskier customer to lend money.
Landlords, mortgage lenders, utility providers, and even employers use your credit to predict your future financial responsibility. That’s why it is critical to make sure your credit report is accurate.
You can request a free copy of your credit report from each of the three major credit reporting agencies — Equifax, Experian, and TransUnion — once each year at annualcreditreport.com.
Make your savings work harder
If you want to manage your money better, you should pay attention to interest rates.
If you have credit card debt, student loans, or a car payment, figure out which one has the highest interest rate and try to pay that one off first.
If you have a savings account, how much are you earning in interest? If you’re only earning 0.09 percent, the national average interest rate, consider moving your money to a high-yield savings account. This type of savings account offers Annual Percentage Yields that are significantly higher, so you can grow your money faster without much effort on your part.
Keep savings and checking separate
Want to grow your savings even faster? Reduce the temptation to dip into the funds you’re saving for a house, a vacation, or a new car by keeping your savings in a separate bank account.
If that money isn’t sitting in your checking account, not only will you be less likely to spend it, but it could also be earning more interest than if it were in your checking account.
Store up for a rainy day
Stuff happens, so make sure some of the money in your savings account is set aside for emergencies. A good rule of thumb is to have enough to cover three to six months’ worth of living expenses in your emergency fund. That way, if you lose your job, suffer a debilitating illness, or need to make a major repair to your home, you don’t need to go into credit card debt to deal with it.
Think about your goals
It can be daunting to think about funding your emergency fund all at once — so don’t. Instead, set a monthly savings goal to get you in the habit of saving regularly.
While you’re setting an emergency fund savings goal, set some other specific financial goals to keep you on track. Trying using the SMART goal method to ensure your goals are clear and reachable.
For example, how much debt do you want to pay off and by when? How much do you want to be saved and by what date?
Set it and forget it
Another way to get you in the habit of saving regularly is to automate your savings. There are a few ways you can do that.
First, you could set up automatic transfers from your checking to your savings account, which can help you save for important goals without having to remember each month or paycheck.
Another way to automate your savings is to round up every purchase you make to the nearest dollar and invest the difference. That’s what Varo’s Save Your Change does: Every time you make a purchase or transfer money out of your bank account, it rounds up to the nearest dollar and sweeps that money into your savings account.
For example, if you buy a cup of coffee for $3.50, Save Your Change will round that up and move 50 cents from your bank account to your savings account. Over the course of a year, you could save over $300.
Learning how to manage your money better is all about getting back to basics: Make sure your needs are covered, manage your debts and savings, and avoid overspending. You’ll be setting the groundwork for a more secure financial future.
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