Finding your way to financial freedom can only be done by being responsible with your finances. If you want to have more money at the end of each month and be able to save, you are going to have to change some of your spending habits. Not sure what you need to do? Here’s the best way to manage your money.
Best Way To Manage Your Money
So first, what’s the best way to manage your money? Well, that would be to create a budget.
I know, I know…budgets suck. But! There are many ways to “budget” without having to be extremely strict and know where every single penny is going. Let’s talk about that.
If you’re not big on budgeting, but still want to learn how to manage your money better, one of the best ways to do that is with the 50/20/30 rule.
How does the 50/20/30 budget work exactly?
Well, it’s actually super simple.
- Basically, 50% of your take-home pay is budgeted for bills and necessities.
- 20% is towards debt or savings,
- and then 30% is for wants (like those new shoes you’ve been eyeing). And that’s it!
If you’re not financially ready to spend 30% for wants, there’s another method to try as well.
What is the 70 20 10 rule?
For many people, bills can take up a huge chunk of their income. While this isn’t always a bad thing, it can make saving and paying off debt harder. But, if you live in a high cost of living area, and still want to manage your money better, the 70/20/10 rule can help.
The 70/20/10 rule works the same as the 50/20/30 rule.
- 70% will go to bills,
- 20% to debt or savings,
- and 10% to wants.
The wants category is a little lower but can be adjusted as your payoff debt or lower expenses.
How much should you have leftover after bills?
You’re starting to budget, but you’re still new and have a bunch of questions. One of the questions that often comes up is, “How much should you have leftover after bills?”
This will all depend on your personal situation.
It’s much harder to save or invest money if you have a ton of student loans or live by yourself on a lower income. And, it’s easier to save or invest if you got a windfall or have a high-paying job with lower expenses.
However, it is important to have SOMETHING left at the end of your bills. If not, you won’t be able to prepare for emergencies or may have more month than money which will get you deeper into debt.
How do I stop living paycheck to paycheck?
Getting out of the paycheck to paycheck cycle is hard. Really hard. Especially if you have never been taught how to manage your money.
If you are living paycheck to paycheck, the best thing to do is to simply increase your income and reduce your expenses.
This could mean getting a side hustle or second job, renting out a room in your home, or even cutting out things like a car (if possible) and living by yourself.
How do I manage my money like a pro?
Want to manage your money like a pro?
What’s the best way to manage your money?
Let’s talk about the 5 easy ways to manage your money like a pro.
Higher earnings mean you will have more money at the end of each month. You could consider switching careers or improving your existing qualifications to give you more chance of getting a higher salary.
Another option is going to or back to college. A college education can open more doors when it comes to choosing or changing careers.
If you are worried about the cost of college, do your best not to go into debt. BUT, if the ROI is worth a little bit of debt, then you might want to look into the option of taking out a student loan from a private lender. The repayments can be manageable and your earning potential could increase substantially depending on your field.
And of course, there’s always the beloved side hustle. Honestly, anything can be turned into a side hustle these days. It just takes a bit of time and creativity.
But if you’re not ready to move on from your job, or need time to get your qualifications together before making more money, side hustle in the meantime.
2) Reevaluate Your Budget As Needed
We already discussed how budgeting is the key to keeping your personal finances in order. But, it’s also super important to rebalance and reevaluate your budget as needed.
A change in income, moving, or even adding on a family member to your household will change how you spend money. To make you stay on track and reach your goals, look at your budget every few months or so to make sure it still aligns with what you are trying to accomplish.
If you are paying off debt, budgeting and managing your money is extra important. Missing a payment or constant interest charging adds up over time. So one of the best ways to be better with your finances is to pay off your debt.
The quicker you pay off what you owe, the quicker you will be able to live debt-free and not have to worry about it.
In this case, it may be worth talking to a financial advisor who will be able to give you expert advice on how you can do this. And, you can also talk to your bank or those you owe money to and negotiate better terms on paying the money you owe back.
4) Save, Save, Save
You probably plan on saving money each month, but you don’t always reach your target. That’s totally normal but, to better manage your finances, you need to learn how to save.
Have multiple savings goals?
You can use banking apps to create different pots or accounts to save money for multiple wants. Then you’ll put the money you want to save in at the beginning of the month. This way you are less tempted to spend it.
Picking up a side hustle to earn extra money and allocating that exclusively to savings is another common strategy for those who want to make this a consistent priority.
Unnecessary purchases will put a large hole in your budget. While it’s tempting to think that one small purchase won’t make much difference, they all add up.
When you are making larger purchases, consider them carefully. If you don’t really need the item you want to buy, then wait until you are in a better financial position to do so.
Subscriptions and monthly contracts for things such as cell phones will also add up. If you can find a cheaper way, switch plans or cut the subscription out completely. These small changes will make a big difference to your bank balance.
The Best Way To Manage Your Money
So there you have it, the best way to manage your money! Plus, these 5 simple tips will help you cut out unnecessary spending and focus on paying yourself first, so you can reach your financial goals faster.
Are you ready to take this lesson and apply it? Have more suggestions or questions? Write us in the comment section below!
AUTHOR Kimberly Studdard
Kim Studdard is a project manager for online entrepreneurs and small businesses. When she isn't spending time with her daughter and husband, or reading her growing pile of horror books, you'll find her working on her HR degree and working towards FIRE.