How to manage your money and improve your finances
How to manage your money and improve your finances
Managing money is something anyone can do. People all over the world have systems to track their expenses and keep their finances under control. But if becoming proficient in this seems like an elusive goal, this article may be an excellent place to start.
You may have heard of the 50-30-20 rule when it comes to budgeting. This rule dictates that you spend 50% of your income on essential expenses, 30% on discretionary expenditures, such as dining out or shopping, and 20% ​​on paying down debt or building up savings.
And that’s just a taste of the tips you’ll find in this article! Let’s find out how to put you on the path to financial freedom. Find better ways to manage your money with WorldRemit.
In summary
- 1. Take stock of your financial situation and spending habits
- 2. Eliminate unnecessary expenses
- 3. Set specific and realistic savings goals
- 4. Pay off your debts if you can
- 5. Create savings accounts
- 6. Set your budget
- 7. Track your spending
- 8. Remember to treat yourself
- 9. Buy at the best price
- 10. Check your credit report
- How to manage your money: frequently asked questions
- Money management: how does it work?
- Why is it important to manage your money well?
- What is the 50-30-20 rule?
- Take stock of your financial situation and spending habits
The first step is to look at your monthly spending habits and categorize them. You can do this manually or using budgeting apps. This will help you budget for the future and give you a solid foundation for where you are now.
Here are some of the most common expense categories you can find in a standard budget:
- Debts (student, car, personal, bank, or credit card loans)
- Entertainment (outings, leisure, sports, concerts, streaming subscription, etc.)
- Food (supermarket or restaurant)
- Housing (rent or mortgage)
- Savings (education, retirement, or any other savings account you may have for vacations, emergencies, etc.)
- Transportation (petrol, taxis, or public transport)
- Utilities (expenses related to internet, phone, electricity, water, gas, or TV)
- Insurance
- Health care
- Clothes
- Any other costs, such as special occasions (small treats and gifts)
Once you have a good understanding of your financial situation and the type of expenses you are incurring, you can take the next step: examine your savings and money goals.
Eliminate unnecessary expenses
Listing your budget can take some time, but it’s worth the effort, as it will allow you to identify categories you don’t need to spend money on. For example, are there any subscriptions that you let last too long? Or products or services that you no longer use?
Cutting expenses is one of the easiest ways to make a massive difference in your health and financial success.
Set specific and realistic savings goals
Should you set short or long-term goals? It doesn’t matter! What matters most is that you put them and stick with them. By doing so, you will contribute to your newfound financial success.
It can motivate you to save. Whether saving for a big purchase, like a house, or a big-ticket item that you can’t fit into your daily budget, you’ll gain confidence over time by managing your money correctly.
However, we recommend you start with a manageable amount. Set easily achievable goals the first month, then increase the amount the following month once you’ve reached your destination.
Pay off your debts if you can
Paying off debt early is easier said than done. Since most debt earns interest over time, managing and improving your finances can be challenging. If you have money aside, consider paying off your debts to avoid paying higher interest over time.
One of the easiest ways to manage your money is to set up savings accounts. These are specific accounts to which you will allocate your savings to budget more effectively. Then, as soon as you get paid, you can put money into these accounts and hold them until you’ve reached your savings goals.
You can save monthly or weekly, depending on how and when you receive your salary. Some banks also offer a feature that allows you to transfer what’s left in your checking account to your savings account at the end of the month. However, this can sometimes make it difficult to track your budget.
Set your budget
We’ve already talked about how the 50-30-20 rule can help you budget. Budgeting is one of the essential habits to achieve financial health.
Considering the expense categories you have already identified, it is time to prepare your budget. You can do this manually (by entering data into an Excel spreadsheet or Google Sheets) or using an app. Set a realistic goal for each category and calculate the percentage of your budget that category will occupy. Then use your financial goals as a “compass” to guide your daily spending habits.
The savings accounts you have set up can be used for various purposes: a vacation, the money you send home each month, or an important event in your life, such as a wedding.
And now comes the most challenging part: sticking to your budget! If you can do this every month, you will quickly (and sometimes dramatically) improve your finances.
Track your spending
Tracking your spending is essential because, most of the time, the small purchases add up to make all the difference when it comes to managing your money.
It’s easy to go over a budget quickly if you order too many takeouts per month or an expensive subscription slowly drains your bank account!
There are several ways to track your expenses and manage your money. You can manually save receipts by entering them into your budget, log your payments in a notebook or note app, or even integrate your bank account data into an app that tracks your expenses.
Remember to treat yourself.
Motivation is essential to improve your finances and managing your money effectively. But even if we advise you to respect your budget, it is necessary to have fun!
It may be a small purchase that is not part of your daily needs. You can even set up a separate savings account that will act as a reserve fund and put all the remaining money that is not accounted for there.
Buy at the best price.
Another great budgeting and money management tip that often helps people improve their finances is to shop around for the best price. You can use price comparison sites for large purchases (like a car) or small purchases (like groceries).
You can also sign up for apps that scan sites for discounts or promo codes. This will allow you to save a little money on discretionary purchases. Finally, you can buy used items to find cheaper alternatives to the products and services you need.
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Check your credit report.
Your credit history records your borrowings and the payment of your debts. You have a good credit score if you’ve always been up to paying off your debts. This score is a numerical value that is assigned to help creditors assess your creditworthiness.
Here are our top ten tips for managing your money and setting you on the path to financial success. One of the ways we can help you in this process relates to the part of your budget that you devote to “family gifts” or general financial support. If this month is going well for you and your budget, feel free to use our app or website to transfer money to your preferred recipient.
How to manage your money: frequently asked questions.
Money management: how does it work?
Money management is the process of systematically reviewing your financial situation to track your saving and spending habits.
Why is it important to manage your money well?
Among the advantages of this approach is that it will give you better control over your finances by giving you an overview of your financial situation. It can help you reach your savings goals over time and even increase them once they’ve been gone!
You can also use money management techniques to pay off the debts you incurred during your overspending days.
Learning to control and manage money wisely is a lifelong process, so don’t worry too much if you don’t get it right in the first month. You’ll be fine if you’ve set a budget and are doing your best to stick to it.
What is the 50-30-20 rule?
This rule stipulates that 50% of your income must be devoted to your basic needs, 30% to what you want, and 20% ​​to repaying your debts or building up savings.
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How to manage your money and improve your finances
