Managing Money: 7 Tips for Smarter Finances

It’s a simple fact: money is stressful. Between bills, debts, unexpected costs, and life-changing circumstances entirely out of our control, it’s no surprise that over ¾ of Americans are spooked by their financial situation.¹ But, just like any other stressor, it’s often best to confront your personal finance fears head-on –– focusing on the factors you can control rather than the ones you can’t. Learning how to properly manage your money can not only be the key to overcoming your financial anxiety, it can also be the one thing standing between you and your financial security. 

Below, we walk through seven money management strategies designed to help you take control of your financial situation like an expert –– making your paychecks go further while removing some of the guesswork from saving money. Read on for some of the best managing money tips. 

Managing Money: Why It Matters

For some spenders, the “out of sight, out of mind” approach is the key to curbing financial anxiety. And while this may work for a while, it’s simply not a sustainable long-term strategy. But why is personal finance important? Simply put, though ignorance may be bliss to an extent, failing to keep a watchful eye on your finances can lead you down a dangerous path –– toward overspending and debt spirals, and away from your goals. Sure, it can be stressful to check your bank account balance after a spending spree. But if you’re properly managing finances, what you find upon opening the app shouldn’t be much of a surprise at all. 

Going beyond the mental health advantages of tracking your finances, managing your money can be instrumental in helping you stretch each and every dollar to its absolute limit. When you spend without a strategy, without a budget, and without oversight, you effectively cede control to your money. Your spending patterns become dictated by your bank account balance when you should be wielding this balance as a tool –– to get out from under debts, get ahead, and work toward the future of financial independence you’ve dreamed of. By managing your money, you can ensure that every penny of your paycheck is accounted for and properly deployed with your goals in mind.

7 Managing Money Tips

Managing your money can seem intimidating, as you navigate budgets, spending plans, and overall savings goals. Luckily, with a few tips, you will feel empowered to take control of your financial situation reach reach your long-term goals. 

1. Know Your “Why” 

If you’ve never attempted to properly manage your money before, this can feel like a massive undertaking without a financial advisor. And, like any undertaking of this stature, the journey toward managing your money effectively should begin with a clear understanding of why you’re taking this challenge on in the first place. What is it that has driven you to take control of your finances? Whether you’re motivated by the thought of achieving financial freedom, the desire to buy a home, or the hopes of funding your dream vacation, having a clear financial goal and a crystallized vision provides much-needed direction and encouragement. 

Your "why" becomes the compass guiding every financial decision –– and your north star should you ever lose sight of your goal. When challenges arise, knowing your purpose helps you stay true to the course. This vision also transforms money management from a daunting task into a purpose-driven mission, making this repetitive (and, admittedly, sometimes boring) process even more meaningful and rewarding. When you identify your "why," you create a roadmap that merges your actions with your aspirations, setting the stage for a secure and fulfilling financial future, including the ability to finance your dreams.

2. Figure Out Your Debt-to-Income Ratio

They say, “You can’t manage what you can’t measure.” By this line of thinking, understanding your debt-to-income ratio is like having a financial X-ray: it gives you a bone-deep view of your overall economic well-being. Your debt-to-income ratio is exactly what it sounds like: calculating the proportion of your income that is diverted toward servicing your debts. A lower ratio signifies better financial health, as less of your income is tied up in debt repayment, while a higher one may indicate potential challenges. 

Monitoring this ratio provides a comprehensive view of your financial standing, helping you make informed decisions about debt management and spending and making it a key element of any money management strategy. Your debt-to-income ratio alone may not tell your full financial story, but with this simple snapshot, you can strategically allocate resources, prioritize debt repayment, and avoid missteps that may jeopardize your financial stability. 

3. Monitor Your Money with a Budget 

No attempt at proper money management is complete without a budget. Creating –– and adhering to –– a budget is one of the simplest ways to maximize the value of your dollar and curb a bad spending habit. Without a clearly outlined budget, you can quickly lose track of your spending, reverting to old habits or developing new ones that will keep you from your goals. 

A budget is vital to your money management strategy for two reasons: the guardrails it creates for your spending, and the valuable oversight it gives you over your income and expenses. By setting hard spending limits, you can eliminate the possibility of overextending yourself financially –– saving money on things like overdraft and credit card fees, and guaranteeing that your priorities are taken care of. And by managing your money, you can identify patterns in your spending that are holding you back. Ultimately, a budget prevents financial chaos while empowering you to deliberately leverage your available resources. 

Depending on your money management goals –– here’s where honing in on your “why?” is important –– you may find success using different types of budgeting approaches. For an in-depth look at various types of budgets for every goal, check out our guide on how to start a budget. 

4. Set a Savings Goal

Would you believe us if we told you that our current elevated interest rates are actually a good thing? Allow us to explain. See, while they might be prohibitive when it comes to buying a car or a home (or paying for daily life, for that matter), these heightened rates also translate to savings accounts –– allowing smart savers to earn nearly 5.5 percent annually on every dollar saved, in some cases.² If you’re adhering to a savings-focused budget, like the 70/20/10 rule, you may be kicking thousands of dollars into savings each year. Leveraging a high-yield savings account can mean hundreds (or thousands) year over year, all at the expense of a little patience. 

That is if you’re sticking to a well-crafted savings goal. When building your budget, be sure to include a clear strategy for savings, ensuring that your savings account is being “fed” as routinely and heartily as you can manage. Whether it’s $20 or $200, every little bit counts –– especially when today’s rates are tilted in your favor. Sure, these high interest rates may be a burden in nearly every other facet of life, but taking advantage of high-yield savings accounts can certainly help lessen the impact. Discover more tips on how to save money. 

5. Prepare for Emergencies

Life is predictably unpredictable, and even the most solidly built budgets have been known to crumble when an unexpected expense rears its ugly head. So, the best thing you can do to manage money like an expert is to create an emergency fund intended for these unwanted surprises. As a general rule of thumb, this emergency fund should be enough to cover anywhere from three to six months’ worth of expenses.³ But if you’re looking to manage your money like a pro, we’d err on the higher side, considering your emergency fund acts as a financial safety net –– thus saving you from further financial fallout. Beyond this, an emergency fund can be an asset to your mental health, giving you the priceless peace of mind that you have a buffer to weather unexpected storms without derailing your long-term financial goals. 

By anticipating and preparing for emergencies, you avoid the domino effect of tapping into other savings –– or racking up interest charges by covering expenses with a credit card. Do your best to gradually contribute to your emergency fund, building a solid defense against the uncertainties that life may throw your way.

6. Establish a Plan (and Stick to It)

“Consistency is key” may sound like a cliché, and in some cases it is. But when it comes to effective money management, it’s the gospel truth. And while some money management strategies will be total financial overhauls –– resulting in rapid improvement and a fast-growing savings account –– it’s a gradual process for many. So, to find the success you’re after, you’ll have to craft a well-thought-out plan and stick to it as best you can. 

One of the best ways to do this is to break your big-picture plan into small, digestible pieces. If your primary motivation for better money management is to pay down your debts, find a way to break this big goal down into smaller elements. Can you commit to a regular monthly payment (beyond your prescribed minimum)? At this rate, how long will it take you to become debt-free? From here, you can look at your budget to see if any of your spending habits can be modified to accomplish this goal sooner. Whether you want to save for a home or grow your emergency fund, this same thought process can be applied to help you conquer seemingly gargantuan goals bit by bit. 

7. Learn How to Track Spending (That Works for You) 

We mentioned earlier that oversight is a key element of your budget, but those looking to manage their money like an expert may require even more of a watchful eye. This is where carefully tracking your spending comes into play. Budgeting, at its core, is theoretical –– you calculate your projected monthly (or weekly, if you prefer) earnings, then begin subtracting your expected expenses. Tracking your money, on the other hand, requires you to “follow” that money to its final destination. Part of managing your money like an expert means cracking down on out-of-budget expenses, so if an odd $5 lands at your local coffee shop, you’ll want to be sure it was accounted for. 

Fortunately, tools and apps are specifically designed with this purpose in mind. Some integrate into your bank account, giving you a clear overview of every expenditure. Others allow you to create your own “envelopes”, monitoring your spending by category or goal. There are even some trackers where every single dollar demands a purpose, forcing you to examine the utility behind every purchase.⁴ While that might be too intense for some spenders, for others it may be the key to finally realizing long-held goals. At the end of the day, the best money-tracking tool is the one that works for you. And given the diversity of these tools, you’re bound to find the right fit.  

The Final Word on Money Management from Truehold

From setting a clear intention at the onset of your money management journey to taking small (but deliberate steps) along the way, managing your money like an expert is easier than it looks. Further, the benefits of effective money management go well beyond financing dream vacations or protecting your financial future. By reclaiming control of your finances, you can begin completely reshaping your relationship with money –– parting ways with the cash-inflicted stress, anxiety, and trauma that so many Americans are currently wrestling with. 

With that being said, managing your money will take work. You may have to adjust your habits and take more hard looks in the mirror than you’d prefer. But in the end, you may just find yourself with an entirely new outlook on money. And with the tools you need to accomplish your most audacious financial goals. 

At Truehold, we’re on a mission to help Americans finance their futures by tapping into home equity. Through our sell and stay transaction, you have the opportunity to unlock your wealth by selling your home and continuing to live in it as a renter. This way, you can use your hard-earned equity to cover certain financial debts that may be holding you back or to invest in the financial goals you’ve been dreaming of. Plus, it gives you time to buy a new home when the time is right. Visit our online archive for more tips on budgeting and money management from the Truehold team. 

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Sources:

1. CNBC. 77% of Americans are anxious about their financial situation––here’s how to take control. https://www.cnbc.com/select/how-to-take-control-of-your-finances/

2. Bankrate. Best high-yield savings accounts in November 2023. https://www.bankrate.com/banking/savings/best-high-yield-interests-savings-accounts/ 

3. Nerdwallet. Emergency Fund Calculator. How Much Will Protect You? https://www.nerdwallet.com/article/banking/emergency-fund-calculator 

4. CNBC. The best expense tracker apps of 2023.  https://www.cnbc.com/select/best-expense-tracker-apps/