How to Manage Your Money Wisely: The Ultimate Guide

25% of Americans say they worry about money all the time. Are you one of them?

Trying to figure out how to manage your money can feel frightening, confusing, and overwhelming. But it’s important to be proactive and deal with your finances.

That’s why we’ve put together our guide, to help you manage your money wisely. Keep reading to find out how to make your finances work for you.

Be Prepared

Table of Contents

The first thing to do when it comes to money is to prepare. These are the foundation for financial success.

Set up Your Bank Accounts

Setting up the right bank accounts is the first step in managing your money. It’s a crucial part of building your financial success.

We recommend that you open three separate accounts. Open a checking, savings, and investment account.

That way, you can keep your cash separate and organized. You can spend what is in your checking account while keeping your savings and investment funds safe.

You can contact your bank to discuss your options further. You can find out what Farmers Bank has to offer at https://www.farmersbankidaho.com/.

Understand Your Situation

Before you plan what you’re going to do, you need to know where you are. Start by looking at your current financial situation, and be honest with yourself about where you stand.

Look at how much your income is, what you’re spending your money on, and how much you have before your next paycheck comes in.

Are you living paycheck to paycheck? Are you overspending on unnecessary expenses? Are you prepared for any unexpected expenses?

Once you know where you stand, you can start to make a plan.

Set Your Goals

If you want to get serious about your finances, you need to set yourself some goals. This will help you to understand what you’re trying to achieve. It will also give you something to measure yourself against.

Where do you want to be financially? This might be about how much money you have going into your savings, cutting down your expenses, or making more investments.

Your goals should be clear and specific. Understand what you need to do to achieve them. You can then make sure you’re working towards these goals.

Make a Budget

Once you’ve made your goals, create a budget to match. This will help you plan where your money will go.

You can plan how much will be needed for everyday expenses and daily life. You can then set some money aside for enjoyment and emergencies, before putting the rest into savings or investment.

Your budget should match you, your lifestyle, and your financial goals. More than anything, it’s important that it’s realistic.

Money In and Out

Pay attention to the money coming into and going out of your bank account.

Check on Your Finances

If you have a budget, you need to make sure that you’re sticking to it. To do that, you have to check in with your finances.

Checking your finances might feel boring or even frightening. But you must do it regularly. That way, it won’t feel too overwhelming.

Look at your income and outcome. Is your spending matching your budget? Are you on your way to achieving your goals?

You can then adjust your spending as needed to stay on track.

Look at Your Income

First of all, understand how much you’re earning. For this, pay attention to your net income after taxes.

This is the amount that’s going into your bank account. Use this to create and refine your budget.

If you want more money coming in, then consider talking to your employer to negotiate a salary increase. If that’s not possible, look into a different higher-paying role, or start a side hustle to boost your income.

Manage Your Outgoings

Now that you’re looking at your spending and you know what you’re working towards, you can manage your expenses.

Look at what you’re spending your money on. Even the smallest expenses can add up and make a huge difference to your finances.

Is there anything you can reduce or completely stop? This might be your take-out coffee, expensive gym membership, or shopping spending sprees.

Once you track your spending you can start to make savings.

Pay Down Your Debt

Debt is a huge expense that can have a massive impact on your finances. It can limit your current budget as well as your future savings.

If you have debts, you’re not alone. By 2020, Americans owe $4.2 trillion in debt.

The best way to deal with debt is to tackle it as quickly as possible. It can feel overwhelming, but you have to be proactive.

Start with the most expensive debt first. These amounts will have the highest interest rates.

Plan for the Future

As well as managing your current finances, it’s important to plan for your financial future.

Build an Emergency Fund

Sometimes, life can take you by surprise. Unexpected expenses can suddenly come your way.

That’s why it’s a great idea to have an emergency fund. You can use this to help you out if you need it.

However, two-thirds of Americans would struggle to find $1,000 in a financial emergency.

It can be a good idea to start a separate emergency account. Try to put some money into it from every paycheck. That way you won’t be tempted to spend the extra cash on unnecessary purchases.

Your future self will thank you!

Understand Your Credit Score

Your credit score is a three-digit number that can hugely impact your finances. It is generally between 300 and 850. The higher, the better.

Lenders use your credit score to decide what they will lend you. The higher your credit score, the better the loan.

There are easy ways to improve your credit score. Start by pulling your credit report, so you can see where you currently stand.

You can then start trying to increase your score. Pay your bills on time, pay off your debts, and don’t use too much of your credit allowance (25% or below is best).

Start Investing

Investing your money is one of the best ways to build and ensure long-term wealth and prosperity.

Try to make small, sensible, and manageable investments over a long period. You can work with financial professionals to understand which investments are best for you and your finances.

Plan for Retirement

Your retirement might feel like a long time away. But it’s important to start saving as early as possible.

If your employer offers any retirement plans, it’s a great idea to contribute. This will help you to gradually begin saving for later in life, giving you greater financial stability.