How to Manage Money 101 – the Complete Guide

Learning how to manage money can be a complete headache. There is no money management 101 courses in high school or college unless you’re a finance major.

As a child, we are even taught that asking others about their finances is rude. I don’t know anyone who had a completely transparent family with them about money management, and mine sure weren’t. But, how are we supposed to learn about money management if no one ever teaches us?

As of 2020, consumer debt was the highest it’s ever been, and it looks like it just keeps climbing. With the way inflation keeps going and job wages staying as stagnant as ever, it’s essential to prepare ourselves for the best future possible. We can do that through money management.

So, what is money management? Money management simply means creating a plan with your money so that you can make the most of it.

1. Keep Track of Your Finances

This step is the simplest when it comes to how to manage money. All you need to do is track how much money comes in and how much comes out. In this day and age, there are so many resources to help you do this.

One of the best apps out there is Mint. Mint allows you to link all your bank accounts to see precisely how much money you have and which accounts have it.

They also do opt-in challenges such as “save $5,000 in one year” and help you track your progress to that goal.

On Mint, you can allocate certain amounts towards specific categories and see if you’re staying on budget.

2. Create a Goal

It’s challenging to save and manage money without a particular goal in mind. Here are some examples of goals to set.

• Start a retirement account
• Save $100 a paycheck
• Pay off credit card debt
• Save $10,000 in one year

Goals can range from big to small. The smaller you start your goals, the easier they will be able to achieve. This is known as the snowball method.

Beginning with a goal of saving $10,000 in one year can seem incredibly daunting. If you start smaller with something like opening a retirement account, you will see how easy it is to progress.

Imagine you start a retirement account and contribute 5%. If your employer matches 5%, you now have 10% of your yearly income toward retirement savings.

If you have a yearly income of $50,000, you will have $5,000 in retirement savings by the end of the year. See how easy it is to get to a bigger goal by starting simple?

3. Plan a Budget

Now that you know how much money you make and spend and what you want your goals to be, you need to construct a budget.

Constructing a budget is not as hard as it seems to be. If you’re already keeping track of your income and spending, you can do some simple things to make improvements.

When you plan a budget, you can easily see what areas you may be spending slightly more in. If you’re going out to eat a lot more than you thought, that will become apparent!

One of the biggest things that get people is subscriptions. You might be subscribed to things that you aren’t aware of.

4. Check Bank Statements Regularly

You need to be looking at your bank and credit card statements BEFORE YOU PAY THEM. I don’t know who needs this reminder, but it is SO helpful when you’re first learning how to manage money.

I was subscribed to DoorDash somehow (I don’t even remember signing up), and I was charged $10 a month for it! It took me three months before I even noticed, which is entirely my fault.

This is why it’s so important to check your credit card and bank statements regularly. You may have accidentally signed up for a subscription you didn’t want.

This tip is also beneficial for detecting fraud. When you notice a suspicious transaction, you can call the bank and have it taken care of immediately.

5. Work on Your Savings

Once you’ve hashed out a budget, you will be able to increase your savings. After finding all the areas you can cut down spending, that money can go into a savings account.

This is one of those items that you need to start small on. It can be as little as $10 a day. If you think about it, $10 a day totals to $3650 a year, which is more than enough for emergencies.

Start small and build that emergency fund first. Ideally, you would want 3-6 months worth of expenses saved up. If you can save even just $500, that can help tremendously for immediate expenses.

Check out some of these simple money-saving tips to help you get started.

6. Open a Retirement Account

If you are employed full-time, you most likely have access to setting up a 401K. What is a 401K? A 401K is an investment account that allows a portion of your paycheck to be set aside for retirement.

Why should you start contributing? Many companies offer a 401K match percentage. This usually falls within 4-6% of your total annual income. The deal is, you need to be contributing the minimum amount of that match.

For example, if your employer matches 4%, then you need also to contribute 4%. You can, of course, contribute more, but your employer will still only match 4% of your income.

Another reason to open your 401K account is to start saving for retirement. You must save as much money as you can for your retirement. The government is running out of money, and we shouldn’t expect to rely on social security when there is a lot of time to save money for ourselves. This is simply for peace of mind.

7. Start Investing

This tip goes hand in hand with opening a retirement account. Your money will automatically be invested when you have a retirement account like a 401K set up. This is pretty much passive, and you won’t need to worry about investing your money on your own.

However, if you don’t work full-time or your employer doesn’t offer a 401k, you will need to set up your account on your own.

Start looking into different brokerage accounts, and get your leftover money put into an IRA. Make sure you decide which type of IRA account you need before opening one.

It is so important to be investing money because as inflation continues to rise, your money in investments will also increase. If you don’t invest, all the money you have in savings will stay completely stagnant. Your money in a regular savings account WILL LOSE VALUE!!!

8. Pay Your Bills on Time

If you have a credit card, or multiple credit cards open, make sure you pay off the balance on time each month! Credit card debt is a severe financial killer. With such high-interest rates, it’s super easy to fall behind on paying your debt off.

If you are already having difficulty paying off your credit card, remember the snowball method. Start with the credit card that has the smallest balance. Pay that off as soon as you can, then begin working on the larger bills.

Once you see the progression, it will make paying off your debt that much more manageable. It’s as much mental as it is physical (like most things in life).

9. Check Your Credit Score

Out next tip for how to manage money is to check your credit score. If you are using an app like Mint, you will receive frequent updates about your credit score.

Why is it important to check your credit score? I have seen horror stories where people have opened a store credit card to receive a discount on a product. Unfortunately, they forget the credit card account exists and forget to pay off the balance. This leaves them wracking up a huge debt bill and destroying their credit score.

Once you have a ding on your credit score, it’s really hard to bring it back. It’s not easy to wipe the lousy report off and start fresh. For more help, see these 7 tips for improving your credit score.

10. Take Time With Big Purchases

Our final tip for how to manage money is to take time with big purchases. You don’t have to rush into buying a. brand new TV or a computer. Right now, the supply chain is severely limited, so prices are skyrocketing. If you want a new car, think twice before buying one.

Used car prices have shot up a whopping 30% since the start of the pandemic. That is just insanity if you ask me. If you want a new car but don’t need one, it’s best to hold off on that purchase for now!