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5 Best Ways to Manage Your Money Efficiently

Nowadays, sadly, money is one of the major concerns people have. It’s also frequently named as one of the leading stressors in people’s lives, where any talk of money is usually leading to discussing ways of how you can make more of it.

However, the key is not always in adding extra work to your plate or seeking additional revenue sources. Instead, it can often boil down to simply learning what you can do with the resources you have and how to manage those resources in the most efficient way. 

Of course, although proper money management is not something you can achieve overnight, the good news is that there are numerous ways you can gradually work towards improving it.

With that in mind, here are 5 ways you can alleviate your financial anxiety and start working towards creating a more effective money management plan.

Create a detailed budget and stick to it at all costs

Simply put, people who find themselves dealing with lots of finance-induced stress on a daily basis generally don’t excel at the delicate art of budgeting. Although budgeting may sound simple enough - see how much money you have and allocate it towards certain expenses - not everyone understands how to do it properly. However, the math is rather simple:

  • Define your entire monthly income
  • Define your entire monthly expenses
  • Subtract your expenses from your income

The amount of money you’ll be left with at the end is where you should start with your budgeting efforts.

Since this amount can change on a month-to-month basis, you should repeat the aforementioned steps every month to stay on the right track.

Next, you should see how many things you both wish to and need to cover with the budget you’re left with. For instance, if you enjoy playing Telegram Casino games, make sure you create a separate budget for this activity. Similarly, if you’re planning on going on a holiday, this activity will also require a separate budget.

You can also try to follow the famous 50-30-20% rule, where you should allocate 50% of your income to necessary expenses (such as rent, insurance, utility bills and food); 20% of your income should go towards savings, which leaves you with 30% to spend on whatever your heart desires that month. Keep in mind, however, that - although useful - this rule won’t always be easy or even possible to follow, so feel free to adjust it a bit to your specific situation.

Stay on top of your spending

Closely monitoring and tracking  your spending is the easiest way to see where exactly is your money going each month. It can not only prevent you from overspending, but it can also actually help you correct some of your behaviors.

Some people even suggest that adopting this approach has helped them feel more comfortable with their finances, which only further encouraged them to work towards implementing healthy money habits in their day-to-day lives.

To make things easier, you can even rely on various apps or software solutions to optimize this task, or you can use a good ol’ pen-and-paper to do the same, if you prefer non-digital solutions.

Create a designated retirement account

No matter if you’re currently working or not, thinking about retirement is another thing many people don’t really enjoy, and the main reason is the fear of lack of finances once they reach their golden years. Luckily, you can easily put these worries to rest by simply creating a designated retirement savings account. 

This account can be entirely separate from your 401(k) plan, or you can choose to use the same account for both.

However, make sure you don’t treat this savings account as something you “can, but don’t have to” put funds in every month, but instead make it a must. That way you can easily avoid spending the money you may end up needing later in life on something that can be classified as a “want” rather than a “need”. 

Always try to have a contingency budget

Although not always easily doable, creating a contingency budget can also help you immensely. Put simply, knowing that you have a budget you can fall back on in case of any unforeseen circumstances is a true blessing. 

Here, you can be a bit more lenient than with your retirement account. You can use any extra income, unexpected bonuses or surprise tax returns to fuel this savings account, so that you don’t put any additional strain on your regular budget, particularly if you don’t have much to work with in the first place.

Of course, if you’re looking to create a designated savings account for this purpose only, make sure you do your research, find the most appealing interest rates, and don’t be afraid to switch banks if the terms or interest rates ever happen to change.

Insist on maintaining a healthy credit score

Your credit plays a huge role in your overall financial health. That’s why you need to do all in your power to ensure that your credit score is good. There are a few ways to ensure this, some of which include:

  • Paying your bills on time, without exceptions, to avoid late fees and penalty APRs.
  • Avoiding getting close to credit limits and trying to keep credit utilization ratio below 30% if possible.
  • Establishing a long (and healthy) credit history.
  • Applying only for the credit you actually need, and when you actually need it, as too many hard inquiries can have a pretty negative effect on your credit scores.

Additionally, you should also ensure that you pay off all of your debts in a timely manner. You can do so by:

  1. Choosing to pay off your smallest balances first. This approach is known as the snowball method and it allows you to make the minimum payments on all of your debts, so that you can use the extra money to pay off your smallest balance
  2. Listing your debts from highest to lowest interest rates. This (avalanche) method enables you to pay off the debts with the highest interest rate first, and then use the extra funds to cover the next one on your list.
  3. Consolidating your debts in a single account. This method allows you to simplify your payments, but there may be additional fees you’ll need to cover if you opt for debt consolidation.

As you can see, developing healthy financial habits and learning how to manage your money more efficiently does require some learning and planning. But knowing how to properly manage the funds you have at your disposal can significantly lower stress and help you achieve peace of mind in the long run.

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Andrew Gosselin CPA

Written by Andrew Gosselin CPA

Andrew Gosselin, CPA is a former senior strategy consultant for a global, multi-billion-dollar software company. He is the Senior Contributor / Editor at MoneyInc, and he holds degrees in accounting, finance, and international business from Bentley University, where he played varsity basketball and was the Lead Tutor of the accounting and finance curriculum for the Bentley Athletic Department. Andrew was named a President's Academic Scholar and was inducted into the Falcon Society, a distinction awarded by the Bentley faculty and his peers for being among those with the highest achievement and abilities in his graduating class.

Read more posts by Andrew Gosselin CPA

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