12 Steps to Manage Your Money Better

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manage money better

Knowing how to manage money better is important for everyone.

Whether you work part-time, surviving at minimum wage, or you’re at the peak of your career making big bucks, you want to get the most out of the money you have.

When you follow the tips listed here you can learn how to manage your money in a way that works best for you.

How to Manage Your Money

These steps will help you to better manage your money and achieve the financial goals you set.

1. Know Where Your Money Goes

Do you ever wonder where your money goes each month? Maybe your income seems sufficient but there’s rarely money left over for saving.

Or it seems on paper that you should have enough cash but you’re left short each month.

You wouldn’t bake a cake without a recipe or take a drive vacation without planning a route. Managing your money without knowing where it’s going is a formula for failure.

Without knowledge of where your money is going, you can’t determine where to make changes. You’re stuck guessing where you should save. Those efforts can be useless and painful.

Take one, two or three months and write down everything you spend. That way you can get an idea of where your money is going and where you might want to make spending changes.

2. Treat Your Savings Like a Bill

If you’re creative you can come up with a dozen reasons why you can’t save some money each month. Some may even have a little truth to them.

But, if you allow them to convince you not to save, chances are you’ll never accumulate any wealth. It’s that simple.

Make the smart money move of treating your “saving” budget line item like a bill. Pay yourself first before you pay anyone else and watch your savings account grow.

By doing so, you’ll develop the habit of saving. You’ll be accumulating savings in both good and bad markets (taking advantage of dollar cost averaging).

And you’ll have compound interest working on your behalf. Lastly, you’ll have money saved to handle unexpected big expenses.

3. Understand How Compound Interest Works

Compound interest may be the most important economic concept for you to learn. And it’s easy to understand and tremendously powerful. Especially if you learn it early in adulthood.

Compound interest is interest earning interest. For example if you invested $1000 and received 10% annual interest you’d have $1100 at the end of a year. The 2nd year you’d have both your original $1000 and the $100 interest earning money.

So, you’d earn $110 that year. The extra $10 might not seem like much today, but if it compounds for 20, 30 or even 40 years it adds up.

Not quite ready for investing? You can still earn interest on your money with an interest bearing checking account.

But just as compound interest is the friend of the saver, it’s a terrible master for anyone in debt. Instead of earning interest, they’re paying it.

Do you think that your credit card is helpful when you can’t afford to pay for something? Consider this example. If you pay the minimum (say 4%) and your interest rate is 18.9% you’ll repay $1.62 for every $1 you charge. Ouch!

4. Know The Rule of 72

The Rule of 72 is used by financial planners everywhere. It’s a quick and easy way to get an idea of how long it will take for money to double. Just divide 72 by the interest rate to get a time estimate.

Often you can do it in your head. For instance, if your interest rate is 8%, it’ll take 9 years for money to double (72 / 8 = 9).

Why would you want to know this? Knowledge can be a great motivator.

Suppose you’re 30 years old and trying to decide whether to increase your 401k contribution. You know that long-term you can expect your contributions to grow at an 8% rate. So, the money should double every 9 years.

$1 now will be $2 when you’re 39, $4 when you’re 48, $8 when you’re 57 and $16 when you’re 66. A quick calculation now might be enough to help you make your retirement more secure.

5. Manage Your Credit Well

Some things follow you everywhere. Your credit score is one of them. It’s used by financial institutions to decide whether to lend you money and to determine what interest rate they’ll charge.

Some landlords will check your score before offering you a lease. And some potential employers are checking before making a job offer.

So how do you manage your credit? Begin by making sure that your score is accurate. Your credit card company may provide your score as part of their service. That’s good. But it’s not sufficient.

Nearly 1 in 5 scores contain an error big enough to negatively impact you. The only way to find out is to get your full report on a regular (at least twice a year) basis.

Always make sure to check for accuracy before taking out a large loan (mortgage, auto loan, etc.).

Next, know what actions can help or hurt your score. Having some unused credit is good. Having too much is bad. Don’t apply for multiple credit cards at the same time. Paying your bills on time is critical.

How important is managing your credit? A 1% difference in a 30 year, $200k mortgage is $119 per month. Or a total of $42,840 over the life of the mortgage!

6. Use a Budget

Budgets are important as you work to manage money better. However, it’s important to use your budget as a management tool, not a straightjacket!

Everyone hates the ‘B-word’. Understandably so. But if they knew how a budget really worked they’d come to love it. Because a simple budget can be a wealth of information about your day-to-day finances.

A budget is not necessarily a way to prevent you from spending past a certain limit. It can be used that way, but that’s not its best use.

Instead, a budget helps you spend money on the items that are most important to you.

Defining how much, or what percent of your budget, and what part of after tax income you expect to spend on certain things, can help you spend on what matters.

For instance, you might expect to spend 17% on auto and related expenses. Knowing that would be helpful if you were considering buying a car that would run that expense up to the 19% level.

If your actual expenses were above the 17% level you’d have to decide whether to adjust your plan or try to cut down the expense in the future.

At its best, a budget is an information tool to point you to areas of your finances that need attention.

7. Have Short and Long-Range Goals

You may not think of it that way, but we all have financial goals. We just think of them as things that we want.

We want to be able to afford groceries and the next rent payment. Those are short term goals. We want to send our kids to college and to retire someday. Those are long term goals.

But there is a difference. A want is something that we hope will happen. A goal is something that should include a plan to achieve the result.

Short-range plans will need to be more precise. If your rent is $1300 due the first of the month you’ll need to know exactly where the money is coming from by mid-month.

Longer range plans don’t need to be so specific.

For instance, if you wanted to have $1 million in retirement funds by the time you turned 65 you could use one of the calculators to determine how much you’d need to save each month to reach that goal.

The monthly savings goal doesn’t need to be that specific.

You’ll make mid-course adjustments as you move toward retirement. The important thing is having a plan and getting started towards your goal.

8. Work to Eliminate Debt

“When you run in debt, you give to another power over your liberty.”

Ben Franklin had it right when he said this. If you’ve got debt, do your best to eliminate your debt promptly.

Use your budget to determine how much extra cash you’ve got each month. Then commit to designate a portion of that extra cash toward fast debt elimination.

You’ll be surprised at how much better you sleep at night as you watch those debt balances disappear.

9. Get a Side Hustle

The side hustle is one of the secret weapons of wealth building and management.

A side hustle can help you:

  • make money to reach financial goals
  • hedge against losses of income
  • help you learn new skills
  • act as springboards toward business ownership

And more. Side hustles come in a variety of sizes and flavors. The best side hustle for you fits in with your skills and your schedule.

Use and grow your side hustle as you wish, targeting the money you make from it to your most urgent financial goals.

10. Know What Things Cost

One of the smartest money moves I’ve ever made is that of learning what things cost.

Knowing what your regular purchases cost is an important part of a smart money plan.

The benefit of knowing what things cost is twofold:

  1. It’ll help you have a better handle on your spending
  2. You’ll be able to spot a great deal when you see it

Make it a point to learn the prices of items you buy regularly and use that knowledge to help keep your budget in check.

11. Eliminate Unused Expenses

Most of us have those expenses in our budget that bring little to no value to our lives.

  • The streaming service you never use
  • Your auto-pay subscription to the online magazine you don’t have time to read
  • That gym membership fee for the gym you haven’t been to in a year
  • The free trial membership to the service you forgot to cancel

Eliminate those expenses and put some extra money in your pocket. And to make finding and eliminating those charges easier, consider using a service such as Trim.

Trim is a money-saving service that finds unused and unnecessary expenses you pay for and cancels them at your request.

12. Have a Retirement Plan in Place

Old age has a way of creeping up on you. Days turn into weeks, weeks turn into years and years turn into decades.

Before you know it, the kids are grown and you’re heading towards 50. Do you have a retirement plan in place?

Have you saved enough money for retirement? How should you invest for retirement?

These are all vitally important questions that, if answered, will help give you peace as you head toward your golden years.

Designate a time to sit down and make a plan for the retirement that you want for yourself. When those days turn into decades, you’ll be glad you did.


So, should you manage your money? It comes down to a choice. Do you want to manage your money? Or do you want your money to manage your life?

Today’s post is from Gary Foreman. Gary is a former financial planner and purchasing manager who founded TheDollarStretcher.com website and newsletters in 1996. He’s been featured in MSN Money, Yahoo Finance, Fox Business, The Nightly Business Report, US News Money, Credit.com and CreditCards.com.

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One Comment

  1. I can never remember the rule of 72. I know what it is, but the number just feels too random to keep it in my memory.

    I don’t worry about it too much, especially since I’ve got the other bullets in this article covered.