5 Useful Strategies to Manage Money Intelligently
Consider your money as a financial journey.
Everyone has doubts about money. Even the most seasoned financial expert can have some weaknesses in their financial confidence.
So what does it mean to be “good” or “smart” with money? If we all have different levels of financial literacy, is there any way to determine a single method or experience that will make someone “smart” with money?
“A good definition points to financial trajectories,” says Matthew Hutton, CFP® and Regions branch manager. “We could say that being smart with money means that an individual or family has solid control of their monthly cash flow. They have their assets structured efficiently to achieve their key objectives. And, most importantly, they identified their objectives and mapped them out. an ideal financial trajectory.
Start designing your financial path by implementing the five tactics listed below.
1. Set goals to help you plan.
While we may all get caught up in short-term planning, consider devoting more attention to long-term goals, such as retirement savings. This is not to imply that you shouldn’t set short-term goals, such as organizing a week-long family trip. Just don’t lose sight of your objectives decades from now.
“The one thing I tell all my clients is that if you don’t know where you’re going, how can you expect to get where you want to go?” Hutton says.
Once you’ve identified your financial goals, consider how long it will take to achieve them based on your current income and expenses.
Think about the goal of building a $10,000 emergency fund. If you set aside $500 a month, you could reach your goal in 20 months. (And, with savings account interest rates at their highest level in years, it could be even faster.) Regardless of the size of your goal, it’s important to be as consistent as possible with saving each month.
2. Create a budget tailored to you
One of the keys to success in your finances is finding balance. Start with the basics: track monthly expenses, identify short- and long-term goals, and take into account everyday and unexpected expenses. and, with that data, create a budget.
To create a budget, start by thinking about your needs and wants. The needs are essential, rent, food, and gas, while the wants are non-essential, vacations, dining out, and that extra streaming service. Meet your needs first and then start budgeting for wants.
Sometimes it’s helpful to divide money between needs and wants. For desires, for example, you can open a savings or money market account where you deposit extra money each month. Or use the envelope method: set aside the budgeted amount and put it in an envelope. When it’s empty, it’s over. Remember to budget for a few fun activities or purchases each month to avoid budget overload.
Adding an automatic budget monitor to your financial tools can help you stay on track every month.
3. Find your financial comfort zone
If you decide to start investing money as part of your budget, you will need to determine what level of risk is acceptable to you. Understanding your risk tolerance is essential for managing money and achieving goals. Some investments, like stocks, allow your money to grow quickly, but they are also much riskier because your money can just as easily lose value. Bonds are somewhat less risky. Cash has little risk, beyond losing value with inflation.
Risk tolerance is personal, but it is important to consider age and stage of life. You may be risk averse, but if you’re more than 20 years away from retirement, for example, you may be more comfortable with some risky investments.
On the other hand, you may accept the risk, but the time frame to achieve your goals is shorter. Would you be willing to potentially lose stock value for money you need in five years?
4. Be aware of your money
Maybe your disposable income exceeds your monthly expenses and you have a small cushion each month in your budget. Maybe you’re living paycheck-to-paycheck and trying to manage your debt. Whatever your current financial situation, think about how you can intentionally use every dollar you receive.
Think about every dollar before you spend it. Review all your expenses from the last three months and see where you could have avoided them. What subscriptions could you cut? What expenses could you avoid? What current expenses could you cut? Maybe you can buy the energy drinks you like in bulk at lower prices, instead of buying them at the local store. Maybe you can look for a cheaper phone plan.
If you live paycheck to paycheck, one of your first goals might be to create a surplus at the end of each month, whether it’s $5 or $50. Good financial habits can have a multiplier effect, and even small goals can help you build a stronger financial foundation.
5. Make your journey personal
Think of your journey toward financial confidence as a road trip.
Goals. The ideal destination and itinerary will depend on your preferences and goals. You must know where you are going before you start the vehicle.
Budget. Your monthly budget is your fuel gauge. It tells you how much you have in the tank and how far you can go before you have to refuel (or make changes or additions to your efforts).
Risk tolerance. Your risk tolerance is your speed. How fast or slow can you drive based on current road conditions and your comfort level?
Finding the right balance can help you feel smart about every dollar you earn, spend, and save.
