So far in this series, we’ve discussed what a budget is, what you should include in a budget, and the various ways you can make a budget–including zero-based budgeting, which we covered in Chapter 8. Now that you have all the budgeting basics, we’ll cover how you can manage your budget.
Making your budget is crucial, but managing your budget is arguably even more important. You can’t just make a budget at the beginning of the month and never look at it again. You have to continuously manage your money with a budget in order to keep track of your finances for the month and plan for your long-term goals.
In this chapter, we’ll give an overview of how you can manage your money and how having a budget can help you do that. We’ll discuss why managing money is important, tips for how to manage your money, how you can improve your money management, and more. Keep reading or use the links below to go straight to a specific topic.
- What is Money Management?
- Why Is Money Management Important?
- 5 Tips for Managing Your Money with a Budget
- How Do I Improve My Money Management?
- Key Takeaways: Managing a Budget
- Don’t Underestimate the Power of a Good Budget
What Is Money Management?
Money management is essentially the process of keeping track of your finances. This can include your:
Money management is key so that you can save enough money to accomplish your personal and professional goals. Everyone manages their money differently, so it’s important to find a management technique that works for you.
Why Is Money Management Important?
There are many reasons why managing money is important. It can help you:
- Stay on top of your finances: If you don’t manage your money, there’s no way you would be able to tell if you’re overspending before you get hit with the overdraft fees. Money management can help you stay on top of your finances so you don’t accidentally rack up a credit card bill that you simply can’t afford.
- Plan for the future: Whether you want to save for a down payment on a house or save for a wedding, money management can help you plan for your future. Managing your money can help you figure out how much you need to save to accomplish your goals and how you can go about saving it.
- Keep track of your expenses: Money management helps you keep track of your expenses, like how much you spend on rent and groceries, so that you can figure out if you need to cut back on some costs.
- Feel more secure: There’s nothing worse than feeling overwhelmed when it comes to your finances. You don’t know if you’re going to be able to pay off that next bill, and every morning you wake up with a feeling of overwhelming dread.
But money management can put an end to this feeling. Money management can help you feel more secure and in control of your finances because you’ll know exactly where your money is going each month.
5 Tips for Managing Your Money with a Budget
The best way to manage money is with a budget. It’s crucial to learn how to budget, like with the 50/30/20 budgeting rule. We discussed this technique in Chapter 7, so you can go back and reread that if you need a refresher.
Managing money may seem overwhelming at first, but you’ll quickly get the hang of it. Below are some tips for how you can successfully manage your money with a budget:
Take Stock of Your Financial Health
First things first: You need to take a deep dive into your financial health. This includes doing things like:
- Reviewing your credit score and history
- Looking at how much you have saved for retirement
- Reviewing what your financial goals are and how far away you are from them
- Figuring out your total income, including income from your salary as well as additional income sources
- Reviewing your spending to see if and where you can cut back on expenses
Make a Realistic Budget
Once you have a better idea of your financial health, then you can actually make a budget for yourself. There are various ways you can make a realistic budget:
- You can use our budget template.
- You can use a budgeting app like Mint.
- You can use the envelope method.
Just figure out a system that works for you and stick with it.
You also need to figure out what to include in your budget, such as:
- Food and groceries
- Daily incidentals
These are just some of the many expenses that you’ll want to put in your budget. Everyone’s budget looks different and will vary depending on where they live and what their personal situation is.
If you aren’t sure where to start with your budget, it might be a good idea to calculate your cost of living so you can get an idea of how much it costs to live in your city. That way, you can figure out your rent budget and estimate for other expenses so you don’t spend beyond your means.
Your budget will also most likely look different each month. For instance, if you have a vacation coming up, you’ll need to include how much you’re planning to spend on travel for that month. To make up for those expenses, you may have to cut back on other areas, like the amount of times you go out to eat.
Figure Out Your Financial Priorities
Once you have your budget created, you’ll then be able to see where you’re succeeding and failing financially, and from there, you can figure out your financial priorities.
After you have your priorities figured out, you should then set goals. These can be personal or professional goals, like buying a new house or increasing your salary.
It’s also important to think of ways how you can achieve these goals. For example, if you want to buy a house, you need to figure out how much you need to save from each paycheck so that you can afford a down payment. If you want to increase your income, it’s a good idea to think about negotiating your salary with your employer so you can figure out an amount that you’re more comfortable with.
First, figure out your goals. Then, create a path to achieve them.
Use Tools to Track Your Budget
The easiest way to keep track of your budget with a budgeting tool. A budgeting tool will help you monitor your spending and savings so you can stay on top of your finances.This can be with an app, a spreadsheet, or a planner.
You can also create a budget using Mint. Mint’s budgeting app is one of the best ways to track your budget for various reasons, such as:
- It’s easy to use
- It keeps everything in one place
- It’s accessible 24/7
- It automates a lot of the budgeting process
- It’s free
Revisit & Revise Your Budget Regularly
So, you’ve chosen a system to create and track your budget, but your budgeting journey isn’t over quite yet. You now need to revisit and revise your budget regularly.
You should be revisiting your budget at least once a month to see if it still suits your goals/current financial circumstances. If not, you can update and edit your budget as often as you like!
That’s the best part about having your own budget– it’s curated to your unique situation. Remember, your budget should work for you, not the other way around.
How Do I Improve My Money Management?
Using a budget is hands down the best way to manage money, but there are some other ways you can try to improve your finances, like by:
- Building up your savings
- Paying your bills on time each month
- Cutting back on recurring charges
- Figuring out an investment strategy
- Staying on top of financial statistics
Doing one or all of the above is a good start to moving your financial health in the right direction.
Key Takeaways: Managing a Budget
- Money management is the process of keeping track of your finances, including your spending, saving, budgeting, and investing.
- Money management helps you stay on top of your finances and helps you plan for the future.
- The best way to manage your money is with a budget.
- It’s important to figure out your financial priorities so you can set goals.
- The easiest way to keep track of your budget with a budgeting tool.
- You will need to revisit and revise your budget regularly.
Don’t Underestimate the Power of a Good Budget
A good budget can completely transform your financial situation and make you feel like you’re finally on top of your finances. It’s never too early to start budgeting. The sooner you start budgeting, the closer you’ll get to achieving your long-term goals.
After reading the previous chapters in the series, you should now have a much better understanding of what budgeting is and why managing money is important. To finish off the series and complete your knowledge of budgeting, make sure to read the next and final chapter in the series, where we’ll talk about how to set up your goals using Mint.