Managing your money well has less to do with simply making sure your bills are paid on time (although this is an absolute must) and more to do with how you feel about money. I know, all with the feels, but it’s so true. Does talking about money make you nervous? Does it make you feel uncomfortable? Or are you so confident with how you manage your money that you actually enjoy talking about it?
Managing your money well isn’t something we inherently know how to do. We aren’t hard-wired to budget our money, but still, spending money comes easily and budgeting takes a little more effort. Which is why it is so important to create habits around how we manage our money so we don’t have to think about it as much, and so over time we can tweak these habits to work best for us.
These are just some of the habits of people who manage their money well that you can adopt and include in your life to help put you in a better financial position and to help you gain more financial confidence.
1 – They Know What Money Is Coming In
The absolute first step of managing your money is understanding how much money is coming in. Where do you get your income from? Have you accounted for all sources?
Things like your wages are what normally comes to mind, but do you earn interest on any money, do you get any regular payments from anywhere else? And if your wage isn’t set and fluctuates, do you know how much you get as a minimum so you can budget from this?
So many people know their yearly income before tax, but they often overlook how much money actually lands in their account – but this is the important figure. Knowing and tracking the money that comes in is a great habit to have.
2 – They Know What Money Is Going Out
Likewise, they also know what money is going out. Sure, the bills come out and the mortgage gets paid, but how much money are you spending on groceries? And how much did you spend at Starbucks last month?
Having a good understanding of where your money is going is a habit that people who manage their money well have down pat. It’s not about being ashamed of where your money goes, it’s about being accountable. This is your money – you should know what’s happening with it.
3 – They Aren’t Too Strict On Their Budget
One of the biggest reasons budgets fail is because they are unrealistic. If you are a foodie who absolutely loves to cook, but you’ve only allowed yourself a budget of $50 a week for groceries when you’d normally spend $150, then you’re setting yourself up to fail.
Do yourself a favour and create a budget that is realistic for the long term and that serves you. Your budget isn’t mean to be restrictive, it’s meant to help you allocate and manage your money. That’s it.
Creating a budget should be a habit that you do each pay cycle – because your financial needs change (birthdays, events, etc) and should only take you a few minutes to do, but will set you up for financial success in the long run.
4 – They Set Financial Goals (And Achieve Them)
What is it you want to use your money to achieve? Do you want to buy a house? Travel the world? Go on a family vacation? Whatever it is you want to achieve, you need to set your financial goals and create a plan to achieve them.
People who manage their money well have their financial goals built into their budgets – they have money going towards their goals at all times and keep track of how they are going towards achieving their goal. They know that a budget helps them to achieve their goals and they do what they can to make it happen.
5 – They Automate Their Finances
You should never have to worry about paying your bills on time because people who manage their money well automate their finances so they don’t even have to think about it.
Create a bills account, ensure there’s enough money in there and have your bills deducted from this account. This means you aren’t mixing your spending money with your bills money and you have money waiting for upcoming expenses.
6 – They Plan Ahead
Feel like Christmas always ‘sneaks up’ on you even though it’s the same time every single year? Or surprised when you realise your service light is on in your car and not sure how you’re going to pay for the work needing to be done?
Plan ahead. Know exactly what expenses are coming up and when and budget for them. Your finances shouldn’t be a surprise (and anything that is should be covered by your emergency account). Knowing what is coming up, planning ahead and budgeting for it are all habits of people who manage their money well, and it’s something that is so easy for you to start today too.
One of my most favorite tools for managing and tracking my money is PocketSmith. It syncs all of our finances, including our loans and assets – which means it shows us our overall wealth. It’s also great for finding and tracking changes in our spending (so we can budget accordingly). I’ve tried so many different apps and this is the only one that I loved. PocketSmith is so easy to use and my husband loves how he can see how much we have left in our budget at anytime.
7 – They Always Want To Learn More
Financial independence and the ability to manage your money well comes over time – it’s not just something you know how to do. And to learn how to make your money work for you requires you to educate yourself about money and personal finance.
Things are always changing, the economy, your needs in your life and your goals, your financial situation, which is why it is important to keep learning more about finance and money management and using that knowledge to make your money work for you.
There are so many sources of information out there, from podcasts to websites like this one, from books to finance courses, from advisors to chatting with your friends. There’s so much to learn and it’s so much fun to learn. Someone who manages their money well knows that learning about personal finance is a habit and it’s something they include in their day to day lives.
Regardless of what financial position you’re in now, or how you’ve handled money in the past, you can always take steps towards being able to manage your money in a more effective way. Start with these habits, take control of your finances and manage your money in a way that works for you.