Mastering your finances: Strategies for smart money management
Whether it’s avoiding scams and fraud, saving on fees and expenses, or simply managing your money efficiently, maintaining sound financial literacy is extremely important.
In both work and personal life, keeping on top of your finances can often be the difference between financial freedom and teetering on bankruptcy. Having the right strategies and tools is an excellent way to master money.
According to the Global Financial Literacy Excellence Center, only 33% of adults worldwide are financially literate, meaning almost 3.5 billion people globally do not understand key financial concepts.
By understanding how money works, you can use your money better. To help you do this, here is everything you need to know about financial literacy, alongside some of the best strategies and tools for managing your money more effectively.
Understanding your financial situation
Before changing your financial situation, you must understand and assess your financial health.
Some of the top things to note down and review are:
- Your income
- Your overall expenses, including anything from food and rent to holidays or concerts
- Any additional assets, such as owning a home or a car
- Potential liabilities
You should always start by cataloging and organizing all your sources of income, including your salary, alongside any investments or side hustles. Then, you can list monthly expenses, starting with the essentials (e.g., housing and food) and continuing with other expenses (e.g., entertainment or eating at restaurants). Note down any assets, such as savings accounts or property, as well as liabilities, such as outstanding credit card balances or loans.
All of this will help you better understand your current financial position.
However, you’ll want to use various digital tools to simplify this process. Spreadsheets like Excel or Google Sheets are a good start, and you can even find some specific apps for tracking your finances.
Setting financial goals
With a good idea of your current financial health, you’re ready to start setting financial goals.
As you look to the future, separate these goals into short-term and long-term aspirations. Short-term goals are achievable within a year or so, and long-term goals span several years or even a decade.
For example, a short-term goal may be funding a holiday or renovating your house, while a long-term goal may be saving for a deposit or funding your retirement/pension.
One good way to do this is through the SMART goal framework. Standing for Specific, Measurable, Achievable, Relevant, and Time-Bound, ensuring any goal has these five attributes is a great way to help you turn goals into reality.
You may begin with a goal of “save money,” but this is very vague. By ensuring your goal is a SMART goal, you can transform it into “save exactly $6,000 for a car down payment by January 1st next year.”
This goal gives you a clear framework to work from and helps you stick to a plan.
Budgeting basics
So you understand your situation and have set some goals. The next step is budgeting.
There are many different ways to budget your finances, however, two of the most popular and useful are the zero-based budget and the 50/30/20 rule.
Using a zero-based budget is excellent for ensuring every penny is put to use, applying the principle of ensuring every dollar is allocated to a specific expense or a savings category, leaving “zero” after your income minus expenses calculation.
Meanwhile, the 50/30/20 rule helps give you a more detailed budget for your life.
This rule states you should allocate 50% of your income to your needs such as food and rent, 30% to wants such as dining out or holidays, and 20% to savings and debt repayment.
Whatever budgeting method you choose, the key is to adapt and create a budget that realistically fits your lifestyle — don’t be afraid to change allocations and find what works for you!
Saving strategies
Even with a budget sorted, assessing the best saving strategies to help you quickly and efficiently tick off your financial goals is still helpful.
Before you start saving for a car or house, you first need to create an emergency fund. This sum should equal three to six months’ worth of your living expenses and be easily accessible to help you through redundancies, medical problems, or any other emergencies.
When saving for specific large purchases, it can often be worth allocating the money into separate savings accounts. If the purchase is a long way away, use savings accounts with higher interest rates to help you earn a little extra.
Alongside this, always remember discounts. With online shopping so prevalent, do your best to avoid impulse buying and instead cherrypick the best deals, discounts, and promotion codes as you start getting ready to buy.
There’s always a way to save money. For example, if you ever need to transfer money internationally, you can look around for the best transfer apps offering lower fees and exchange rates. With BOSS Revolution, you get some of the lowest and most transparent exchange rates available. Even better, your first money transfer is free with no fees!
These deals and apps help you save money every way you can.
Managing debt
Debt isn’t always bad, although you do need to be careful when handling it.
“Good debt” such as a mortgage helps boost your credit. Meanwhile, “bad debt” like high-interest credit card balances can harm your score and cost you fortunes.
If you have accumulated bad debt, you must prioritize strategies to clear it. This includes the debt snowball method, where you clear the smallest debts first (eliminating interest payments), making the larger debts easier to clear later.
For those with more income, the opposite method, or the “avalanche” method, may be more effective. Start with the larger debts to clear the larger interest payments before working your way down.
If you’re really in trouble, you can also consider consolidating or refinancing your debts to make paying them back simpler and easier, though please proceed with caution and seek advice.
Investing & protecting your finances
Once you’re in a more stable financial situation, you’ll want to both protect what you have and invest in your future.
Remember to cover yourself with any necessary insurance, such as house, life, or medical insurance — while the premiums may be painful, they are worth it.
Meanwhile, invest your money in stocks, bonds, or ETFs. Though riskier than a savings account, they usually offer much higher returns in the long run. For newcomers, investing a small amount regularly into diversified ETFs is often the most stable and reliable choice.
Conclusion
Mastering your finances isn’t easy. It requires hard work and commitment. Yet, with the right tools and strategies, you can quickly find yourself unburdened by debt and in an excellent position to invest in your future rather than worry about your past.
Plan ahead, take small steps wherever possible, and don’t fear slow progress, as conquering your finances takes time.