Money can often feel elusive. You spend most of your time working to earn it, yet it’s easy to feel like you never truly have a grasp on it. This can easily be the case unless you practice proper money management.
It doesn’t matter where you are in your life, these basic money lessons are crucial for you to get ahead financially.
How to think about money
All of us can probably agree that sometimes — maybe even most of the time — money is complicated. We might be intimidated by it, greedy with it, unsure about the best way to maximize it, and almost all of us could use more of it. Unfortunately, many of us don’t prioritize our finances simply because we’re not sure how.
To change these patterns, we need to take time to understand our emotions around money. According to Tana Gildea, a certified financial planner and author of The Graduate’s Guide to Money, "We pick up emotional messages about money from a very young age — long before we understand what money is."
Take a moment, and ask yourself how you truly feel about money. Do you think you’re capable of saving money once you earn it? What about managing it properly? Does simply thinking about money make you uneasy?
“If you don’t feel positive [about money],” Gilda says, “you are not going to have a very positive experience in your financial life.”
Ultimately, you want to manage your money as often as possible, even on a day-to-day basis. Getting to the point where you really care about your finances is powerful and will help you take charge of your financial future. Plus, it’s way better to make your money work for you instead of the other way around.
How to talk about money
How you think about money is one thing — talking about money is often much harder to do. Being able to talk about money is something you should practice becoming more comfortable with. In particular, couples tend to only speak out loud about money when they’re in crisis mode (if at all), which can lead to intense discussions. Learning to talk to each other about money before trouble strikes could help prevent those financially troubled times altogether.
Set aside time to regularly speak with your relevant loved ones about money and finances. It could be over dinner one evening, while out for a walk around your neighborhood, or even in lieu of your standard Netflix date with your spouse. Learning to discuss money without emotion will make it less taboo and frustrating, which is a win-win for everyone.
Syble Solomon, a member of the Financial Therapy Association says, “In families, financial conversations can get heated and judgmental, with one person feeling he or she is right and someone else is stupid or incompetent or irresponsible.”
Instead, Solomon suggests to use the acronym HALT as a guideline. Meaning, “don't try to have a money conversation when someone is hungry, angry, lonely, or tired. And avoid numbers and legalese — at least at first. Instead, start getting comfortable talking about finances in more general terms.”
How to keep track of money
Your relationship with money — and how you keep track of it — depends on who you are. Some people prefer going paperless and tracking their money online, while others still enjoy using a checkbook. Whatever is more appealing to you is great as long as your system works for you.
To make sure you’ll stick to your new money habits with ease, focus on the habits that best align with your personality. For instance, if you know you won’t take the time to sit down to clip coupons, maybe don’t focus your energy on trying to convince yourself you need to clip coupons. Perhaps an app on your phone would be an easier way for you to save money each time you shop.
The same goes for how you keep track of money. If it means keeping a notebook of your income and spending, stick with that. If you like to manage your money with a spreadsheet on your computer, then track your money with a spreadsheet.
Anyone can benefit from tracking their spending, so just find a way to track it that best fits you.
How to live within your means
It’s easy to think you’re living within your means if you’re just getting by every month, but you may actually be overextending yourself in the bigger financial picture. To get ahead financially, you’ll likely need to change your lifestyle. This might put you off at first because change can be frightening, but you can become comfortable living within your means.
Deana Arnett, a certified financial planner and senior planning consultant at Rosenthal Wealth Management Group, explains that the key to getting ahead is actually to live below your means.
“To really live at a level you can afford,” Arnett says, “you have to modify your lifestyle slightly and live below your means. This is really the key to financial success. There are so many ways to live comfortably without spending every penny, but so many people never learn this lesson.”
Just as your spending is ongoing, you should maintain your budget on an ongoing basis as well — making occasional adjustments along the way. If you can determine areas where you might be spending frivolously, reallocate that money toward saving for goals that matter.
You may think you can’t enjoy yourself by living below your means, but this isn’t the case. Changing how you think about money can make it easier to not always have to spend. It will also provide a huge sense of relief as you see your bank account grow over time. This money lesson on its own could save millions of people from living paycheck to paycheck.
How to set a budget
Setting a budget. You may think you don’t need one, but most people can benefit from sticking to a budget. Even if you’re conscious with your spending, having a physical budget, whether it’s on paper or on your computer, will allow you to know exactly what’s going on with your finances.
While it’s easy to think that by budgeting your money you’ll no longer be able to enjoy life, the goal of managing your finances is that you aren’t wasting money that could otherwise be beneficial to you. It allows you to spend in moderation today so you can live comfortably tomorrow.
Start by setting yourself up on a balanced financial diet. Managing your money is a lifestyle, not a quick fix. Just as eating healthy takes time to turn into a habit, so does getting your finances in order. One way to stay on track is to set a month-to-month budget, or even three budgets. Money expert, Chellie Campbell, suggests having three budgets — low, medium, and high — and deciding which one you’re on at the beginning of each month.
"Low budget is if you are making less money or saving for something special like a down payment on a house or a car,” she explains. “Medium budget is the money you’re making right now and how you’re spending it, and high budget is your dream budget [when more money is coming in]. Anyone can do low budget for a month — it’s when you think you have to do it for a lifetime that people give up."
How to prioritize spending
Identifying what truly matters to you when it comes to how you want to spend your money makes a huge difference. If home is your favorite place on earth, and you’ve made the decision that you’re going to put a significant portion of your income is going toward your living space, just make sure it’s truly what’s important to you.
If you’re not happy with the way you’re spending your hard-earned cash, or think you could be doing it better, start paying closer attention to where the money is going. One way to help you spend wisely — and make sure your budget matches your spending — is to use two spending accounts. This probably sounds weird at first, but by having one account for necessities and the other for “fun” spending, you’ll be able to track exactly where you’re spending money each month.
How to save for retirement
Statistically speaking, there’s a good chance you’re not saving nearly as much as you should be for retirement. According to a FinanceBuzz survey on retirement, 45% of respondents only had a vague understanding of what they needed to save for retirement and they hadn't done all the math yet.
For those who do save, many use the “set it and forget it” approach to saving for retirement, choosing the simplest investment and letting it runs its course. This can lead to trouble later on, though, if you don’t know what’s in the funds you choose.
So what should you do? Be more proactive about your retirement account. Take the time to learn what specific steps you should take to get up to speed about retirement. Start with making sure you diversify your investments to lower your risk. If you have a 401(k), many plans offer mutual funds and exchange-traded funds (ETFs) made up of securities organized around things like when you plan to retire, risk tolerance, or a balanced approach.
Speaking of the 401(k), if your company matches a portion of your 401(k) contribution and you aren’t taking advantage of the free money, get on it ASAP. Otherwise, you’ll have to save significantly more later to make up for the match and the deferred growth that comes with this free money.
If you want to take control of your money and transform your finances, start with these seven basic money lessons. They may require you to alter parts of your life or current situation, but when you practice proper money management, you’ll find your situation is being changed for the better.