Managing your money aimlessly can lead you to overspend, undersave and bear enormous stress. As many as 75% of Americans say they’re stressed about their current financial situation, according to Finder’s Consumer Confidence Index (CCI).
Taking ownership of your finances is freeing. But for many, proper money management doesn’t come naturally. It certainly did not for me.
A healthy relationship with money may require you to reframe your thinking and change your spending habits. It’ll be a bumpy road, but if you want to take control of your finances, it’s a road worth traveling.
Take these four first steps to control your finances for good.
Everyone has strengths and weaknesses, and maybe money management skills fall into the latter category for you, as it does for many others. A majority of Americans struggle with money, and I place a lot of that blame on the lack of financial literacy programs in our education system. Only 23 US states require students to take a course in personal finance to graduate from high school, according to a 2022 survey from the National Financial Educators Council.
Whoever’s to blame, you’ll only keep treading water until you acknowledge your shortfall and commit to changing how you think about and manage money. Only then can you begin down a path of financial control.
Budgets get a bad rap, but they’re essential to managing your money effectively. Without one, you’re likely to overspend and undersave, ultimately keeping you in the very cycle you’re trying to escape. Businesses use budgets to track resource availability, create goals and prioritize projects. You should, too.
A budget lets you spend and save with purpose. It tells you how much money you’re earning each month, how much money you’re spending and on what. A budget lets you identify areas of overspending so you can make the necessary changes to reallocate resources to achieve your most important goals, like becoming debt-free and building your net worth.
Debt is both financially and emotionally taxing. Not only is debt costly because you pay a fee to borrow money, but it also negatively affects your well-being.
According to a recent study on the relationship between financial worries and stress, debt is “significantly associated with increased psychological distress and poor mental health…”
Eliminating debt has many benefits. It gives you one less financial worry to stress about. It can improve your credit score, which in turn can qualify you for lower insurance premiums, according to the Insurance Information Institute. It also lets more of your income be available to you.
If you have high-interest debt with an interest rate that outpaces any potential returns you may earn on your investments or savings, consider focusing on paying it off. Then, turn to growing your net worth.
According to Finder’s CCI survey, a combined 20% say they could live off their savings for a week or less if they lost their job tomorrow, with 14% saying they’d last under a week. What happens in week two? Many resort to their credit card, which puts them right back into debt.
With debt eliminated and a budget in place, you can fully concentrate on growing your savings for any short- and long-term goals and boosting your net worth. This includes establishing and growing an emergency fund, saving for a down payment on a home and saving for retirement. Experts suggest saving at least three to six months’ worth of necessary expenses should you lose your job.
As you begin to invest for your future, leverage tax-advantaged retirement accounts to help bolster your savings. Many private employers offer retirement plans with company-matching contributions. Employers provided upward of 6.8 percent in matching contributions on average for traditional 401(k) plans, according to the Society for Human Resource Management. By not taking advantage of such a benefit, you’re leaving money on the table.
Meanwhile, the Internal Revenue Service (IRS) lets you save up to $6,500 ($7,500 if you’re age 50 or older) in an individual retirement account (IRA) in 2023. You can claim a tax deduction today by investing through a traditional IRA or enjoy tax-free withdrawals in retirement with a Roth IRA. The best Roth IRA accounts can help you invest for your future while benefitting from tax benefits.
Proper money management takes work, but the payoff is priceless. If you’re struggling to control your finances, identify what’s holding you back and create a plan to change your situation.
Matt Miczulski is an investments editor at Finder. Matt dissects and reviews brokers and investing platforms to expose perks and pain points, explores investment products and concepts and covers market news, making investing more accessible and helping readers to make informed financial decisions.
Before joining Finder in 2021, Matt covered everything from finance news and banking to debt and travel for FinanceBuzz. His expertise and analysis on investing and other financial topics has been featured on CBS, MSN, Best Company and Consolidated Credit, among others. Matt holds a BA in history from William Paterson University.
Bonds, treasury securities, blue chip stocks, ETFs, REITs, CDs and annuities are some of the best investments for retirees.
Learn how to use Robinhood’s commission-free options trading platform to maximize your investment strategy despite market volatility.
You have to be 18 to legally start investing yourself, but teens can use investing apps with the help of their parents to start early.
Starting October 16, Robinhood Legend will become available to all Robinhood users for free. See what’s included in this new desktop platform.
24-hour stock trading is available from Robinhood, Interactive Brokers, Schwab and E*TRADE. Compare your options here.
SoFi’s Roth IRAs stand out for their low trading costs, access to both human and robo-advisory services and 1% IRA contribution match.
Check out the best investment newsletters to stay informed and find new opportunities.
Start your child on a path toward financial success with a Roth IRA for kids.
Some of the best ways to invest for kids include savings bonds, stocks, index funds, robo-advisors, custodial accounts and more.
Micro-investing apps like Opto, Robinhood, eToro, Acorns, Interactive Brokers, M1 Finance and more let you invest with as little as $1.