Money is a topic that has historically been a bit of a taboo to talk about. So it's no surprise that many people feel somewhat awkward managing their money. While the Internet has provided lots of resources for managing money, there are still many who continue to struggle with this. Successfully managing your money can be an important contributor to overall mental health. And if you ignore your finances, you can find that it comes back to bite you at the worst possible moments. So, here are a few tips on how to get comfortable managing your money and get your finances where they need to be.
Before we share tips on getting comfortable managing your money, let's talk about what that means. While being comfortable naturally means different things to different people, the basic idea is that your finances don't cause you any undue stress. In fact, people that are comfortable managing their money may find that it reduces stress since you know that you're in a position where the unexpected won't adversely affect you.
The very first thing that you'll want to do to start getting comfortable managing your money is to create a budget. For many people, the word budget has a bit of a negative connotation, since it can bring to mind the idea of limiting yourself or having someone or something else controlling your finances. But a better way to think about a budget is that it can help you not spend money on the things that aren't important to you, so that you still have money left over for the things that are important to you.
There are many different budgeting sites and apps that you can use, and which one will work best for you is somewhat of a matter of personal taste. At its simplest, you don't even need anything more than a pen and a piece of paper. Write down all of your expected income for a period of time (usually a month). Then, write down all of your expenses. Hopefully, your income is more than your expenses — if not, it's time to start cutting back on your expenses (or raising your income)
While a paper and pencil can work to start a budget, where online budgeting apps can really help is the ability to automatically import and classify your historical transactions. While some expenses like rent, cell phones, or utilities can be the same each month, it can be hard to know how much to budget for variable expenses like clothes or groceries. Budgeting apps can show you how much you've historically spent in these categories. Then you can use that as a place to start for your budget.
Once you've set up a budget and managed to live below your means, it's time to start saving and investing the surplus. One of the best budgeting tricks and a great way to get comfortable managing your money is to pay yourself first. Many people just take whatever money is leftover at the end of the month and save or invest it. But what happens all too often is that you find that there is no money left at the end of the month.
A much better way to manage your money is to pay yourself first. Your budget will show you how much you are setting aside for saving. As soon as you get paid, move that money out of your regular everyday account and into your savings account. It's important to set up a separate savings account because that will make it harder to take money out unless it's an emergency. Most people find that just having a separate savings account makes them less likely to dip into it.
Another great tip to manage your money is that you don't have to do this alone. Historically many people have been hesitant to talk about their finances with other people, though it is becoming more common. While you don't have to shout your finances from the rooftops, it can be helpful to share your situation with someone you trust. It can be a friend, a family member, or a financial advisor.
Having someone that you regularly check in with and keep you accountable can help you stay on the right track. If you have a spouse or partner, another thing you can consider is how you divide up financial responsibilities. If one partner is better at managing the household finances, he or she can take the lead, which can help make everyone feel more comfortable. If you do decide on that, both partners should still have a basic idea of what is going on with the household's finances, in case of death, disability or divorce.
There is no denying that emotions play a big part in people's spending habits. The math for successful finances is simple — spend less than you make. But if it were only that easy, we'd all be rich (and thin). In many cases, the emotions you feel around earning, managing, or spending money have come from hundreds if not thousands of experiences you've had during your whole life.
So take some time to explore those emotions. It will be difficult to feel comfortable with your emotions surrounding money without knowing and recognizing them. Think about how you feel when you earn, spend or save money. Understanding and processing these emotions can help prepare you to make better decisions in the future. Realizing that you spend money when you're sad or stressed (as one example) can help you make plans to instead take other steps to combat those emotions instead of spending money.
One of the very best things that you can do to get more comfortable managing your money is to put your finances on autopilot. Most humans have much worse outcomes in all areas when making decisions impulsively rather than making a plan. So the more of your finances you can automate the better.
Decide how much you want to save each month and set up a rule to automatically transfer that amount from your everyday checking account into a separate savings account. This goes along with the "pay yourself first" principle we talked about earlier. If you have other bills that can be paid automatically, set those up as well. The more you can automate and the less you need to think about your finances, the less stress you'll have. That will help you to feel more comfortable managing your money.
It's also important to understand the expectations of reality. It's unlikely that you'll be able to set up a budget one time and then forget about it for the rest of your life. If you manage to stay under your budget each and every month forever, you may be the first person in all of history to do so. Budgeting and financial planning is more of a marathon than a sprint.
So if you find at the end of the month that you've blown past your budget, don't freak out about it. The absolute worst thing that you could do is throw up your hands and stop paying attention to your budget. That will put you right back where you started. Instead, find a time when you can calmly assess what happened. Were your budget category amounts not in line with reality? Did emotions play a part in going over in one area or the other? Figure out what went wrong and what steps you can do to make things better next month.
Another area where you'll want to ignore the ebbs and flows is any long-term investing that you're doing, like investing in the stock market in retirement accounts. When the stock market starts making headlines with poor returns, it's not uncommon to worry. You might start thinking about taking your money out to "keep it safe". But in reality, that's the worst thing that you can do — much better is to just leave it alone and wait for the market to recover. In fact, if you have extra money to invest, during a stock market downturn can be a great time to buy low.
Getting comfortable managing your money is a combination of becoming knowledgeable about finances, getting organize,ed and managing your emotions. The first thing to do is create a budget if you haven't already. Then you'll want to pay yourself first, automate your finances and try to focus on the long-term. Share your financial journey with a family member, partner, or trusted friend. You'll be well on your way to living a stress-free life of financial success.