Do you regularly find yourself wondering where all of your money goes after cashing each paycheck? Do you want to save hundreds or thousands of dollars every month? Do you want to travel more, worry less, become more organized, and have your friends outwardly judge you but secretly think you’re super responsible?
If you answered “YES” to any or all of those questions, then keep reading!
Whether you work a high-paying, full-time job or you make minimum wage, managing your finances plays a crucial part in unlocking the type of lifestyle you so desperately crave. Setting a budget and tracking your monthly spend doesn’t sound fun — trust me, I get it. Going out for happy hour drinks after work every Friday sounds way better. However, putting in a little bit of time and energy into analyzing your spending habits and understanding just how much you earn every month will eventually pay off. I promise!
You might be questioning why a 25-year-old is writing an article about why managing your finances is so important. Shouldn’t this post be written by an accountant? Or a financial expert? Or someone who’s older and more established?
Well, last year I was able to save $10,000, travel to eight new states and still afford to go out with friends and enjoy my life while living in my own one-bedroom apartment on Long Island, New York… all thanks to successfully managing my finances. My life has significantly improved as a result of tracking my daily spend and income, so I want to share my personal experience and insights with you to help you improve your current lifestyle, stop stressing over money issues, and achieve your dreams.
First things first, before we discuss how to manage your finances, let’s talk about why you should manage your finances and a few of the really awesome benefits of doing it.
The earlier you start tracking your funds, the faster you can start saving the amount of cash you need in order to fulfill your goals. If you have dreams of eventually moving out of your parents’ house, owning a home, paying off your student loans, traveling through Europe or adopting a dog, then it’s time to better manage your money.
These are just some of the amazing perks of tracking your finances include:
- You can save money (and lots of it).
- You’ll know exactly how much money you earn.
- You’ll know exactly how much money you spend.
- You can create a realistic budget that will enable you to save more and spend less.
- You’ll become aware of what you’re spending your money on so you can adjust that
- amount accordingly.
- You can travel and go on vacation more often.
- You can buy new clothes and go on shopping sprees.
- You can buy literally whatever you want with however much money you’ve saved, like five pints of ice cream or 30 bottles of hint water.
- You’ll never pay more on monthly bills than necessary.
- You can pay off your debt sooner than later.
- Depending on what you learn about your spending habits, you can set short and long-term plans for the future.
Are you convinced yet? Are you ready to become financially responsible? Congrats! Let’s start adulting.
Based on my own personal experience, here are 4 easy ways to begin managing your finances:
1. Write down your financial and personal goals.
Sometimes we get so stuck in our ways that we forget about the future. Something as little as looking at a sticky note on the fridge or our bedroom wall can remind us that today’s actions will directly impact what we are able to do tomorrow, next month, and even next year.
Do you want to retire early? Do you want to travel the world? Or do you just want enough cash on the side to pay for a round of shots at the bar with your friends? No matter what your purpose is for tracking your expenses, grab a piece of paper and write down your financial and personal goals, then hang it up somewhere you’ll see it every day. Let that note serve as a daily reminder and a sense of motivation to you that you have dreams, and those dreams are within reach.
2. Check your credit card and billing statements before paying.
I never pay my credit card bill until I check my receipts to see if they match the list of purchases posted on the statement. There have been restaurant bills that magically disappeared off my card, times when servers forgot to tip themselves, and instances of pending charges that never actually went through. On the other hand, there have been times when my card had been charged when it wasn’t supposed to — so then I’d open a dispute and get that money back. This means that I gain anywhere from $1 to $50 back in my pocket that I can then choose to either save or spend on other things.
Whether it’s your phone bill or your credit card statement, always check the details to make sure you’re not paying more than necessary. Although it’s much easier to automatically pay your bills without looking at what you were charged for, you could be throwing your hard-earned cash out the window as a result.
3. Create a spreadsheet to track your income vs. spend.
Like a total nerd, I’ve created and used my own Google Sheets spreadsheet to track my finances for the past two years. After I make a purchase or earn a dollar, I immediately open my spreadsheet and jot down how much money I spent or earned.
No, I’m not kidding. Ask any of my friends — before I leave a restaurant or walk out of a store, I grab my phone to “track my spend.” Yes, I’m insane.
All entries include the date, description, amount, and payment method and are color-coded by category (yellow for groceries, blue for bills, green for gas, pink for shopping, purple for going out, orange for apartment essentials, brown for miscellaneous, and lime green for income). At the end of each month, I add up all of the entries then conduct an analysis of my category spends and total income to see just how much money I spent on what vs. how much money I saved.
Even though you might think I’m nuts, doing this has helped me to create a realistic budget, save more money, and analyze my funds in order to achieve my goals. I’ve been able to save thousands of dollars by implementing this system, some of which I’ve spent on traveling and doing awesome things I wouldn’t have been able to do if I hadn’t known where my money was coming and going for the last two years.
4. Download a money management app.
If you’re more normal than I am and you’d rather not build an entire spreadsheet from scratch, then you’re in luck!
There are tons of pre-existing apps available that were designed for this exact reason — to help you track and categorize your expenses. Certain apps deliver in-depth monthly reports that analyze just how much you’ve spent and earned over the last 30 days. You can even automatically upload entries by taking photos of receipts and letting the app do the work for you. When it’s that simple, you can’t afford to come up with an excuse as to why you can’t track your finances.
Whether you want to customize your own spreadsheet or use an app, having a visual representation of your finances will drastically help you understand where your money comes and goes. This new understanding will grant you the ability to take whichever action you need to change your financial situation, whether that means buying a new car, putting $100 in your bank account, going out to eat less often, or shopping once a month as opposed to whenever you’re bored.
Knowledge is power. Stop stressing and start saving.
It’s actually really easy to manage your finances — you just have to be willing to put in the work every day that will ultimately pay off in the long run. If you have a smartphone (and I know you do!), you can immediately start learning, planning, and prioritizing what you spend how much of your money on in order to save money and start meeting your goals. The sooner you start, whether it’s in your 20s or however old you are today, the closer you’ll be to achieving the financial freedom you’ve always dreamed of!