Manage Your Money Well
financial health, financial freedom

One of the biggest challenges in life is learning to manage money well. If the foundation of your financial strategy is unstable, then everything you build is at risk of collapsing. In order to eliminate financial stress, it is critical to develop healthy financial habits and behaviors. Money management is the first and most important stage in building a strong financial foundation.

Managing money well means building routines that optimize your cash-flow from day to day. It means you are able meet current needs, as you prepare for future needs and emergencies. Let’s dig deeper and explore what it looks like to actively balance financial ebbs and flows.

Always Cover the Basics

It is a well-known fact that when our basic needs are not met or at risk of not being met, our whole focus shifts to survival mode. Stress and anxiety prevent individuals from being at their best physically, emotionally and mentally. It significantly impacts relationships, productivity and long-term wellbeing. Cover your basic needs and be prepared for short-term disruptions.

Where to begin:

  • Shelter – plan to allocate no more than 30% of your income towards housing (includes utilities, maintenance, taxes, insurance and furnishings)
  • Rent/Mortgage – choose an amount you can afford on your own. If you need a roommate, quickly build up savings to cover any potential future gaps (they can’t pay, they move out or you need to move out)
  • Essentials – be aware of your monthly costs, learn how to make your space more energy efficient and safe
  • Maintenance/Repairs – labor is expensive. Learn how to do minor repairs and care for your appliances/fixtures/property. Replace air filters on a regular basis and keep extra batteries, light bulbs on hand
  • Food – keep dry goods and frozen foods in stock. Beans, rice, noodles, dried fruits, nuts, potatoes, carrots and onions are nutritious staples to have on hand. When vegetables are in season, freeze small portions to use for future meals
  • Housekeeping – regular weekly cleaning routines help reduce illness and clutter. Keep white vinegar and baking soda on hand – these two ingredients can clean sinks, drains, metal fixtures, shower heads, hard water stains and so much more

Stay Within Your Limits

Another critical financial habit to develop is knowing your limits. At any given time you should be able to calculate how much money you have, how much you need to cover the basics and how much is needed for other obligations. You can use simple tools like a calendar, journal or spreadsheets to track your on-going cash-flow. Manage your money well by keeping a healthy balance between income and expenses.

Where to begin:

  • Living Expense Ratio – add up your total recurring costs that you are responsible for each month (housing, loans, transportation, food, insurance, etc) and divide that by your monthly income. Strive to keep it below 70%
  • Financial Commitments – carefully track recurring expenses like subscriptions, memberships, clubs, streaming, supplies, etc. Do they align with your long term goals? What low or no-cost alternatives are available?
  • Debt-to-Income Limit – add up your total minimum monthly payments on any loans and divide by your monthly income. Strive to keep it below 40%. This should include your housing payment (rent/mortgage). In order to qualify for a mortgage, it must be less than 40% with the new mortgage payment added.
  • Alerts/Notifications – take advantage of online banking tools to notify you about account activity and balances. Set up automated reminders for bills, maintenance, doctor visits, etc.

Put Your True Self First

Once you develop consistent financial habits, you’ll find that the less of your income you spend means the more you have to invest in your own goals and aspirations. That’s where each person has to find their own balance. When you manage your money well, it’s like directing traffic. You decide where each dollar goes and why.

You Are Not Alone

We created My Financial Zen to build a safe and supportive community where members can learn, grow and share their unique financial wellness journey. We invite you to subscribe to our blog, complete the Financial Health Assessment, schedule a Free Coaching Session or send us an email with your questions.

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