7 tips for managing your money

If you’re not totally comfortable with money management , don’t worry. You’re not alone. In fact, the recent Guardian Study of Financial and Emotional Confidence found that 37% of workers said they avoid dealing with their finances because it's too overwhelming, and more than 3 in 4 feel stressed and concerned.¹

The good news is you don’t have to have an MBA to get a grip on your financial situation. All it takes a little knowledge and practice can be helpful to reduce your anxiety around money begin reducing your anxiety around money is a little knowledge and practice. Start by taking a few minutes to learn about:

1. Creating a budget

2. Tracking expenses and spending

3. Setting financial goals

4. Building savings

5. Healthy credit practices

6. Protecting your family finances

7. Investing basics

1. Create a budget

If you do nothing else, take the time to create a personal or household budget stability. There are several different budgeting strategies, but here are the key steps to the 50/30/20 rule:

• Calculate your monthly after-tax income.

• Calculate your essential expenses, which should comprise approximately 50% of your after-tax income. If these needs exceed 50%, try to make some adjustments to your spending habits.

• Set aside 30% of your after-tax income for wants: discretionary expenses such as dining out, entertainment, and vacations. If 30% won’t cover them, think about what you might cut out.

• If possible, allocate at least 20% of your income towards savings and debt repayment. This includes emergency funds for unexpected expenses, retirement contributions, loan repayments and saving for long-term goals such as paying for college or buying a house.

• Keep records to help you stay within the allotted percentages.

• Regularly review your budget and adjust it as necessary, especially if there is a significant change in your income or circumstances.

These percentages are a general guideline, and you can modify them to fit your specific circumstances, but try to ensure that each bucket – needs, wants, and savings – is covered.

2. Track expenses and spending

Whether you do it before or after creating a budget, keeping track of your monthly expenses and spending can help you to gain better insight into your spending patterns, and that knowledge is the key to help achieve more control over your spending. You can do it the old-fashioned way – with pen and paper – or use a traditional spreadsheet program. More and more people are also taking advantage of powerful online budgeting apps that work on their smartphones. Features to look for and consider in a budgeting app include:

• Automatically syncing with bank accounts, credit cards, and other financial accounts to get a real-time view of spending.

• Expense categorization and tracking against budget targets, with alerts as you approach their limits.

• "Zero-based budgeting" that earmarks all of the money you have on hand to expenses, savings goals, and debt payments to foster more mindful spending.²

• Personalized tips based on how you spend and save money over time.

• By tracking your expenses and spending, you’ll have a clear picture of how much you spend each month and, importantly, where you might be able to trim costs if there is a shortfall between your cash flow and your total expenses.

3. Set financial goals

Once you have a clearer picture of your current financial situation and budget, the next step is to think about the future. That means asking yourself questions about what you want and where you see your life heading:

• What are your goals moving forward?

• Are you planning to buy a home, start a business, or pay for a child's college education?

• Do you plan to travel extensively at some point?

• When would you like to retire, and what type of lifestyle do you want during retirement

While nobody can predict the future or the twists and turns that lie ahead, it's important to have an idea of where you want to go so you can start to devise a plan to help get there.

Once you’ve determined your long-term goals – such as home ownership, college tuition, retirement, travel – prioritize them. Then, try to establish a clear timeline and target savings amount for each goal. In other words, how much money will you need to help reach each goal? And by what date?

Don't get overwhelmed if all your priorities and resources don't add up. Just take a step back and reconsider whether your list of goals and aspirations is realistic. If not, think about how to adjust it to better conform to your current and projected financial situation.

By making a list of specific goals – and assigning a dollar amount and timeline to each of them - you can start to create a long-term money management plan that can help you get where you want to go.

4. Build your savings

One of the best ways to help boost your financial confidence is to start saving for the future. While you may not be in a position to allocate a lot of money to savings at first, most financial professionals would urge you to start as soon as you begin earning money. Even if you can only afford to set aside a small fraction of your income for potential growth over time.

Whether you’re saving for short-term goals such as an emergency fund, big purchases such as buying a home, or long-term goals such as retirement, here are two of the easiest ways to help you start:

• Open a savings account
  Any bank or credit union can help you set up a dedicated savings account specifically for your emergency fund and other short-term goals. These accounts typically are stable products because the Federal Government guarantees your savings, and your money is readily accessible, allowing you to deposit and withdraw cash with few, if any, restrictions.

• Contribute to or open a retirement account
  For retirement savings, make use of tax-advantaged accounts such as 401(k) plans through work or Individual Retirement Accounts (IRAs) and Roth IRAs that you set up for yourself. These accounts offer benefits like tax deductions, efficient growth, and/or tax-efficient withdrawals, depending on the type of Individual Retirement Account.

There are several online financial institutions that can help you set up an IRA. Or, if you need more help navigating the many types of savings and retirement accounts available, consider talking to a financial professional.

5. Manage your use of credit

Managing how you use credit is crucial to help effectively managing your household or personal finances. It can also be the key to help unlock new financial opportunities. An established credit history and good credit score demonstrates financial responsibility, and that can help make it easier to qualify for loans, mortgages, and credit cards at favorable interest rates. It can also help you qualify for better insurance premiums and increase your chances of getting many jobs. Here are a few of the most common ways to help build credit or improve your credit score:

• Pay bills on time, every time

• Try to pay more than your minimum payments

• Keep your credit use well below your assigned credit limits

• Maintain a diverse mix of credit accounts – but don’t have too many credit cards

• Check credit reports for accuracy and address any errors promptly

Good credit habits and managing credit diligently can help pave the way toward a stable financial foundation and a healthy financial future.

6. Consider cash value life insurance

If you’re thinking about purchasing life insurance to protect your family finances, consider a whole life insurance policy that has a cash value component. In addition to paying your survivors an income tax-free death benefit if you unexpectedly pass away, cash value life insurance – whole life insurance and universal life insurance - also acts as a tax-efficient asset-building vehicle.

Every month, as you pay premiums, a portion goes to covering the cost of insurance, and another part can grow as cash value, which accumulates over time without being taxed.³ These funds can be accessed while you are still alive, for example, to help pay college tuition, fund a new business, or even to help supplement retirement income.⁴ Because it offers a life-long death benefit and a tax-efficient cash value component, many consider a cash value life insurance policy one of their most valuable long-term financial assets.⁵

7. Learn how to invest

While traditional savings accounts and money market funds are typical savings products for short-term goals such as an emergency fund or a summer getaway, long-term goals like a home purchase or retirement may require you to invest in higher-yielding products such as stocks, bonds, or mutual funds.

Fortunately, there are many ways to learn about investing, from books and podcasts to online courses and financial websites such as Investopedia. All of which can help you get up to speed on key concepts, and when you're ready for hands-on experience, there are virtual trading platforms that allow you to practice without using real money. Already know a bit and ready for a deeper dive? There are investment seminars, local workshops, and online forums that can make it easy to access and share practical insights. Or, if you decide you don't want to go it alone, speak to a financial professional before you actually start investing.

Guardian can help you reach your financial goals

Getting more comfortable with money management skills can help you start your financial journey. If you need guidance on managing your money moving forward – on issues such as retirement strategies or using life insurance to help protect your family's future - Guardian can help. To find a Guardian financial professional near you, just fill in your zip code and click below.