5 Steps to Manage Your Money Better

A Guide to help you Take Control of Your Paycheck

So, you received your paycheck.

What can you do to avoid feeling like you work hard all week just for your money to disappear into thin air?

How can you use this paycheck to:

• Cover your expenses?
• Get yourself something you want?
• Buy your kid a birthday gift?
• And still, save something?

The answer lies in how you manage your money.

Learning how to manage your money better is a vital part of achieving Financial Independence. If you work week after week, only to live paycheck-to-paycheck, and choose to do nothing about it, you will never be able to escape this vicious cycle.

But since you are reading this, I know you want to take control of your money and I am here to help.

Here are 5 Steps to help you manage your money better.

1

Use a Budgeting Ratio to divide your paycheck.

Budgeting Ratios use fixed percentages to help you to divide and allocate your paycheck in the areas of:

• Expenses such as Rent, Utility, Groceries, and any other monthly payments you have
• Savings
• Investing such as buying stocks, learning a new skill, or doing something that will benefit your future self
• Giving/Repaying Debt -to buy gifts, contribute to something you admire, or pay off additional debt instead.

These four areas make up a person’s financial life.

Thus, the first step is to know what each of these areas mean to you. Then, decide what percentage of your income you will dedicate to each.

Check out this Beginner’s friendly Budgeting Ratio to help you get started.

2

Start tracking your income and expenses.

Once you have a fixed amount for your spending in place, the next step is to ensure that you are sticking to your budget.
This means tracking your income and expenses.

You can use whatever tracking method you prefer, such as a:

• Notebook and pen
• Spreadsheet
• Budgeting app

I use a spreadsheet app on my phone to track my spending because it is always easy to access.

3

Set Budgets for Expenses you can control

The budgeting ratio gives you a total amount to cover ALL your expenses. But you get to decide how much of that money you want to dedicate to Groceries and other consumables, rent, and bills, paying off debt, etc.

If you have debt, you should note that the less money you spend on rent, bills, and groceries, the more money you will have to pay off your debt. And the faster you pay off your debt, the sooner you will achieve financial stability.

Rent is a fixed expense while utilities fluctuate. It will take moving out or getting company to lower your rent. And while you can do some things to reduce your utility bills, there is no guarantee on how low your bill will be.

That leaves consumables. And luckily, you can set your own fixed budget for this expense.

The average person consumes approximately $100 per week on food and toiletries. Even Less if you budgeted effectively and a lot higher if you do not use a budget at all.

Some tips to stay on budget includes:

• Bulk buying
• Making use of store brands
• Meal-planning

4

Actively work on lowering your spending and increasing your income.

Budgeting is good for maintaining a balance between your income, spending, and savings. But if you want to save more, have more for investments, or repay your debt faster, actively working on lowering your expenses or increasing your income is necessay.

You can lower your expenses by:

• Reduce impulsive buys. For example, avoid browsing shopping apps or entering stores just for fun because chances are you will feel inclined to make a purchase.
• Challenge yourself to spend less than your budget. For example, if your budget allows you to spend $100 on food this week, take $90 with you to the store instead.
• Be particular about the things you buy to avoid buying things you do not need. For example, decide on specific colors that you want to wear. The next time you go clothes shopping, you won’t purchase unless it is the color you wear. Thus, reducing the chance of you buying something just because it is cute.

You can increase your income by:

• Taking on a side-job for the days you are at home, such as babysitting, pet sitting, or dog walking.
• Use the money you put aside for an investment to learn a new skill that can make you money later- Such as photography or videography.

Then whatever you get out of the challenges can be used to pay off additional debt, used for investing, or saved in an Emergency Fund.

No matter how much money you make, being able to challenge yourself to save more or spend less is always beneficial to your finances.

Once you master how to manage your money better, you will start to climb the ladder towards financial independence sooner than later.

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