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How to Manage Your Money Better

February 06, 2019 · 5 minute read

We’re here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey. Read more We develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide. We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right. Read less

How to Manage Your Money Better

If you want to manage your money more efficiently and effectively, you definitely aren’t alone. For example, when you think about New Year’s resolutions made each year by friends, family members, and coworkers, they probably include:

•  I’m going to save more money this year.

•  This year, I’m going to pay off all my credit cards.

•  I’m going to create a budget and stick to it this year.

And while everyone may have similar resolutions, no two people have the exact same financial situation, goals, challenges, or opportunities, so no two financial strategies should be precisely the same.

Yet, there are certain strategies that will help nearly everyone improve their financial situation, bringing them closer to achieving their money-related goals. In this post, we’ll share five money management tactics.

The five tactics are:

•  Set financial goals, along with a realistic budget.

•  Start saving money (or more money).

•  Use your credit cards wisely.

•  Manage your debt appropriately.

•  Use the right bank account.

Keep reading to get tips on how to accomplish those tactics.

Setting Financial Goals, Along With a Realistic Budget

No matter what financial situation you’re in, a great way to manage money begins with goal setting and budget making. If the idea of doing so stresses yotu out, know that setting goals doesn’t have to be stressful.

That’s because, while it’s important to set concrete, realistic goals, it’s also okay to create, say, a five-year plan that culminates in the vacation of your dreams—or whatever else puts a big smile on your face.

Let’s delve into budget making first and then return to goal setting. Here are some tips to create a solid budget:

  1. Collect the most recent statements from all of your lenders, as well as your most recent utility bills, property tax statements, and the like. Make sure you have everything gathered together.

  2. Using these documents, make a list of your monthly expenses, including:

 a. fixed ones, such as rent or mortgage payment, insurance payments, credit card payments, student loan payments, your typical grocery expenses, and so forth

 b. more flexible ones, such as eating out at restaurants, hobby expenses, clothing, and so forth

  3. List all sources of monthly income; use your take-home pay after taxes and after pre-tax contributions are taken out.

  4. Add up your savings, including your retirement accounts.

  5. Create a draft of your monthly budget.

  6. Identify weak spots in your budget and adjust it, as needed. If, for example, your dining out expenses are cutting into your ability to save, what adjustments can you make to improve your financial picture while remaining realistic?

Now, think about your financial goals. Try to break them down into multiple-year plans, not just this year or 25 years from now. They might include items like this:

•  One-year plan: Pay off credit card debt.

•  Two-year plan: Increase savings account by 50%.

•  Five-year plan: Have enough savings for a down payment to build a new house.

This can help your goals feel more achievable. Keep those in mind as we go through the other tips for learning how to manage money better. For additonal help with budgeting, get started with SoFi Relay. SoFi Relay tracks all of your money, all in one place (at no cost) so you stay on pace to hit your goals.

Starting Saving Money (or More Money)

Once you have a reasonable draft of a budget and you know your financial goals, know that you can continue to tweak the budget to help you achieve your goals.

It’s typically recommended that, ideally, everyone has an emergency fund that would cover living expenses for three to six months (or even up to 12 months). So, what are you willing to cut back on to create that fund?

Do you subscribe to numerous subscription-based services and apps? Which ones don’t you really use? Which ones are a bonus and not something of true importance? Rather than going on a big trip this year, how can you create a staycation to remember? If you’re a fan of designer clothes, what outlets might help you to get the outfits you love at a price that’s gentler on your wallet?

Here are three more ideas to consider:

•  Pay yourself first by having money automatically deducted from your paycheck to put into a savings account.

•  Monitor how well you’re meeting your savings goals and revisit your budget until you find the right mix of strategies to meet your savings goals.

•  If you discover that there are luxuries you really don’t want to give up, you can always pick up a side hustle and use that extra cash for your splurges.

If you think of saving as a game to see how quickly you can reach a certain goal, it can make the whole process much more enjoyable.

Using Your Credit Cards Wisely

When thinking about how to manage finances, you may think about credit card management first—and you’re right that this is a core component. The average credit card annual percentage rate (APR) in 2018 was 15.32%. By just paying credit card minimums, the principal balance may not seem go down very much.

There are, however, three time-tested tips that could help you escape credit card debt. They include:

  1. The snowball method is a debt payoff strategy where you focus on the smallest debts first. Then once you tackle your smallest debt, you continue to pay off your debts in order from smallest to largest. Remember, it is important to continue to pay the minimum payment on all of your debts, even though you are focusing on the smallest one.

  2. Or, use the same basic system, but pay them off starting from the one with the highest interest rate then down to the lowest.

  3. Or, consolidate credit card debt into a low interest personal loan and focus on paying off that one loan.

A big advantage of the third method is that you have an opportunity to get a lower interest rate from a personal loan than a credit card.

No matter which method you choose, once credit cards are paid off, it’s probably smart to only use them to the degree that you can pay them off in full each month. Then, when emergencies arise, you can use your emergency savings fund to address those needs.

Managing Your Debt

As you tackle your credit card debt, you’ve already begun the process of better managing your debt overall. And, if you have student loans, it may make sense to also consider how to address that debt effectively. And, it can be a good strategy to investigate how much money you can save when you refinance your student loans into one convenient, low interest loan.

You can find your rate at SoFi in just two minutes. At SoFi, we consolidate and refinance federal and private loans together. We charge no application fees and there are no prepayment penalties or hidden fees. Plus, you can find the rate you qualify for in 1 minute with no commitment.

Using the Right Bank Account for You

As you’re building up your emergency savings, it’s important to consider your savings account’s interest rate. Right now, rates are rising on savings accounts, but it is still important to make sure there aren’t conditions in the fine print that could make the deal less than appealing. Conditions to be aware of can range from minimum balances that are beyond your current financial reach to fees and more.

You can also go with a non-traditional option, such as a cash management account with SoFi Money®. It is a cash management account that will provide you with tools to spend and save.

About SoFi Money

You can simplify your finances with SoFi Money. SoFi Money is a cash management account and has no account fees.

SoFi Money comes with numerous benefits, including:

•  You’ll receive a debit card.

•  You can make mobile transfers and photo check deposits.

•  You can benefit from complementary career coaching and SoFi community resources.

•   You can count on security SSL encryption and fraud protection. Plus, once your money arrives at our partner banks, it is FDIC insured up to $1.5 million.

You can open a SoFi Money account quickly and easily. Start saving and spending in one place.

External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Each business day, cash deposits in SoFi Money cash management accounts are swept to one or more sweep program banks where it earns a variable interest rate and is eligible for FDIC insurance. FDIC Insurance does not immediately apply. Coverage begins when funds arrive at a program bank, usually within two business days of deposit. There are currently six banks available to accept these deposits, making customers eligible for up to $1,500,000 of FDIC insurance (six banks, $250,000 per bank). If the number of available banks changes, or you elect not to use, and/or have existing assets at, one or more of the available banks, the actual amount could be lower. For more information on FDIC insurance coverage, please visit www.FDIC.gov . Customers are responsible for monitoring their total assets at each Program Banks to determine the extent of available FDIC insurance coverage in accordance with FDIC rules. The deposits in SoFi Money or at Program Banks are not covered by SIPC.
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SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC .
Neither SoFi nor its affiliates is a bank. SoFi Money Debit Card issued by The Bancorp Bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.

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