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7 Tips for How to Manage Money Effectively (More than Ever Before)

How to manage money effectively? Strategies and tricks you need to know so that you can funnel more of your money towards what you want.

How to manage money effectively?

woman in yellow shirt sitting on desk smiling with notebook, text overlay "7 tips to manage your money effectively"

For something to be effective, it must product a desired result or outcome.

This means that in order to manage your money effectively, you need to be doing it so that you’re able to use as much of it as possible for the desired results and money goals that you have.

These could be:

  • Paying for your next summer vacation
  • Paying tuition to finish your college degree
  • Saving up money towards a healthy retirement down the road
  • Paying off remaining debt to free up cash flow for other things
  • Saving up for a down payment on a home
  • Fill in the blank

Are you reaching your money goals (there’s 5 different types of financial goals)?

Maybe not, or maybe not just as fast and efficiently as you could be.

That’s what we’re going to go over, today – strategies, tips, and tricks to get you managing your money as effectively and efficiently as possible.

How to Manage Money Effectively

Grab that money goal you’ve always wanted to accomplish but can’t seem to, and let’s get going. Time’s a wastin’!

1. Know Your Financial Goal

When you’ve got something exciting to work towards, or something you’re trying to get out of your life because it causes distress (like debt), then you’ve got motivation to manage your money effectively.

Check out these articles to help you hone your financial goal:

Once you know what it is, wave it loud and proud!

2. Remove All Obstacles Stopping You from Sitting Down to Manage Your Money

There are physical and mental obstacles out there that are dead-set on us not accomplishing what we want to.

And when it comes to managing your money? You know, actually sitting down to take action on finances?

It’s no different.

You’ll want to remove all of the possible obstacles in your life to actually get in there and get the money work done (tips from below).

Two examples include:

Which brings us to the next point…getting your accounts in order.

3. Detox Your Financial Accounts

How can you manage your money effectively when you've got accounts all over the place that don't all talk to each other (i.e. they aren't linked up)?

We’re going to have your financial system all put together, wrapped up in a bow. This will make how to manage your money wayyyyy easier for you. But before we can do that, we’ve got to do some decluttering.

Here’s where I encourage you to do a “financial accounts dump” by writing down all of your financial accounts on one list. Everything that we're working with – we want the whole picture.

Here are the types of accounts you likely have (and if you don't, you might want to add a few of these to your money tasks in the Resource section):

  • Checking Accounts: Individual, Joint
  • Savings Accounts: Individual, Joint
  • Health Savings Account (HSA)
  • Credit Card Accounts
  • Mortgage/Escrow
  • Employer Retirement Accounts: 401(k), 403(b), pensions, Simple IRA, SEP, SARSEP, 457, and 409A
  • Individual Retirement Accounts (IRA): Roth/Traditional, or Individual 401(k) for self-employed people
  • Non-Retirement Investment Accounts: Bonds, stocks, mutual funds, Certificates of Deposit (CDs)
  • Insurance Accounts: Auto, Home, Life, Health
  • Flexible Savings Accounts (FSAs)
  • Long-Term Care Policy
  • Annuities
  • Children's Financial Accounts: College Savings plans (529s), Coverdell ESA (Education Savings Account), Checking, Savings, Retirement Accounts, Custodial Accounts

Pro tip: Having trouble recalling all of your financial accounts or want to make sure you’re covering your bases? Check out your free annual credit report (annualcreditreport.com) and see what shows up.

Take these account maintenance steps:

  1. Shed the Unnecessary: Get rid of accounts that no longer serve you. In some cases, you'll need to combine accounts. For example, an account you opened just for the opening bonus that you no longer need, or nixing your duplicate accounts after combining finances a few years ago with your spouse, or you have a litter of 401(k)s from employers you’ve left over the years and haven’t combined these into one place.
  2. Review Your Access + Security for Each Remaining Account: We're talking about one of your precious resources: your money. So, we need to make sure that the right people have access to it, that you're able to easily access it, and that it is as secure as it can be. Make sure you know how to sign into each of your accounts online for easy access, and that the right people can access the accounts. Tighten up security by changing passwords that haven’t been changed in years, as well as set up an easy way to remember all these passwords (I personally use the free online software, LastPass).
  3. Assess Coverages + Protections: Make sure your accounts all reflect your current needs. For example, is your life insurance adequate now for how your life has changed since you opened it? Does your insurance policy include your wedding rings and home renovations completed since buying it? Does your checking account have overdraft protection (or not – I like to keep ours shut off)?

4. Update Your Net Worth Every 6 Months

I am a FIRM believer that your self-worth does not equal your net worth.

So much so, that I want to add that before I write about this next step that will help you manage your money more effectively.

Now that I’ve gotten that off my chest, let me tell you why tracking your net worth can be so game-changing.

If there was an easy report card for money management – one that you could track quickly, and would give you a snapshot “grade” for how you’re doing – it would be your net worth.

And this works whether you’ve got debt, or none. Whether you’re in the red (and you can work your way back to “0”), or you’re already in the black and plugging away.

For the first 6 years or so, I updated my net worth manually (about every six months). But then, I found Personal Capital.

It’s a completely free dashboard Free Personal Capital Account that gives you a free snapshot of your finances. Not only that, but it automatically updates your net worth. Score!

Here’s a whole article on ways to use this free portfolio check-up and money management tool to further your finances.

5. Come Up with Your One-Word Financial Statements

I did this powerful exercise with a group of people several years ago, and I’d like to offer it to you as well.

It’s a powerful and easy way to figure out how you feel about your finances right now, and how you want to feel about them (i.e., what to work towards).

  • Come up with one word about how you’re feeling right now about the state of your money life.
  • Come up with one word about how you want to feel about your finances.

When I did this with a group of women, I got the following answers for their current state of how they feel towards their finances: “overwhelmed”, “distracted”, “nervous”, and “pathetic”, all the way to “autopilot”.

6. Track, Track, and Track Some More

How will you know how you’re doing financially? How will you know if your money management strategies are effective – meaning, enabling you to work towards the money goals you have?

By tracking.

We discussed the importance of tracking your net worth.

Now, it’s time to discuss how to track things on a more granular, day-by-day level.

Use these resources:

7. Get Smart about Breaking Financial Guidelines

Money is not a one-size-fits-all subject.

There are general guidelines and rules that, if followed, will get you far. But it’s hard to listen to regurgitated financial rules if you are not even close to being able to follow through.

For example, if I told you to go further or to push past your $50,000 wall in typical annual savings this year, you’d probably tune out pretty quickly, right {with a roll of the eyes}? Many of us don’t have that much in an account, let alone are able to save it on an annual basis.

But tuning out is precisely what you should not do.

The fact is, we are all at various levels. You're trying to figure out how to get better at managing your money, just like I'm trying to figure out how to manage my money, and both may look differently.

Each one of us operates at a business-as-usual level, has probably gotten a glimpse of their peak level, and are capable of being inspired to tap into their ultimate level. And our levels change all the time. When our peak level becomes our new business-as-usual, then suddenly we get a glimpse of a level we never thought we had in us.

This is life. Plateaus, jumps, plateaus, jumps.

If you take advice (financial or other) and implement the spirit of it — whether it is far beyond your level or not — then you will continue to grow. But don’t become discouraged by it. Don’t think “$50,000? She’s nuts!” and walk away having gained nothing from the suggestion.

Instead, work on the advice at your level {and one notch above to really stretch yourself}.

These considerations are key when figuring out how to manage your money in a way to meet your goals, but without driving yourself nuts.

What is the best way to manage your money? It’s by getting a grip on your current money management system (whatever that looks like), cleaning it up to run efficiently, then adding in some smart strategies such as tracking, working towards a money goal, and more. I hope I’ve shown you how to manage money effectively, so that you can use more of your hard-earned cash in the way that you want to. How satisfying that will be!

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Amanda L. Grossman is a Certified Financial Education Instructor, Plutus Foundation Grant Recipient, and founder of Frugal Confessions. Over the last 10 years, her money work helping people with how to save money and how to manage money has been featured in Kiplinger, Washington Post, U.S. News & World Report, Business Insider, LifeHacker, Woman's World, Woman's Day, ABC 13 Houston, Keybank, and more. Read more here.