How to manage your money better, especially when life hits.
When it comes to managing your money, it seems like once you think you got everything figured out… something always happens.
Or as the saying goes…. $hit happens!
You know exactly what I am probably referring to:
- You get your tax return and the washing machine goes out.
- The credit cards are finally back to $0 and a pipe bursts.
- It’s raining outside and you hit a pothole, now your rim is bent.
- Your dog eats chocolate and her vet bill is $4,300.
While the list can go on, maybe something like this has happened to you, maybe it hasn’t. However the likelihood of something occurring in your life that requires your attention and some finances is likely.
So when life hits, it is probably a really good idea to know how to manage your money better. Here is a list of 6 steps to help you! But first…
Why you should manage your money better anyways?
Table of Contents
Life always seems to hit us when we least expect it…
- In 2017 it was my car’s engine, followed by the washing machine.
- Back in 2012, it was the passing of my mom that made it a financially stressful year. In 2014 it was my own stupidity of buying a brand new truck.
- And just this year, my dog decided to eat some chocolate resulting in a $4,300 vet bill.
You catch my drift… but I tell you all of this because something is bound to come up. We couldn’t have ever imagined our dog eating chocolate while we were at work or having a $6,000 student loan interest bill in 2018.
But it happened. And no matter what happens in your life, you don’t want to be caught with your pants down when it comes to your finances. So the first step in making sure you are prepared for life events is knowing how to manage your money better.
Step 1: Shift your mindset about money.
In order be prepared for the things life throws at us, we have to first shift our mindset about how we tackle our finances.
Creating financial goals, having short term financial targets, and managing your money are all key elements to shifting your mindset. Keeping this all in mind, it is important to put your financial goals out in front, even when life is going great.
Step 2: Budget your money.
This might sound redundant, but to manage your money better, you need to have a budget. LIKE a really good budget that you follow and track.
Start with a budget: No matter what you financial goals are, when life happens living off a budget is still a must. You just might have to shift around money from one category to another.
Track your budget: Make sure you track your budget. Making a budget is great, but if you never follow it or actually see where your money is going, what’s the point? Use apps like Mint, Personal Capital or YNAB to track your money.
Manage your money and adjust: Depending on what kind of budget you decide to use, make sure you are making adjustments. For example, when the dog ate chocolate, our student loan pay off focus shifted temporarily to replenish our emergency fund.
Step 3: Make an emergency fund.
From 2010 to 2016, a $4,000 vet bill would have set us back for the rest of the year financially. Even making $400 monthly payments would have taken 10 months, not factoring interest.
But luckily for us, we created an emergency fund in 2016 for the moments just like these. Now that you know you should manage your money better, start your emergency fund by following these steps:
- Learn to pay yourself first, AKA reverse budgeting.
- Setup a separate savings account not attached to your checking (Try Ally 2.2%)
- Have a goal to save 1 month of fixed expenses
- Double your emergency fund, then double it again, thus saving 4 for months
- Decide on what you want to do next: