How to manage your money: 21 tips that will help you achieve a healthier financial life

Financial independence is a dream shared by many people, whether they are entrepreneurs or not. But in an increasingly unpredictable economy, it is harder and harder to plan your expenses and save enough to have a stable financial life, especially for those who want to start their own business.

In this post, we will share with your 21 simple tips for people who wish to achieve a financially healthier life, even without a very high income.

If you put into practice at least one of the habits below, you will see that, in time, your money will grow more and you will be able to invest in the activities you enjoy the most.

And, spoiler alert: from now on, spreadsheets and calculators will be your best friends.

1.  Keep track of your fixed expenses

Fixed expenses are those that we have to pay every month, such as rent, water, electricity, telephone, and internet bills, and so on. It’s important to highlight that you should include things like taxes for the entire period you make these payments.

Having a register of your fixed expenses is important for you to know exactly how much money is left at the end of the month. This is the money that you can invest, save, or even spend on leisure activities. If you are an entrepreneur, you should also control the fixes expenses in your business, such as rent and production costs.

There are many ways of keeping track of these expenses, but we strongly recommend you have a spreadsheet on Google Drive or Excel, in order to constantly save the document and not running the risk of losing it. Moreover, the software itself can calculate the costs and subtract the expenses from your wages or profit.  

2. Put aside at least 10% of your earnings every month

Before you pay your fixed expenses, try to put aside at least 10% of your earnings in order to invest. If you are a salaried employee, this means you have to take this out of your salary, and if you are a self-employed professional, you need to take this from what you earned in that specific month.

The objective here is not only to save up money for something superfluous, but to invest this money so that it can grow into a solid asset in the future.

In the beginning, it may be hard to “let go” of thisese 10%, but if you focus on long-term goals, and manage to adapt your lifestyle without making extreme sacrifices, in less than a year you’ll be able to see the first results.

3. Keep your personal expenses and business expenses separate

This is a valuable tip for those who already have a business, or intend to start one. Many medium-sized and micro-entrepreneurs still struggle to separate personal expenses and business expenses. This may lead not only to losses, but to bankruptcy.

This is bad practice because you can’t know if your business is making a profit if you keep subtracting money from your cash flow. The lack of capital then prevents you from making improvements to your processes and improving your promotion strategies. This, in turn, restricts the reach of your brand.

And lastly, mixing up personal and business expenses can lead to a false impression of “wealth”, and motivate you to spend more than you really should at that moment.

Therefore, we recommend you keep two separate accounts, in case you are an entrepreneur. The good news is that you can use the legal entity when hiring corporate plans for your company, such as health insurance and meal vouchers, which also helps when it comes to saving money.

4. Avoid taking out loans

Loans are dangerous to medium-sized and small business, as they represent a long-term commitment with high -interest rates.

We know sometimes it is impossible to not take out a loan, as they may be useful in raising resources in the initial phase of the business. But whenever you need to take out a loan, try to choose a smaller term one, and carry out a thorough research on the conditions presented by the financial institutions, to pick the one with the lowest rate.

Remember that loans should also be added to your fixed expenses spreadsheet, for the whole period of the contract.

5. Pay off debt as soon as possible

If you have already taken out a loan in your name, consider paying it off as soon as possible, to cut down on the length of the contract, and, of course, to bring the interest rates down.

But beware – we are not saying that you should have financial problems to pay off your debt more quickly. The ideal thing here is to use “spare” money to pay more installments. So, we are not suggesting you should not pay your fixed expenses or mess with your business’s cash flow.

For instance, you can do some freelance work in other to pay off your loans more quickly.

6. Carry out research on investment

Investing is a way of making sure you won’t spend your money on something superfluous. But when we use the word “investment”, it may seem that we’re talking about something that requires a lot of prior knowledge.

Do you also think so? But nothing could be further from the truth!

Everybody can invest, from the most conservative to the boldest profile. That’s why we recommend you study the different kinds of investment available in your country and economy. Only then will you be able to choose the one that best fits your profile. Also, talk to people who are knowledgeable about investing before you make your decision.

Savings Accounts

Savings accounts are a big hit everywhere, because they are easy to open, and fairly safe. Savings, in most countries, have the lowest risk of any other kind of investment, but they also have the lowest return potential.

That’s why making cash deposits into a savings account is recommended to conservative investors, with lower risk tolerance.

Mutual funds

Mutual funds gather money from different investors, and then invest it in a variety of stocks, bonds, and other investments. This kind of investment is suitable to those people who are able to invest thinking in the long-term.

Stocks

Differently from the previous options, the stock market is recommended for those investors with a bolder profile. Stocks can fluctuate immensely during the period the market is open. So it may be risky. A deeper understanding of how companies are performing and a continuous monitoring of the stock market are crucial.

7. Set financial objectives

Before we move forward, it is important to know the difference between goals and objectives. Even though we use these two words interchangeably, goals represent what you want to achieve in the long term. Objectives, on the other hand, represent the concrete actions quantitatively and with a pre-determined deadline.

For instance: your goal is to increase the sales revenue of your business. Your objectives, in turn, may be doubling the number of transactions in the next six months, to increase the average ticket of your clients by in 50%, and so on.

Take this opportunity to read outr post on how to set goals for your business.

8. Always pay cash

This may sound like a cliché, but any finance specialist would tell us we should only buy something when we have the money to do so.

That’s why paying cash (or using a debit card, of course) is an excellent strategy to save money, since you avoid spending money you don’t actually have, and ending up with credit card debt.

Many shops around the world offer special deals and discounts for cash payments. This means that you can save money, and pay less for a product or service.

9. Avoid using your credit card

This suggestion is closely related to the previous item, as it prioritizes cash payment.

Does this mean you should never use your credit card? Of course not!

Credit cards represent a convenience for the consumer, besides being the most common online payment method. Our tip is that you try to avoid using it when you have cash to pay for something. In many different parts of the world, when you make payments (or pay in installments), you end up paying interest, thus spending more than you would if you paid up front.

10. Set limits to variable expenses

Everything that is not considered a fixed expense can be called a variable expense. Which means that the latter can be paid later.

But we know that, in practice, it doesn’t work like that. Sometimes, people want to indulge in small pleasures, like going out with friends, taking a trip or buying something that is not essential.

For these cases, we recommend you set a limit for these variable expenses. Set aside a small amount for your leisure activities.

We know that your goal is to save money, but if you end up making too many sacrifices, you may give it up completely. Setting small rewards for when you accomplish an objective can be an incentive for you to keep moving forward.

You should make a list ofwith five items considered superfluous and try to include at least one of them in your monthly budget.

11. Use financial management tools

If you’re not used to working with spreadsheets and need easier methods to control your spending, know that there are a wide variety of programs and apps to help you.

One of them is YNAB, You need a budget. This is an excellent budgeting tool with an easy and intuitive spreadsheet layout. You can try it out for 34 days for free.

Another one is Mint, an app available for iPhones and Android devices. It is a free app that helps you control your finances by keeping tabs ofn all your transactions in one place.

12. Look for alternative sources of income

Today, there are many activities you can carry out at home and make money from. One excellent example is Affiliate Marketing. With it, you promote products from other people, in exchange for a commission whenever a sale is made through your link.

If you are creative and enjoy creating content, you can start a blog and write about something you like. You can also become a Digital Producer and create an online course to share your knowledge with other people.

People who own a YouTube channel or a profile with a lot of followers on Instagram can become a digital influencer and make money through partnerships with brands, selling products and showing Google AdSense ads.

To do any of these things we mentioned, all you need is a computer with access to the internet. And if you haven’t identified with any of the professions we suggested, you can still find other ways of supplementing your income by working from home.

13. Have an average budget  

Self-employed professionals struggle when it comes to budgeting, since they don’t have a fixed income or benefits.

The tip to avoid unpleasant surprises is to have the average in revenues in the last few months and identify the periods in which you make more and less, and the effects of seasonality (such as commemorative dates and events) on your sales.

The ideal here is that your minimum earnings are enough to pay for your fixed expenses. For those months in which you make more than the average, invest the surplus or save it for a rainy day.

14. Use the internet to compare prices

If you look a product up online, you will see that many different sites sell them, at many different prices.

Therefore, whenever you’re about to make a purchase, look for the best price to fit your budget. After all, when it comes to saving money, every cent counts.

There are some tools such as PriceGrabber that search and compare offers, listing the different shops from the cheapest to the most expensive ones. Alternatively, you can use the marketplace and e-commerce filters to find the cheapest offers. These two examples apply to physical products.

If you are looking for a digital product, like an online course or an ebook, it is a good idea to research on Facebook groups or subscribe to Producers’ lists, to keep up with the offers and compare prices.

It’s important to remember that, for digital products, price is not the only thing that should be taken into consideration. The value it provides, the problems it helps you solve, and if it is a high value-added product, and the actual cost, it should all be taken into account.

15. Join credit card reward programs

Reward programs are excellent for people who want to save money. In these programs, you are rewarded for every purchase made, getting points that can be exchanged for other products and services, such as flight tickets, for instance.

Most credit card issuers, especially in the United States and the United Kingdom, offer reward programs, and subscribing to them is usually free.

There are also many cash back reward programs available, and the difference is that you can redeem your points for cash instead of merchandise or flight tickets. Some examples are the Chase Ultimate Rewards, and the American Express Reward Dollars.

16. Join Membership programs

Is there a product or service that you consider superfluous, but you nevertheless consume frequently?

Then, you should consider joining a membership program. This way, you save more than if you bought the item separately, besides the obvious advantage of getting the products directly at your doorstep.

Wine, coffee, beer and beauty products are examples of products sold through membership programs.

And when it comes to digital products, monthly subscription plans are just like Members Areas, virtual learning environments, in which the students can consume materials made available by the salesperson.

17. Buy second-hand products

With the ever-growing trend of minimalism and conscious consumption, buying second-hand items is a way of doing your part in saving the environment, and saving some money in the process.

There are many thrift shops all over the world, with high-quality clothing and shoes being sold at a much lower price. And not only clothes, but other items such as pieces of furniture and household appliances.

Online, you can find a variety of products on websites such as Letgo in the United States, and Preloved in the United Kingdom. On these platforms, users make products available for sale and the sites act as intermediaries in the purchase process. The same thing happens on E-bay, although it also carries new products.

You can also join Facebook B/S/T (Buy, Sell, and Trade) groups and exchange products and services with other people.

18. Don’t ignore small expenses

Services that charge your credit card directly, such as Uber, Lyft or apps and sites that deliver food, can act as traps for people who want to save money. That’s because you spend money without actually realizing you’re doing so, and when the bill arrives, you are surprised by many different charges.

Therefore, we advise you not to ignore these small expenses. As much as you take short rides on Uber, for example, they can add up and become a problem at the end of the month.

Take talks instead, and during the day, use public transport. Depending on the distance, it might be much cheaper.

Of course we’re not saying you should never use rideshare or delivery apps. Just make sure you don’t overdo it, or use them when there’s a cheaper alternative.

19. Avoid eating out

Eating out can be very expensive depending on where you work or where your company is located. That’s why we recommend you look for cheaper options, or even take your own food to work.

Again, we are not saying you shouldn’t eat out when you feel like it or when you need to do it. You should just try to cut down on how much you spend on restaurants, if possible.

If you work from home, it’ll be even easier to adapt to this new change. Also, you can eat healthier by controlling what you eat and how you prepare it.

20. Choose auto-pay for your bills

Automating bills is an excellent way of making sure you won’t pay late fees. Accumulating bills is never a good idea, as it makes it easier for you to lose control over your finances. To solve this problem, we have two suggestions: spend less (which is basically what we’ve been saying in this post), and, if possible, setting due dates a few days after your payday.

21. Save every extra penny

The 21st and last tip is pretty obvious, but makes all the difference for you to manage your money a little bit better, and make it grow. In a word, save every extra penny you earn.

You know that payment you didn’t know was coming in? Such as bonuses, profit sharing distribution, freelance work, or, for entrepreneurs, a product launch with better results than you were expecting.

Save this extra money and invest it, add it to the 10% you save every month. As this extra money is a pleasant surprise, you won’t miss it when it’s time to pay the bills.

It’s important to remember that, the more you invest, the more you make, which in turn means more money to buy something important, or make improvements to your business.

Did we leave any important tip out? Would you like to share what you do to make your money grow? Leave us a comment in the section below. And read our post on how to start selling online from scratch.