How to Improve Your Finances

A lot of people want to earn more money and increase their income. You’ve probably dreamt about winning the lottery or a raffle with a huge cash prize at one point in your life, right? While everyone wants their finances to increase, not many know how to manage it. You don’t need a higher-paying job or some help from relatives to improve your personal finances. Creating wealth is crucial, but protecting your funds, using them prudently, and managing them properly are equally important.

Here are some tips to help you manage your finances:

Set goals

A person holding three blocks illustrating a house, a car and a family

Identifying a strategic financial plan is important, as it helps you understand the purpose of budgeting, saving, investing, and spending. Do you want to get out of debt so you can save for a down payment for a house? Do you want to save up for a major expense, like an out-of-the-country family vacation or a bathroom renovation? Do you want to save to afford that great preschool for your baby in the next few years? Do you want to start setting aside some of your income for your upcoming wedding or building your retirement funds?

Plan what you want to do with your money in the short-term, medium-term, and long-term. Aim to set one from each category. Set realistic goals with set timelines to help you stay motivated and keep your goal achievable.

Create a budget

a married couple making a budget together

The first step to managing your finances is to create a budget. It’s the first and most important step when it comes to managing your money. It’s simple and has been practiced for centuries – but not all people do it. People who feel the impact of financial stress usually struggle with budgeting, as they feel less in control and tend to be more impulsive in spending their money.

Budgeting helps you ensure that you’ll have enough money for the things you need, see if there is an allotment for the things you want, and allow you to build your savings for future goals. It dictates how much you can spend each month based on your income. When you’re sticking to a budget plan, you can ensure that your needs will be met, your bills will be paid, and you’ll be less tempted to spend beyond your means.

If you build your budget from scratch, start by listing all your sources of income – this is how much you have to work with. Then, make a list of all your monthly expenses. Prioritize what’s most important, like rent or mortgage, bills, food, transportation, and groceries. Then, make sure to include everything you spend, including entertainment, eating out, shopping, and more. Savings and other investments must also be listed on the budget – make sure to save even a little bit; it’s better than not saving anything at all. And if you have debts, you’ll also need to ensure that debt repayment is factored into your expenses. Once you have this information, you can calculate your net income and compare it to your expenses to determine your budget.

You can start a budgeting worksheet by following general steps like these:

  • Add up your monthly income – This includes your monthly salary at your job, including other sources of income like tax refunds, bonuses, or income from side jobs.
  • Add up your monthly expenses – Include expenses in the fixed (major) buckets like housing, utilities, food, transportation, groceries, student loans, etc. If your monthly payments are different, you could use an average amount from the previous months.
  • Subtract your expenses from your income – This amount is the starting place for your budget. You have to work with any leftovers to build up savings and wealth. But if you really want to build a solid amount of savings, treat savings as expenses, too, so you’re not tempted to spend your money if you see an amount left over. If what’s left is too small, you may want to consider cutting costs for things like subscriptions, takeouts, and shopping, if you haven’t already.

List this in a notebook, or better yet, use an Excel spreadsheet or budgeting app so you can easily adjust the amounts and be able to check it more often.

Track your spending

a woman checking receipts and tracking her spending

Have you ever experienced asking yourself, “where did all my money go?” Money is easier to spend than earn, so make sure you’re tracking where it goes so you always have enough money when needed. Better financial management starts with spending awareness.

Tracking your spending goes hand in hand with budgeting. If you’re not watching where your money goes, you’ll have no idea if you’re sticking to your budget or blowing through it.

Many people aren’t genuinely aware of how much they spend on groceries, shopping, takeouts, and other miscellaneous expenses every month. Tracking where you spend your money can be an eye-opening exercise that could help you shift the way you spend your money. For example, you may learn that you spend more than $300 a month on meals during the work week or $100 a month on morning coffee. It may shock you and lead you to pack your lunch twice a week or encourage you to buy your own coffee maker to make coffee at home. Educating yourself about your spending habits can help you make a plan on how to improve your spending.

Once you have a budget, it’s essential to set a priority for your spending. Focus on your needs, such as housing, food, and transportation, before spending money on wants. This will help you avoid overspending and ensure you have enough money to cover your essential expenses.

Keep your budget realistic and be consistent

Your budget must depend on your monthly spending habits and your take-home pay, so you can set a budget you know you can keep.

You don’t have to be too strict and make drastic changes. If you’re currently ordering takeouts five times a week, don’t empty the budget for takeouts next month. Make it realistic and create one that works with your lifestyle and spending habits. If you realize you really need to cut back, do it gradually so you won’t end up resenting yourself for making a budget.

Budgeting is a way to encourage better spending habits, but give yourself a realistic shot to adjust and reach your goal eventually. This is the only way this money management method will work.

And when you start budgeting, make sure you’re consistent in tracking and adjusting as you see fit. Deciding to make a budget is one thing, but sticking to it is the goal in the long run. Be consistent in setting a monthly budget since it will adjust depending on expenses that will come, income that may be added or subtracted, bonuses you may receive, etc.

Reduce debt

A woman cutting her credit card to prevent debt

If you have debts, managing debt is a crucial part of financial management. But if you don’t have one, don’t start borrowing money now! Paying off debt may help you better manage your finances and reduce money-related anxiety. As much as possible, limit your debt. Do not depend on credit cards or take on multiple loans simultaneously, as it can cause a financial problem for you.

The best way to reduce debt is to start by paying off high-interest ones, such as credit card balances. High interest can eat into your savings and cause you to spend more in the long run. You can also consider consolidating your debts to lower interest rates and simplify payments. If you have trouble managing your debt, consider speaking with a financial advisor or credit counselor.

Build an emergency fund

a jar labeled “emergency fund” with cash inside

Unexpected expenses can happen at any time, so having an emergency fund is important. Aim to save at least three to six months of living expenses in a separate savings account. This will help you avoid going into debt in the event of an emergency, like the loss of a job, an accident, a needed major home repair, or an unexpected health emergency. Insurance plans like health insurance, term insurance, and critical illness insurance can help you financially secure yourself in emergencies.

Prioritize saving

A woman putting coins in a piggy bank

It’s essential that you start saving as soon as possible. List savings in your budget as soon as you receive your first paycheck. But if you’ve been working for years and you haven’t saved yet – start saving now. The earlier you start saving, the more interest your savings will get over time. With compounding, you get interested not only in your savings but also in the yearly returns.

Save up for big purchases

stacks of coins placed in an ascending order by height, with a wooden house on the right side

Some types of loans and debt can be helpful when making big purchases like a house or a car. But for other big purchases, like appliances, furniture, home repairs, renovations, and more, cash offers are the safest and cheapest buying option.

When you buy in cash, you’ll avoid generating interest and creating a debt that takes months or years to pay back. In the meantime, saving money can accumulate interest that can be put toward your purchase.

Invest in your future

A man analyzing financial balance sheet with investment financial data

Investing in your future is essential to achieving long-term financial stability. Consider opening a retirement account or investing in stocks, mutual funds, or cryptocurrencies. Even if your ability to invest is limited, small contributions to investment accounts are great for using your earned money to make more income.

There are so many investment options, so it’s best to talk to a financial advisor so you can decide what works best for you in your current income and financial situation.


Managing your finances can be daunting, but it’s essential to achieving financial stability. Taking control of your finances can help you achieve your financial goals, reduce stress, and avoid financial difficulties in the future. Remember to stay committed, stay focused, and make adjustments as needed so you can lessen your money problems and experience financial freedom and wealth-building.