8 Money Management Tips for Better Living

Lisa D. Ellis

Reviewed by QualityHealth's Medical Advisory Board

Are you finding it increasingly difficult to make your paycheck stretch to cover all of your expenses? If so, you’re certainly in good company. The cost of living continues to rise ahead of salary increases, and the fear of layoffs is very real for many Americans. Couple these factors with the fact that consumers are increasingly expected to cover more of their health care costs and retirement, and it adds up to a sure-fire recipe for financial anxiety.

"People today are concerned about their jobs, paying bills, putting kids through college and so much more," says Derrick Kinney, ChFC, CASL, CLTC, CRPC, a financial advisor who runs Derrick Kinney & Associates in Arlington, Texas. "With so much on their shoulders, they’re experiencing more money-related stress than I have ever seen in the past twenty years. People who come to my office often want a better life for themselves and their kids, but they feel like they’re on a treadmill and can’t seem to get ahead."

8 Money Management Tips for Better Living

If all of this sounds familiar, don’t despair: Kinney has this advice to help you reach your financial goals.

Define what you actually hope to achieve. Are you looking to retire to Hawaii when you turn 65? Or do you want to buy a beach house where you can summer with your family? When you have a clear idea of your goals, it can be much easier to work toward them, Kinney says. For instance, if you put an extra $50 in your retirement account each month and know it is for something you care about, that will make your sacrifices much more meaningful, especially when you calculate how much you’ll accrue by the time you reach retirement age.
Know your spending habits. "Budgeting can be overwhelming," Kinney says. But you can’t make the decision to reduce your spending if you don’t have a true handle on where your money goes each month. He suggests clients take three months to track their spending, so they can get an understanding of their expenses, and where they might cut back without feeling the pinch too much.
Be realistic. "I find people want to take drastic steps, but smaller changes can be easier to sustain over time and therefore, can add up to bigger gains," Kinney says. It can help to look at managing your money in the same vein as dieting: If you try to drastically change money habits, you may be setting yourself up for failure. Instead, Kinney suggests taking it slow to make changes you can stick with over the long-term. For instance, if you want to pay off high balances on your credit cards, it can help to set quarterly goals: Figure out how much you can pay over the next three months and watch the balance go down. Once you reach this goal, you can set another one for the next quarter. With manageable targets, you’ll set yourself up for success.
Plan for emergency expenses. Unfortunately, you can rarely predict (or prevent) a car breaking down, a plumbing emergency, or unexpected medical expenses. These unwelcome surprises can easily throw you off track. That’s why Kinney recommends deciding in advance how you will handle such unplanned but not uncommon financial obligations—you won’t feel as overwhelmed if they come up.
Put yourself first. Many parents struggle with the decision about whether to save for their retirement or their children’s college education. Kinney says in most cases, your retirement should win out. This is because if you can’t support yourself in your retirement, you could become a financial burden to your children. Meanwhile, your children should be able to take out loans to pay for their education, and pay them off over time. Kinney adds that parents should talk to their children about what they are thinking and why, so there aren’t any surprises later.
Consider investing in long-term healthcare insurance policies to protect yourself and your children. The younger you are (and the better your health) when you purchase such a policy, the lower the premiums will likely be.
Don’t compare your money situation to others. When people try to keep up with their neighbors and friends, they can set themselves up for added money stress. Each family should come up with the financial goals that suit their own situation.
Check yourself on a regular basis. Monitor your progress, but don’t feel that your money management is an all-or-nothing proposition. If you find yourself sidetracked from paying off a credit card balance or saving for your retirement, it doesn’t mean you have to forego these projects. Instead, give yourself permission to make mistakes, and then get right back to your money management plan. It may take you a little longer but you can still accomplish your goals: "Crises happen all of the time, so we just want to make sure that afterward, people get back on track as soon as they can," Kinney says.