Best Tips for How to Win with Money
In this article I am going to talk about five things you can do to set yourself on the path to win with money this year. If you will commit to making changes in these five areas of your money, you will be able to succeed with money and move steadily toward financial stability and obtaining financial freedom and building wealth for you and your family.
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5 Simple Ways to Win with Money
By following the five simple tips below on how to win with money, you will be able to change your money habits for good and eventually reach financial freedom for you and your family!
1. Determine your why and set financial goals.
This first step is so important. Your why helps you know what is really important to you and your family and gives you the motivation to stick to the financial goals that you set.
Without a powerful why, there’s a good chance you’ll quit before you reach your financial goals. So what are your core values? What is most important to you in your family and in your life? If you align your financial efforts with your core values, you are much more likely to succeed.
Perhaps you want to get out of credit card or student loan debt. Maybe you really want to be able to purchase your own home. Maybe being able to retire with dignity and comfort is super important to you. Perhaps taking control of your money and your income is your current driving motivator. Or maybe it is the fear of what will happen if you are not able to pay your bills or if you continue to be unable to pay all of your bills.
Having fear be your motivating factor is not the best why, but sometimes it is an effective one. Before we started learning about personal finance my husband and I had made some financial decisions that weren’t the best, and we had over $60,000 in debt (this was before we bought our first home).
And when I finally kind of realized the magnitude of that financial burden, there were definitely nights when I was so worried and scared that it was difficult to sleep. There were days when the knot in my stomach never seemed to completely let up. That was because at the time I didn’t know if it really was possible to get unburied from so much debt.
So admittedly, part of my why—and one of my now core values—is a super strong drive for financial security. Even though I enjoy spending money on meaningful experiences with my family, which is another one of my strong values, when it comes down to it, my need for security trumps even that. (That doesn’t mean that we don’t do anything fun as a family—don’t worry! It just means I won’t jeopardize our financial security even for amazing experiences with my family.)
Two more why’s that govern how I spend money (or rather, don’t spend it) are more positive ones than the power of fear—they stem from a desire to have a comfortable retirement and a strong drive toward independence and self-sufficiency. I have a strong need to be responsible and to be able to care for myself.
Take the time to figure out your own why. Why is it worth it to save money? Why is it worth it to invest? Why is it worth it to have an emergency fund? Why is it worth it to get out of debt? Why is it worth it to spend less than you earn?
Why is it worth it to save for retirement? Why is it worth it to save to help pay for your kids’ college? And also figure out your own financial values. Then set goals and plans that align with your why and those financial values.
2. Make (and then stick to!) a budget.
A budget, or spending plan, is basically a list of monthly goals for your money. It is where you decide what you want to spend for each area of your finances. If you are living paycheck to paycheck, you might want to estimate a little high for the different budget categories right at the beginning, just to give yourself a little wiggle room. And we’ll start working on ways to find more money in your budget during the next step.
As you create your first budget and then work to tweak it, don’t shoot for perfection and don’t be too hard on yourself.
It will take a few months for you to get most of the kinks worked out and for you to start really budgeting effectively. But when you do, chances are that you will feel like you got a raise, even before you start adjusting your budget in order to spend less and save more. And that will feel amazing! Find steps for creating your first budget here.
One tool that I love to use to track our finances is Personal Capital. With Personal Capital you can see the activity from all of your banks and credit cards and so on in one place, which is awesome.
And you can also link your company 401(k) or retirement plan and your IRAs and other brokerage accounts, as well. It’s a great way to get an easy, complete picture of your finances. And it’s free! You can sign up for Personal Capital here.
3. Decide to spend less so that you can save more.
Food. One of the easiest ways that you can find room in your monthly budget is to choose to spend less on food. First, if you are spending much money eating out, decide how much you will save in this area. The average American family spends about $300 a month eating out. In contrast, our family spends less than $30 a month eating out. Could you (will you) bring your work lunches?
Could you find other means of (free) family entertainment? Could you have a movie and popcorn night at home? Could you have more potluck dinners and game nights instead of going out to eat for family gatherings? Read this article to find ideas for how to save money eating out.
And now let’s look at your grocery budget. The average family of five spends about $700 a month on groceries. And our family of five spends on average less than half that. There are many, many things that you can do to cut your grocery bill. You can buy less meat and buy less expensive meat. You can limit the amount of junk food, soda, and alcoholic beverages you buy.
You can buy more inexpensive staples like brown and white rice, pasta, potatoes, beans, other grains, and eggs. You can buy only fruits and vegetables in season. You can shop less often, shop with a meal plan (sign up below to receive free, awesome meal planning worksheets to help you start to meal plan like a pro!), use a grocery price comparison chart (sign up for the free worksheet below!), and buy less food.
Read this article to learn more about these and other ideas; it discusses more than 60 ways that you can save money on groceries.
Transportation. Look at your driving habits. Could you drive less? Could you carpool more? Could you bike or walk more? Could you sell one vehicle to become a one-vehicle family? We have had only one vehicle for most of our marriage, which has saved us several thousand dollars over the years.
If you have loans on one or both vehicles, could you sell one or both of them and buy less expensive vehicles for cash (or with a small loan you could pay off quickly)? Could you stay closer to home when you travel for vacations? Read this article to find more than 30 ways to save money on transportation.
Entertainment. Where does most of your entertainment budget go? What could you spend less on or cut out completely? Will you cut your cable or satellite and find cheaper options? Will you find free and cheap options for entertainment to replace eating out if that is a big pastime for your family?
Will you look at ways to lower your smartphone bill? Will you cut your gym and other memberships and find less expensive alternatives for exercising? Will you cut magazine and gaming subscriptions? Will you buy fewer video games and get your DVDs and books from the library? Will you go on less expensive vacations? We save a lot of money by using Airbnb. I love Airbnb! Sign up here to save $40 on your first stay!
For ideas on how to save money on entertainment, read this article.
Check out these related articles:
73 Totally Fun Free and Cheap Activities for Kids
13 Best Tips for How to Raise Kids without Breaking the Bank
Once you have found ways to slash your budget in those three areas, work on reducing the money allocated to your other budget categories, as well. Find more than 20 ideas for how to spend less money in virtually every budget category.
4. Build an emergency fund.
As you are working to improve your financial situation, begin to build a small emergency fund. I recommend building a starter emergency fund of at least $1,000 as quickly as possible by taking on extra work, selling stuff around the house, reducing your spending on things like food and entertainment, or (ideally) all of the above.
At first you may feel like you can put only $50 or $100 a month toward your emergency fund, but increase this amount as quickly as you can. Try to have $1,000 (or $500 if you make a household income of less than $20,000 a year) saved within a couple of months.
If you feel more comfortable with a little more of a safety net, then you can increase that to up to one month’s worth of expenses. And then save a fully funded emergency fund once you are out of consumer debt. Learn here how to build a three- to six-month emergency fund.
Do you want to turbocharge your saving so that you can get that emergency fund built up faster? Do a no-spend challenge.
5. Work to get out of nonmortgage debt as quickly as possible.
Once you have extra money in your budget from reducing your expenses and increasing your income, start really working on paying off your debt. In order to accelerate your debt payoff plan, you can use either the debt avalanche method (pay off debts with the highest interest first) or the debt snowball method (pay off the smallest debts first).
You will save some money on interest if you use the avalanche method, but for most people, I would recommend the snowball method, or else a combination of the two, where you begin with the snowball method and then switch to the avalanche method once your commitment level to getting out of debt is rock solid.
The snowball method is the one we used, and I feel that it works best in most cases because it keeps your motivation high because you have more frequent debt payoff wins. Read this article to learn more about how to get (and stay) out of debt.
By making changes to your money in the five areas listed above, you will be able to get control of your finances and really will be able to win with your money this year and throughout your life. By determining your financial why and outlining your financial goals, making and then sticking to a budget, reducing your spending in order to save more money, creating an emergency fund, and eliminating your nonmortgage debt, you will have a firm foundation to succeed with your money and be on your way to ultimate financial freedom.
Which step are you on in this financial journey outlined above? What is your most important financial priority this year? What could you use the most help with? Leave a comment below and let me know! I would love to hear your thoughts!
Invitation to Share
Was there something in this article that inspired you to change something about your money? Are there ideas or tips that you feel could help others? Would you please take a minute to share this article via email or social media? I would love your help to share these principles of financial well-being. Thank you!
Join our closed Families for Financial Freedom Facebook group to get support and share ideas for how we can all improve our financial well-being by earning more, spending less, saving more, and investing more and reach our financial goals. You can do this! And we are here to help.