Ways to manage your money better

Sticking with money management tips isn't always easy. Managing your finances can mean chopping some of the fun out of your daily routine. But all of your hard work will be worthwhile.

You could end nights spent worrying over unpaid bills. And when the bill comes due for a romantic dinner, you know you'll be able to pay it.

Follow these steps to make the most of the money you have now and build a secure future.

1. Choose the Right Bank

Your bank does more than hold money for you. A bank is a partner in your financial health and your future. Unfortunately, some institutions just don't make great partners.

For example, some banks charge fees for everything, including:

• Paper statements. Opt for a mailed copy instead of an online version, and you'll pay for it.
  
• Overdrafts. Spend more than is available in your account, and you'll pay a hefty fee.
  
• Debit card replacements. Lose your card, and you'll pay to get a new one. You might even pay more if you want it quickly.
  
• Balances that are too low. Many banks have minimum balance requirements. If you drop below, expect a fee.
  
• Account maintenance. Some banks even charge $25 to close your account.
  
• Hidden reasons. It’s often not clear what many of these hidden fees are for.
  

Pick the wrong financial partner, and you could spend more on fees than you expect, and that could blow your budget.

The right mobile banking app could also help you develop money management skills. For example, we help you learn how to set a budget, save for the future, and don’t charge overdraft or hidden fees and don’t have any minimum balance requirements. At Current, we give you instant spending notifications, so you know exactly when money goes out of your account, when you enable push notifications. We offer Savings Pods so you can move money easily, helping you to save for a larger purchase. We also publish plenty of blogs to help you learn more about how to be a money-savvy consumer.

Download our app and sign up for Current in just 2 minutes.

2. Watch Your Bank Balance Carefully

We've mentioned overdraft fees already, and close to 20% of Americans have been hit with a charge like this within the last year. Current has free overdraft, up to $100 and no one ever pays overdraft fees.

But supervising your balance has additional benefits.

It's difficult to manage your money when you don't know how much you have or where it goes each month. Watching your account is one of the best ways to understand your available money and current spending habits.

Pay close attention to:

• Income. How much do you take home after taxes and fees are removed? Does your salary vary, or does it stay the same from month to month?
  
• Automatic deductions. How much comes out of your account due to prior agreements you've made? You might be surprised at how much your Netflix addiction costs.
  
• Top budget items. You may believe you spend all of your money on groceries and clothing. But look closer, and you may discover that your car and your dining habits have a bigger bite.
  
• Leftover revenue. When your next paycheck is about to arrive, do you still have money in your account? Or has all of it gone?
  

Use automated tools, like those we have at Current, to view your points. With us, you’ll get paid up to two days faster, enjoy free overdraft and instant gas hold refunds, and avoid hidden fees.

3. Craft a Working Budget

If the idea of setting spending limits makes you cringe, you're not alone. Even wealthy people struggle to come up with a reasonable budget.

But a budget can help you meet key goals, such as:

• Saving for the future.
• Paying down your debt.
• Living within your limits.
• Cutting back on unnecessary expenses.

Consider a zero-based budget. Experts say it takes just a few minutes each month to craft and maintain a plan like this. Follow four steps:

1. Determine your monthly income. Jot down how much you make each month after taxes. Don't forget to include the funds from all the jobs you hold.
   
2. Write down all recurring expenses. Rent, car payments, utility fees, debt payments, and groceries happen each month. Determine how much you normally spend, and plan to pay them again next month.
   
3. Write down all seasonal expenses. Holiday parties, birthday gifts, and other one-time fees should appear in your budget too.
   
4. Tinker to zero. If you have just enough to cover all recurring and seasonal expenses, your budget is complete. But if you have money left over, use it to pay down your debt or toss it into savings. Your goal is to account for every dollar you have.
   

Think of your budget as a living document. You may need to amend or adjust it due to outside problems. If you miss a few shifts at work, for example, your monthly budget may be tighter than the prior version.

But do your best to stick with the plans as you've written them. Your plan should guide you through most financial choices.

4. Create an Emergency Fund

If you have nothing set aside and the unexpected happens, you've created what financial experts call a "financial nightmare." You'll have to borrow to cover your expenses, and it might take months to dig out from under the damage.

Ensure that your budget contains a small line item for savings. If you're living close to the bone, you may only set aside $5 or so each month. But in time, you'll see your money grow. And when problems arise, you'll be ready.

We make savings easy at Current. Set up Savings Pods, and you can set aside money for a future purchase.

5. Don't Borrow More Than You Can Repay

Lenders will lure you in with phrases like, "Get the credit you deserve." Sign up, and it feels like you've been given free money. But every dollar you borrow must be paid back with interest. Take out too much, and it's difficult to recover.

Experts say 43% is a good debt-to-income ratio. Figure out yours by:

• Assessing payments. Add up the amount you pay toward your debt each month.
  
• Determining gross income. Look at your check stubs, and find out how much you earn before you pay taxes.
  
• Doing the math. Divide your payments by your income.
  

Every time you're tempted to take on more debt, determine how much it will add to your current load, and find out if your ratio climbs over 43%. If it does, borrowing that money right now isn't wise for you.

6. Attack Debt With a Plan

Credit card companies, mortgage servicers, auto loan companies, and others all want a piece of your money. Who should get the biggest piece? When it comes to debt, don't worry about spreading the load fairly. Be strategic.

Experts say the best plan involves paying down the loan with the highest interest rate. You'll save money, as you'll spend less on fees. And when you've paid off the balance, you can move down to the next loan with the highest balance.

It's important to note that every company you owe should get at least some money from you each month. You can't skip payments to some companies to let you pay more to another. But if you have extra room in your debt budget, put it toward the most damaging debt first.

7. Automate Savings When You Can

Your job may offer you the quickest and best way to improve your financial situation. If you're given the opportunity to sign up, take it.

A retirement account, such as a 401k, is beneficial due to:

• Hidden savings. Money comes out of your paycheck before you ever see it. You won't be tempted to skip this month's contribution, as it's already come out of your check.
  
• Pre-tax savings. Companies take your contribution out of your check before they assess taxes. For example, you make $2,000 per month, and you set aside $300 for your 401k. You'll pay taxes on $1,700, not $2,000.
  
• Tax credits. At the end of the year, when your taxes are due, you can deduct some of the money you've set aside in your 401k.
  
• Retirement prep. Just a quarter of Americans start saving for retirement in their 30s, when experts say they should. Take this step, and you'll be in rare company.
  
• Growth potential. Money sitting in your 401k can grow based on rises in the stock or bond market. You'll make money while doing nothing at all.
  

Some jobs don't offer 401k benefits. And some won't help you if you only work part-time instead of full-time. But if you're given the chance to save with a 401k, never give up the opportunity.

Current Can Help

We can help you get paid up to 2 days faster with direct deposit with our Premium Account. And we don’t have any overdraft fees.

Find out more about how we help you manage your money.

Current is a financial technology company, not a bank. Banking services provided by Choice Financial Group, Member FDIC.

References

Bank Accounts: More Fees Are Coming. How to Fight Back or Flee. (February 2012). Consumer Reports.

Safe Checking in the Electronic Age. (May 2012). Pew Charitable Trusts.

The 5 Best Money Management Tips I Could Have Told Myself When I Was 22. (July 2020). Business Insider.

How to Manage Your Money. Ramsey.

8 Simple Money Management Tips to Follow in Your Daily Life. (August 2020). Entrepreneur.

What Is a Debt-to-Income Ratio? Why Is the 43% Debt-to-Income Ratio Important? (November 2019). Consumer Financial Protection Bureau.
This Is When People Start Saving for Retirement: And When They Actually Should. (September 2019). CNBC.