How to Manage Your Money

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What we cover:

  • 3 money management tips: track what you spend, consider creating goals; and review/revise your plan.
  • SMART goals: Specific, Measurable, Attainable, Realistic and Time-bound.
  • Revisit the 50/30/20 Rule (50 percent essentials, 30 percent wants, 20 percent savings).

Yes, learning how to budget and manage your money can make your life easier.  

But before we deep dive  into our three money tips — track your spending, create goals, review and revise your plan — here's an important thing to remember: your spending habits will change, because your life is going to change. 

You may get married, have a baby (maybe twins!), start your own business, or move halfway across the country. All of these life changes mean your budget will change too. To take action on our three money tips, consider using a money management app that can help automate much of the work.

Tip 1 - Track what you spend 

When you track your take-home pay, you’ll have a clear line of sight into your finances, post-taxes, and how that money is allocated. This is a must. Once you’ve done that, you can see how and if your spending patterns are in line with your idea of financial well-being.

Look, there’s two different ways you can go about doing this and one way is clearly more cumbersome than the other.

We think the path of least resistance would be to download the Clarity Money personal finance management app and link your bank accounts. Then you can track your spending according to certain categories plus engage with our new Weekly Budget feature. Shameless plug, we know — but we’re really proud of that thing.

If you’re more of a pencil-and-paper kind of person, then nestle into a comfortable chair and get ready to crunch some numbers and make lists. If you insist, try these lists:

List all of your regular sources of income – you want your post-tax total (what you take home) and to track income that’s dependable since that’s essentially your financial bedrock.

  • Take inventory of all accounts, including account balances of your checking accounts and bank accounts, which also help you start to understand your net worth.
  • List expenses you have every month, like mortgage payments or rent, loan payments, insurance; and what you tend to pay every month on variable, necessary expenses — like gas or grocery store bills — that show up on credit card bills.
  • List expenses that may be more flexible, like eating out; and optional — like a vacation you may be saving up for. 
  • List paid subscriptions that you've signed up for, including gym memberships, video/music streaming services, fashion collections, food delivery providers, online tools, digital news outlets, and gaming companies.

Once you have these numbers lined up, you’re ready to answer two important  questions:

  • Are you spending more than you make? 
  • Do you have some money set aside for savings? If not, do you want to start saving and create savings goals?

If your spending or saving levels aren’t where you want them to be, the list you just put together may help you re-prioritize your expenses, to see where you may be able to cut back. For example, you may realize that you have been paying for a subscription for the last few months that you haven't been using, so canceling that subscription or finding a less expensive alternative could save you money in the long run.

If you’re looking for a financial compass of sorts, the 50/30/20 budget rule could provide a strategy for allocating a steady income. 

It breaks down like this: 

50 percent for essentials – These are recurring monthly expenses. Think insurance, rent or mortgage, gas, groceries, etc.

30 percent for wants – what do you want but don’t need? Dinner and movies? Vacations? Collectibles? Clothing? 

20 percent to save – Still building an emergency fund? That’s what this can be used for. Or, just use it to continue stashing money away — because there’s no harm in padding your savings account.

Tip 2 – Consider creating goals

Do you understand where your money is going? Check.

And can you see how it measures against the money you’re bringing in? Check and Check.

Great, so now you can create goals and a plan to reach them — because goals are useless without a clear plan of attack. 

A goal that’s smart is a goal with a plan to reach it.

Maybe a goal is to invest more on a regular basis. Or continue to build up your emergency fund. Thinking about getting a new car, upgrading your living situation or taking a much-needed vacation? These are all goals, and there should be an action plan behind the ones you plan to prioritize. 

To reach your goals, you’re going to want to dive into another set of numbers: how much money you’ll need to reach each of those goals, and what you’ll need to save every year, every month, and every week to achieve them. 

It requires  a few steps, but if you’re serious about budgeting it’s worth it because breaking down goals into parts is the concept behind what are called “SMART” goals — which stands for goals that are Specific, Measurable, Attainable, Realistic and Time-bound. 

In other words: A goal that’s smart is a goal with a plan to reach it. You don’t have to do the letters in order. Just account for each of them.

What a SMART goal looks like:

Let’s say for example, that your goal is to save $2,000 in an emergency fund (Specific).

In one year (Time-bound).

Breaking it down monthly or weekly, you would need to save on average about $167 per month or about $38 every week (Measurable, Attainable, and, if we’re on a roll, Realistic).

Breaking this one goal into parts makes it easier to act on than pursuing a vague goal like “save some money.”

So that’s part one of saving. 

Goals and plans aren’t the kind of thing you can just set and forget.

Part two includes knowing that it’s possible for the money you’re setting aside to earn money while it waits to be spent — let it sit in an account that earns interest. 

Some options you may want to consider: savings accounts that offer high Annual Percentage Yields or “APYs” — the total interest you will earn on a savings account or certificate of deposit in one year, including all compounded interest. (Marcus offers a high-yield Online Savings Account.)

What if debt is a major part of your financial picture?

Getting a handle on higher interest debt and the associated interest rate is important for many reasons, including lowering your credit utilization and shoring up your credit score. 

Big-picture “How do I tackle my debt?” advice goes beyond creating a budget to thinking about your current subscriptions and credit score. Now another shameless plug — the Clarity Money app can aid in staying on top of your debt and credit standing through free credit score tracking. 

Tip 3 - Put your plan to work, review and revise

Now that you’ve got a budget, goals and plans for how to meet those goals, you should feel ready to take action. Keep in mind that it’s OK to make adjustments. Sometimes in life you just need to adapt.

Plus, this will help you get ready for the next phase: checking in regularly on your action plans to see if you’re on course to achieve your goals. Keep tracking your spending, keep seeing if you’re staying within your budget and identify if anything is throwing you off track.

Then, do it again. In fact, consider scheduling regular check-ins on your progress, because we know how difficult it can be to make time for this. Goals and plans aren’t the kind of thing you can just set and forget. But building check-ins into your schedule should make it habitual over time, and when you establish good habits like this it can feel like achieving any and every goal is within reach.

If you get a raise — first, nice job! Next, make a plan for it by first asking:  is the increase needed to pay down debt? Can you repurpose it for a few months to build an emergency fund? Can you put it towards a vacation savings account? 

Sound like a familiar pattern? Good; you’re getting the hang of it. 

Ask for support and reward yourself

Having someone remind you that you have financial goals may help you stick with them — consider finding an accountability partner, like a trusted friend or family member, to help keep you on track. Clarity Money can also offer notifications and weekly budget tracking to help you ensure you’re on track. 

Above all else, give yourself some credit. Any progress is good progress. So celebrate even the small wins with your budget. For example, 12 months to meet a SMART goal of saving $2,000 for an emergency fund can feel like a long time. So consider giving yourself a small (budget-friendly) reward for achieving each SMART goal.   

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Marcus by Goldman Sachs® and Clarity Money® are both brands of Goldman Sachs Bank USA.

This article is for informational purposes only and is not a substitute for individualized professional advice. Articles on this site were commissioned and approved by Marcus by Goldman Sachs®, but may not reflect the institutional opinions of The Goldman Sachs Group, Inc., Goldman Sachs Bank USA or any of their affiliates, subsidiaries or divisions.