Let’s face it: It can take a lot to feel like you’re “good” with money. We don’t learn about personal finance in school, going through credit card bills can be a big scary mess and some so-called experts will shame you for simply buying a cup of coffee. But your finances are not something you can ignore forever. If you feel like you’re not good with money, here are some important principles to keep in mind.
Dealing with your finances isn’t about doing math; it’s about knowledge.
For a lot of people, there’s a big misconception that being good with money means being good at math or knowing the ins and outs of the stock market. That’s simply not true. Yes, you may need to whip out a calculator for some basic number crunching, but you didn't need to earn an A in high school algebra to get a handle on your finances.
Face your fears and start writing everything down.
Check your account balances, debts and spending often to make sure you know where your hard-earned cash is going. Don’t like putting pen to paper? Totally fine. There are plenty of free apps that will help you stay on top of your money.
Pay yourself first.
When you get a paycheck, what’s the first thing you do with it? Before you start paying your landlord, your credit card company or the person who owns your local bodega, you have to pay yourself. If you start saving a little bit each paycheck, even if it’s only $20, that money will grow over time. You’re the one doing the work and earning that cash, and future you deserves to reap the benefits.
Start an automatic transfer from your checking to your savings account each time you get paid. If you can, use a high-yield savings account, which will give you a better interest rate. Interest is basically free money, and there’s no reason not to go for it. Many accounts like these will offer upwards of 1% in interest, whereas many typical checking accounts only offer a fraction of that.
Build good credit without taking on a dollar of debt.
Having a good credit score (a score of 670 or higher, according to the three main credit bureaus) is important for a lot of big financial decisions, including taking out a home mortgage, getting other kinds of loans or even just opening a new credit card. So, how do you do it?
Your credit score takes into account a few factors, like your length of credit history, how much credit you use and whether or not you pay your bills on time. That last one is the most important. When you use a credit card, you need to pay your bills on time and in full every single month, no exceptions. If you just pay the minimum balance (which can be tempting), you end up accruing interest on the rest of your bill, meaning that you will owe more than what you originally charged to your card, on top of late fees.
One easy way to build good credit is to open a credit card with no annual fee and put one or two recurring charges on it, like a streaming subscription or a gym membership, that you know you can cover every month. Set that card to autopay and you’ll never have to think twice about maintaining a high credit score.
Make a plan that suits your needs.
Budgeting is like dieting. If you straight up stop any kind of discretionary spending, or stop eating carbs cold turkey, more likely than not you’ll have an impulse buy a bagel a few weeks later. Build a plan that works for you.
If you don’t like tracking a lot of little purchases, use a bucket system, where you can spend a certain amount of money however you’d like. Or, try the envelopes method — literally put cash into envelopes for different expenses, and once it’s gone, it’s gone. If you hate putting pen to paper, get an app that will send push notifications when you hit your spending or savings goals.
The real key is checking in on your budget often. If making or even just following a budget doesn’t sound like your idea of a good time, there are ways to make it at least a little fun. Reward yourself for sticking to the plan, even if the plan has to change along the way.
If you self-identify as being bad with money, there’s no reason you can’t change that mindset. Stick to a few simple strategies, don’t be afraid to ditch what isn’t working and be gentle with yourself along the way. Any progress is good progress for your finances.