15 Top Tips To Master Your Money In 2021 - The Humble Penny (2024)

15 Top Tips To Master Your Money In 2019 – Ad

As the New year kicks off, many will have money resolutions.

“Save more money”, “Stop borrowing”, “Get out of debt” etc.

These tend to disappear after a few days and weeks as resolutions aren't enough to encourage change.

Change usually requires goals backed with active decision making around taking action re habits, lifestyle etc.

Taking the steps to master your money in the New Year is important for a number of reasons. You,

• Grow in confidence to make the right decisions in your financial life.
• Approach the year with more careful planning.
• Get better at doing something different to how you perhaps operated the previous year.

Doing this will require you to not only think of how you can master your money but actually diarise slots in your diary to consider your finances.

To consider the top tips to help you master your money in 2019, we'll look at them in three broad sets:

1. Toolset
2. Skillset
3. Mindset

TOOLSET

These are the mechanisms you use to develop your skills and achieve your goals.

1. Know Your Net Worth

Surprisingly, many people don’t know their financial net worth and don’t bother to work it out.

Your net worth is a snapshot of your current financial position. Think of it as a financial selfie!

By definition, it is the sum of all your asset less all your liabilities.

Part of the reason why I like to begin from the net worth is that it shows you everything you own and owe.

Having this on one page is powerful as it gives you a helicopter view from which you can make decisions and set goals.

Knowing your financial position is not enough. You need to understand your financial performance and this where a budget is helpful.

2. Budget Consistently

A budget is a plan for how you’re going to distribute all the income that you make.

You could either distribute it to savings and investment or use it to pay expenses such as debt, living cost etc.

As a budget involves both income and expenses, it should cover your plans for your income and plans for your expenses.

Setting a budget is one thing, doing it consistently is quite another.

This is often tied to a lack of knowledge on how to budget properly and partly down to lack of motivation.

Budgeting consistently will help you ensure you live within your means and avoid taking on debt to support your lifestyle.

Related post:5 Ways To Motivate Yourself To Budget Consistently

3. Monitor Your Credit Report

If you still have a mortgage or are likely to borrow money in the near future, then monitoring your credit report is a big deal.

Especially as the information that leads to the score is supplied by external parties.

So you want to ensure that the correct information is held, and do what’s necessary to boost your score.

There are many ways to improve a poor credit score today.

Experian offers you the opportunity to check your credit score for free, forever.

4. Decide On A Savings Rate

I’ve previously written about why I think savings should be prioritised over investing.

Having a fixed savings rate gives you something to aim for and measure against.

When we started out years ago, we aimed for a savings rate of 20% of our disposable income and gradually increased it.

This made saving fun as we saw more of our money remain in our bank account and that motivated us to do better.

I’d recommend starting with a percentage you’re happy withand aim to increase this by 1% a month.

If saving money isn't painful, then you're not saving enough.

It will be difficult initially, but you’ll be surprised how easily you’ll get used to trying to beat your previous savings rate.

Deciding on a suitable savings rate is also a positive step towards aiming for financial independence.

5. Use Cash More

Making money more digital changes behaviour as many are really unable to keep track of spending.

This becomes worse as people spend above their means and begin relying on debt.

If you’re currently in debt and see things getting worse, I’d highly recommend only spending cash not debit or credit.

This helps to give you more of a focus on what you actually have or don’t have.

6. Manage Cash Flow

The number one reason why many are broke is due to the inability to manage cash flow.

Cash flow refers to the inflow and outflow of cash out of your life.

Many people understand how much they earn as it’s often from one source.

However, not many understand how much they spend as they often don’t track expenses.

Another reason for this is because it’s easy to live a lifestyle of excess and find it hard to admit to.

Putting important controls in place such as budgeting (see above) is important.

Another way of managing your cash flows is to have a bias for the essentials.

7. Make Your Money Grow

Investing your money is best kept simple.

Learning to invest is a necessary skill, which not only requires the need for knowledge, but also the need for a particular type of mindset.

Choosing to invest your money is not enough. It has to be linked to your medium and long term goals.

I highly recommend pursuing a passive investing strategy that does not require you to time the market.

Check out these 10 Tips For Smarter Investing

SKILLSET

This refers to your motivation to put your abilities to use.

It also covers how you act based on your knowledge and understanding.

8. Focus On Personal Development

By far the fastest way to increase your earnings over time is to focus on improving your abilities.

The focus on personal development is also one way to fast track your financial independence.

Practical ways of doing this include:

• Reading books
• Taking risks i.e. try new things and experiment.
• Learn new formal skills such as qualifications.
• Use the internet for focused active learning, not passive consumption.
• Take on new challenges in your job and seek promotions.
• Leave your job if you’re not growing and seek new opportunities.

9. Use Your Skills

Using existing skills is one of the most underused resources many people have.

There is always someone else out there seeking the abilities you currently have.

So one way to improve your financial outcome this year is to apply your current skills to a new audience.

If you’re good at teaching, consider teaching online.

Perhaps you’re good at encouraging others and listening, consider coaching.

10. Get Coaching

Coaching is the fastest way to get a result.

Rather than scanning the internet seeking answers, sometimes it helps to find the person with the answer.

So a good consideration is – How many people are there between your problem and your solution?

Don’t be afraid to ask people to coach you either. Often times, it’s inexpensive or free.

MINDSET

This is how you see and view the world around you.

It covers your beliefs and ways of thinking that drive your behaviour and life outlook, and how you’ll deal with situations.

11. Set Goals

Setting goals around key elements of your finances is a good way to stay motivated and see change.

These could include earning, saving and investing more.

One of the most effective areas we found for setting goals is around debt.

As interest on debt compounds, it is not only growing daily but can also be expensive.

Read: Why Setting Goals Is Important For Debt Freedom

12. Spend Less Than You Earn

Before debt became so easily available, more people spent within their means.

That’s because the only access to money they had was their income.

One way to ensure you spend less than you earn is to put necessary controls in place.

E.g. practically reduce access to short term expensive debt.

Have no spend months or cut your credit cards up if you must.

13. Diversify Your Income

Diversifying your income is all about reducing risk.

Such risks can come from losing your job or becoming ill etc.

An easy way to begin this is to identify one source of income you’d like to target.

Commit some time to it, and learn what is necessary for this to become a reality.

Another way of achieving what diversification of income gives you is to build an emergency fund.

This too reduces your risk, although temporarily.

14. Earn More Money

One of the biggest money blocks many have is around their capacity to make more money.

Just because the news tells us that wage inflation is 2 – 3%, does not mean that’s all we can make.

It’s all down to the mindset.

I personally don’t see a cap when I think of my income. My focus is usually on how I can employ creativity to create value.

Value creation leads to value capture, and through that, you make more money.

So I’d highly recommend earning more as a priority. Whether it’s through your job or other side interests.

Don’t do it and then suffer lifestyle creep. Do it, and use it as a vehicle for building up a buffer and potential freedom fund.

Read: 21 Passive Income Ideas For A Freedom Lifestyle

15. Communicate

Communication is the number one soft skill.

In a relationship where one person spends and another doesn’t, communication is often lacking.

Communicating effectively with your partner is key to mastering your money in the new year.

This ensures you’re on the same page and heading in the same direction.

Communication also encourages accountability.

If you don’t have a partner, I’d highly recommend asking a trusted friend to be your accountability partner.

They can help you do the right things and tell you when you’re crossing the line.

What are you doing differently to master your money in the New Year?

Do please share this post if you found it useful, and remember,in all things be thankful and Seek Joy.