Managing your finances truly goes beyond adding numbers on a spreadsheet and cutting expenses. Being honest, most of us avoid our finances because we know there is a bigger problem behind how we got here in the first place. It can be due to a variety of reasons: our views on money, how are parents managed money, lack of financial literacy, or just life emergencies that happen.
I know it can feel overwhelming, but the good news is that it only takes small steps to see positive results. No matter how many courses or books you read, you will not see results if you never start.
Whether you’re goal is to save for your first home, pay off debt, or just want to feel more in control of your money, improving your finances is all about the mindset of staying consistent and changing some habits.
Implementing these 10 easy steps will help you get started on the path to financial wellness—no matter where you are right now.
1. Create a Budget
This part is key regardless of how much your making. If you can’t manage a $30,000 salary, making $100,000 will still leave you living paycheck to paycheck if you don’t learn how to budget. The first step to improving your finances is knowing where your money is going. A budget helps you track your income and expenses, giving you a clear picture of how much you can save or spend each month.
You can start with a simple spreadsheet, app, or pen and paper works just as good. All you need is to start. Once you see where your money is going, you can make smarter decisions about where you spend your money and where it makes sense to cut back.
Only then you can start to set a clear financial plan. Whether it’s saving for a trip, paying off student loans, or building an emergency fund, your budget will be your financial roadmap.
2. Set Up an Emergency Fund
Whether it was $1,500 or $15,000 I can’t tell you how many times an emergency fund has saved me from financial ruin. From losing my job, car repairs, to medical bills, having an emergency fund gave me peace of mind when the unexpected expenses came up. Life can be unpredictable, and the last thing you need is the added stress of not knowing where money is going come from to cover those emergencies.
Start by saving enough to cover three to six months of your basic living expenses. Even if that seems like a lot, the key is to start small and stay consistent—set aside a little each month, and over time, you’ll build a cushion.
If saving a large sum seems unattainable for now, try setting smaller goals, like $500, then building from there. This fund should be separate from your checking account so you won’t be tempted to dip into it for everyday expenses. If possible go with a different bank for your savings fund (out of sight, out of mind).
3. Pay Off High-Interest Debt
Deciding which debt to pay off first can be overwhelming. However, credit card debt and other high-interest loans should be priority as these can weigh heavily on your finances. The longer you let these debts sit around, the more interest you pay, which leaves you with less money to save or invest in your future.
Two popular strategies are the debt snowball method (paying off the smallest debts first for psychological wins) and the debt avalanche method (tackling debts with the highest interest rates to save more money over time).
Once you start clearing your debt, you’ll free up more money to allocate to savings and other financial goals.
4. Automate Your Savings
Saving money doesn’t have to be hard if you automate the process. Set up automatic transfers from your checking account to a savings account every month. This way, you’re less likely to spend what you don’t see.
A good rule of thumb is to save at least 20% of your income—split between an emergency fund, retirement, and other savings goals. However, adjust according to your current situation. If you can do more great! If not, do less but keep it consistent. Do what works best for you.
Even small, automated transfers add up over time and take the guesswork out of saving. Again, the goal is to simply start.
5. Start Investing Early
One of the best ways to grow your wealth is by investing. The earlier you start, the less you actually have to invest monthly because the more time your money has to grow thanks to compound interest—essentially earning interest on your interest. Even if you can only invest a small amount each month like $50 it’s worth it.
Consider starting with a 401(k) if your employer offers one, or open an Individual Retirement Account (IRA). You can also look into low-cost index funds that give you broad exposure to the stock market with less risk. If you want to set it and forget it—- go for a Target Date Index fund and learn as you go. You can always change your investments later if you want.
Investing may sound intimidating, but getting started early will make a huge difference in your long-term financial future.
6. Build Your Credit Score
Another mistake I made was thinking I should avoid credit and pay everything in cash. I was unaware that strong credit score opened doors to better financial opportunities, like lower interest rates on loans or easier approval for renting a home. Although I had a good credit score, I had no credit history which is equally important.
You can build or improve your credit score by opening a credit card, paying bills on time, keeping your credit card balances low, and regularly reviewing your credit report to spot any errors or fraudulent activity.
Over time, these small actions will increase your score and make you a more attractive borrower.
7. Reduce Unnecessary Expenses
We all have spending habits we can cut back on. Whether it’s those daily lattes, subscription services you rarely use, or eating out too often, small savings here and there can add up to big savings. Review your monthly expenses and ask yourself where you can cut back.
This will look different for everyone, but my recommendation is if you feel like you can’t eliminate the expense entirely, try downsizing slowly where you can. Like try eating out only once per week or reducing your streaming subscriptions from 5 to 2, switching a few name brand items to generic, can free up cash for savings or investing without feeling like you’re depriving yourself.
Eliminating all expenses or making too many changes at once can feel overwhelming and unrealistic. This will make it harder to stick to your plan.
8. Increase Your Income
If you have already cut back on all the unnecessary expenses and you are still struggling, you need to increase your income. This could mean taking on a side hustle, freelancing, asking for a raise at work, or look for a new job entirely.
If you have skills that others are willing to pay for, like graphic design, writing, or tutoring, now is a great time to explore those options. You could also consider going back to school or taking courses to boost your earning potential in your current career.
Even a small increase in income can help accelerate your financial goals, whether it’s paying off debt or building your savings faster.
9. Plan for Big Purchases
When it comes to large purchases like a car, home, or vacation, planning is key. By setting aside money over time, you can avoid going into debt for these expenses. Use your budget to map out how much you need to save each month for these big-ticket items.
Planning in advance also helps you avoid impulse purchases that could hurt your financial health. Whether it’s a home down payment or a dream vacation, give yourself time to save, and you’ll avoid the stress of large financial commitments.
10. Set Financial Goals and Track Your Progress
The key to long-term financial success is setting clear goals and regularly tracking your progress. Start by setting small, achievable goals, like saving $1,000 for an emergency fund, and then move on to bigger ones, like buying a home or saving for retirement.
Use tools like budgeting apps or even a journal to keep track of your savings, debt payments, and investments. Check in regularly—weekly, monthly, and quarterly—and adjust your goals as needed.
Conclusion
Improving your finances doesn’t have to be overwhelming. By following these 10 simple steps, you’ll be on the path to financial freedom. Remember, consistency is key—small, steady changes over time lead to big results. Whether you’re just getting started or looking to take your financial game to the next level, don’t wait to take that first step today. I’m rooting for you. You’ve got this! 🙂
