How Good Are You at Managing Your Money? A Practical Guide to Money Management
Money is more than just dollars and cents—it’s security, opportunity and peace of mind. Yet managing it well isn’t second nature for most people. Whether you’re a business owner, professional or retiree, the way you handle your finances can impact every part of your life—from your career and relationships to your long-term goals.
So, how good are you at managing your money?
In this article, we explore the essentials of strong financial management—what it looks like, why it matters, and practical steps to improve. Along the way, we’ll offer insights and checkpoints that you can use to assess your own financial habits.
What Is Money Management?
Money management refers to how you handle all aspects of your finances—from budgeting and saving to investing and tax planning. It includes:
- Spending wisely (budgeting, controlling expenses)
- Saving consistently (building emergency funds and sinking funds)
- Investing strategically (retirement plans, taxable accounts, real estate)
- Managing debt (eliminating bad debt, leveraging good debt)
- Planning ahead (estate planning, insurance, tax planning)
People who manage their money well are proactive, informed and intentional. They make decisions with their future in mind—not just their current comfort.
The Signs of Strong Money Management
Here are several indicators that you’re handling your money well:
- You Live Below Your Means
- You consistently spend less than you earn.
- Your lifestyle adjusts when your income fluctuates.
- You Pay Yourself First
- You save regularly and automatically, not just what’s left at the end of the month.
- You Have a Budget (and You Stick to It)
- You know where your money goes each month.
- You track spending and make adjustments as needed.
- You Avoid High-Interest Debt
- You pay off credit cards in full monthly.
- You understand the cost of borrowing and avoid debt traps.
- You Have an Emergency Fund
- You’ve set aside 3 to 6 months of living expenses for unexpected events.
- You Invest for the Future
- You contribute to retirement accounts like 401(k)s or IRAs.
- You rebalance your portfolio periodically and stay the course.
- You Plan for Taxes
- You understand your tax situation and adjust your strategy annually.
- You collaborate with a tax advisor proactively—not just at filing time.
- You Have Clear Financial Goals
- Whether it’s buying a home, starting a business or retiring early—you’re saving with purpose.
- You’re Financially Literate
- You understand basic financial concepts like compound interest, inflation, and diversification.
- You Sleep Well at Night
- Your financial choices don’t keep you up worrying.
If most of these statements describe you, congratulations—you’re on solid ground. If not, don’t worry. You’re not alone, and you can always improve.
Common Money Management Mistakes
Even well-intentioned people can fall into traps. Here are some common money mistakes we see in our advisory practice:
- Lifestyle Creep
- Increasing your spending every time your income rises, rather than increasing savings.
- Ignoring the Budget
- Living without a clear spending plan often leads to overdrafts, missed bills or stagnant savings.
- Not Saving Early Enough
- Time is your best asset when saving for retirement. Waiting too long can mean working much later in life.
- Overusing Credit
- Relying on credit for basic needs can lead to unsustainable debt levels.
- Financial Disorganization
- Missing payments, losing track of subscriptions, or failing to consolidate accounts can waste both time and money.
- Underestimating Taxes
- Failing to plan for quarterly estimated payments or taking unexpected gains can result in penalties and surprise tax bills.
How to Improve Your Money Management Skills
Build a Budget That Reflects Your Values
A budget isn’t about restriction—it’s about priorities. Start by:
- Listing your fixed expenses (rent, loans, utilities)
- Estimating your variable spending (groceries, dining, hobbies)
- Setting goals (emergency fund, vacation, home down payment)
- Allocating funds toward savings first
Use tools like YNAB (You Need a Budget), Mint, or Excel to stay on track. Review your budget monthly.
Establish Financial Goals
Your goals should be:
- Specific (“Save $20,000 for a down payment in 24 months”)
- Measurable (track progress monthly)
- Realistic (align with your income and lifestyle)
- Time-bound (set deadlines)
Break down big goals into smaller milestones to stay motivated.
Automate Everything You Can
Remove the temptation to spend by setting up:
- Auto transfers to savings accounts
- 401(k) contributions through payroll
- Bill autopay to avoid late fees
- Monthly investment contributions to brokerage or IRA accounts
Automation turns good habits into financial momentum.
Track Your Net Worth
Review your net worth at least quarterly. Use tools like Personal Capital, or a simple spreadsheet listing:
- Assets (bank accounts, investments, property)
- Liabilities (mortgages, loans, credit cards)
Watching your net worth grow is a great motivator—and highlights areas that need attention.
Address Debt Strategically
Not all debt is created equal. Pay off high-interest debt quickly (credit cards), and consider refinancing student loans or mortgages when rates drop.
Use either:
- The snowball method (pay smallest balances first for psychological wins)
- The avalanche method (pay highest interest rates first for maximum savings)
Talk to a financial advisor before making large payoff decisions—especially if you’re balancing investing goals.
Review Your Insurance and Estate Plan
Good money managers protect what they’ve built. Make sure you have:
- Health, disability, and life insurance
- Umbrella liability insurance if your assets exceed basic coverage
- A will, power of attorney, and healthcare directive
Life changes like marriage, children or new businesses should trigger a review.
Plan for Taxes Year-Round
Many taxpayers leave thousands on the table simply by failing to plan. Ask your F+H advisor to help with:
- Quarterly estimated payments
- Retirement plan strategies (e.g., backdoor Roths, SEP IRAs)
- Charitable giving (bunching, donor-advised funds)
- Capital gains planning
- Entity structure reviews for business owners
- Estate planning
Tax planning is not just for April. Start early each year and try to give thought to it periodically during the year.
When to Seek Help
While DIY money management can work, many people benefit from professional help when:
- Their finances become more complex (business ownership, high income, inheritance)
- They’re making major life changes (divorce, buying a home, retirement)
- They feel stressed or confused about their money
- They want a proactive tax strategy
Working with F+H or another financial advisor isn’t just about saving time—it’s about making better, more informed decisions that can change the trajectory of your life.
Final Thoughts
Money management is a journey, not a destination. Like physical health, it takes regular checkups, ongoing effort, and the willingness to learn from mistakes.
So how good are you at managing your money?
If you’re not where you want to be, that’s okay. The key is to start. Small changes made consistently—saving a little more, tracking spending, planning ahead—can lead to massive improvements over time.
If you need help making sense of your finances, we’re here to assist. At F+H our team of professionals works with individuals, families, and businesses to build custom strategies for budgeting, tax planning, investing, and long-term wealth creation.
Let’s start a conversation.
