Get Better at Money Without Overhauling Your Life

Consider this: 70% of American households are financially unhealthy! Yes, you read that right! A staggering 70%. That’s as per the report by Financial Health Pulse. 

And here is what makes it even worse: These financial woes will likely grow deeper in the coming days, especially for middle-income households that are increasingly becoming reliant on credit.

But do you know that a few simple tweaks in your everyday life can easily put you on the path to financial freedom? 

That’s right! 

Contrary to popular belief, you don’t need drastic lifestyle changes to achieve the much-coveted financial liberty. 

With the 10 simple lifestyle changes I’m about to share, you can improve your financial health for good. 

1. Understand Where You Stand Financially

Before starting your journey to financial freedom, understand where you are currently standing financially. Having a self-economic snapshot can help you pinpoint areas that you’re doing well and the ones you need to improve so you don’t have to operate in the dark. 

Thrive Global, in collaboration with Discover, conducted a study that found that 90% of Americans are stressed about money. This discovery places finances as the #1 stressor in the United States. 

Sadly, a whopping 65% of those living with this anxiety fear that their financial woes are only bound to worsen in the future and that they may have to live with this problem for the rest of their lives.

Now, regardless of where you stand financially and how you feel about the future in regards to finances, begin by understanding your current financial position. 

How much are you bringing in? How much goes into savings, expenses, debts, and other needs? Having all this information is essential before you begin pursuing the freedom you so much crave. 

To get a clear understanding of your financial position, track all these elements for some time, say a month or more. 

There are many ways to do that. Go manual if you prefer a more hands-on approach or, even easier, opt for tracking tools. Thanks to technological advancements, there are a multitude of apps that can make it easier to keep tabs on your financial flow.

Mint, PocketGuard, Monarch Money, and TDMySpend are a few examples of tracking apps that can do the monitoring work perfectly. They will even sync with your bank account, ensuring more centralized and thorough financial monitoring. 

Once you have a snapshot of your financial position, it becomes easier to identify any loopholes in your current economic life that you need to address, marking your first step to attaining financial freedom.

2. Work With A Budget

Drafting a budget might sound like an obvious step for properly managing your finances, but do you know that as popular and overly emphasized as it is, we still have nearly 2 in every 5 adults (39%) who don’t budget for their money at all?

That means 61% of people at least have a budget. That looks fair, right? Well, in the actual sense, not really — because only 30% of them stick to the budget they create. That means 70% of those who draft a budget benefit from it just as much as those without one.

So, what’s the point? Draft a budget and, more importantly, stick to it. A budget helps you create a clear spending plan, ensuring you use your money correctly.

And remember, budgeting doesn’t mean depriving yourself of what you enjoy. It’s all about making intentional decisions with your money. 

The Importance of a Budget

There are numerous benefits you get from creating and sticking to a budget:

• Provides Financial Clarity: A budget can help you understand exactly where you are spending your money, giving you a clear picture of your income, expenses, savings, and debt.

• Helps Control Spending: By setting limits for different categories (e.g., food, entertainment), a budget can be an effective tool for preventing overspending and helping you stay within your means.

• Supports Financial Goals: Creating and adhering to a budget ensures you allocate funds towards long-term goals, like building an emergency fund, saving for retirement, or paying off debt.

• Reduces Financial Stress: Lacking a budget makes you only more anxious about your financial life. So, create one to avoid stress. Stats show that 62% of those with a budget feel more in control of their finances, 55% more confident, and 52% more secure. Generally, knowing you have a plan for your money reduces anxiety about unexpected expenses or living paycheck to paycheck.

• Encourages Saving and Investment: By earmarking a portion of your income for savings and investments, a budget makes it easier to build wealth over time.

• Improves Financial Discipline: Regularly tracking your budget encourages better money management habits, like avoiding impulse purchases and making thoughtful financial decisions.

• Prepares for Emergencies: A budget allows you to set aside funds for emergencies, helping you avoid going into debt when unexpected expenses arise.

• Helps Track Progress: Budgeting allows you to monitor your financial progress over time, making it easier to adjust your habits to reach your goals faster, through tools such as journals and goal charts.

Budgeting Methods

If you don’t know the method to use for budgeting, there are several options available. Here are a few to guide you:

• 50/30/20 Rule: This method divides your income into three categories: 50% for needs (rent, utilities, groceries), 30% for wants (entertainment, dining out), and 20% for savings and debt repayment.

• Zero-Based Budgeting: In this method, every dollar you earn is assigned a specific job, whether it’s for saving, investing, or spending. The goal is to ensure that your income minus expenses equals zero at the end of the month.

• Envelope Budgeting: This method requires that you put specific amounts of money into envelopes representing different budget categories. It could be physical envelopes or an electronic app or spreadsheet. Then, you’re expected to only use money under a given envelope for purposes that can be placed under that category. Once you exhaust the allotment in a given envelope, it means you can’t spend within that budget category until the next allocation. 

3. Optimize Your Bills & Subscriptions

Just having a clear budget isn’t enough. You must stick to it and thoroughly review your spending habits to optimize your bills and subscriptions. It is one of the easiest ways to free up extra cash each month without compromising your lifestyle. 

By taking a proactive approach to optimize recurring expenses, you can save hundreds — or even thousands — of dollars annually.

To do that, you need to begin by doing a financial audit. Check the amount you spend on recurring bills and subscriptions, from gym membership fees to streaming services. Nearly a third of consumers underestimate how much they spend on subscriptions by $100 to $199 monthly, so ensure you get that right. 

Once you have that in place, cancel any subscriptions you never or seldom use. Canceling these can create instant savings.

In addition, you can also consider negotiating a better rate with your service providers. Many are willing to offer discounts or promotional rates to retain customers. This includes utilities, internet, cable, and even insurance providers.

Don’t assume that negotiation in this case can’t work. It can. In fact, according to Consumer Reports, 70% of people who negotiated with their cable or internet provider succeeded in getting a lower rate. 

And, of course, always compare your service providers regularly. Where possible, switch to providers who offer more attractive rates but ensure you do not compromise on the quality of service you’re getting.

By optimizing your bills and subscriptions, you can ensure you’re only paying for what you need at the best possible rate. Small changes can lead to big savings, freeing up money for more important financial goals.

4. Proper Debt Management

Debt remains one of the most significant obstacles to financial freedom, so managing it effectively can be a massive step toward the liberty you need. Sadly, most people are struggling with debt. 

In fact, stats recently published by Gitnux revealed that the total debt valuation of US households stands at an astounding $15 trillion, with the average American home having an average credit card debt of $8,000.

That’s a lot! Thankfully, with the proper debt management strategy, you can eventually repay all your debts and secure a ticket to the financial freedom you’ve always dreamt of having.

Here’s how you can create a realistic plan to manage your debts:

Believe That You Can Be Debt-free

If you have to beat debts, you must first believe in your capacity to do so. You might need to change your mindset, even if you owe large amounts that seem impossible to repay. Otherwise, it will be almost impossible to win the battle against debt when you’re still waging war against yourself.

If settling your debts with the current income level seems mathematically impossible, you might want to use a different approach. You can create more avenues for bringing in income or declare bankruptcy if that can't work.

List All Your Debts

Once you have the right mindset, the next thing to do is list all the debts. This includes everything you owe, be it student loans, mortgages, personal loans, credit cards, Auto loans, family loans, 401(k) loans, or any other type of debt.

If you don’t want to list all these,  get a copy of your credit report from either of the three major bureaus — Experian, Equifax, and Transunion. However, you might need to check your credit card report in case there’s a loan left out.

For each debt listed down, take note of the following:

• Minimum payment amount

• Annual Percentage Rate (APR)

• Number of remaining payments

• Outstanding balance 

How Much Does Your Budget Avail For That Purpose

Once you have all the loans listed, check how much room your budget provides for repayment. Remember, when using the 50/30/20 rule, 20% of your income should go into savings and loan repayments. 

If that amount already looks minute for your loan amount, check through your expenses and create more room for loan repayment by eliminating the things you don’t need. For instance, check for any subscriptions you don’t use often or at all or the ones you can generally do without. 

Pick The Right Debt Payment Plan

Once you’ve created enough room to accommodate your debt payment from your income, the next thing to do is pick the right strategy to repay the loan.

There are a few strategies to use:

Debt Snowball

This debt repayment strategy involves paying the smallest debts first, working your way up — regardless of their APR. The idea behind beginning with the smallest debts is that you’re motivated more to keep repaying your debts every time you’ve cleared a loan.

Debt Avalanche

This repayment technique involves prioritizing loans based on their APR. The method advocates for first repaying loans with the highest interest rates because this will allow you to save money by reducing the amount you have to pay as interest.

Debt Management Plan

You can also discuss a debt management plan (DMP) with creditors. While pursuing this method, a credit counselor will negotiate lower interest on your credit cards and help you design a repayment plan that will eventually deliver you from debts. 

Once using this repayment strategy, you will need to make the agreed regular payments to the credit counseling agency, and they will distribute it to your creditors as it seems best until all your loan is cleared.

5. Don’t Be Afraid To Invest

Do you know that a quarter of all US households live from paycheck to paycheck? And get this: 26% of American families spend at least 95% of their income on necessities, as revealed in an internal report by Bank of America.

What does that mean? Well, most households in the United States don’t have adequate income streams to gather wealth that guarantees financial freedom over time.

That’s why if you want to secure your financial liberty, you must consider having investments. Investing is one of the most effective ways to build wealth over time, and you don’t need to be a financial expert to start.

The idea of having a savings account is superb, but it’s even better if you can put your savings into investment. With inflation averaging 3% annually, your savings lose value over time unless they’re earning a return. By investing, you can earn returns that outpace inflation and grow your wealth. Check out our tips for a successful investment journey. 

And remember, you don’t need a large sum of money to start investing. Even small amounts can grow significantly over time due to compound interest. If available, take advantage of employer-sponsored retirement plans that offer matching contributions — this is essentially free money.

6. Maintain A Positive Credit Score

As you do the budgeting, the investments, and everything else we’ve covered so far, ensure that you strive to maintain a positive credit score. 

When you have an incredible credit score, you can access better loan rates, credit cards, and even jobs in some industries. 

The average American has a FICO score of 717 as of 2024, an improvement from the 689 recorded in 2010. A credit score of 717 is considered “good,” but there’s always room for improvement. 

Understanding Credit Scores:

Of course, for you to maintain a positive credit score, it’s essential to understand how this rating works.

Now, credit scores are calculated based on factors like payment history (35%), credit utilization (30%), length of credit history (15%), types of credit used (10%), and recent credit inquiries (10%).

The scores are then recorded within the range of 300 to 850, with 850 signifying the best credit score rating anyone can ever have.

Here’s how the score range is categorized:

• Very Poor: 300-579

• Poor: 580-600

• Fair: 601-660

• Good: 670-739

• Very Good: 740-799

• Exceptional: 800-850

Ideally, you should aim to be among the 21% of Americans with an “exceptional” credit score of 800 or above. That way, you’ll have an added advantage in your pursuit of financial freedom. 

Quick Wins for Better Credit:

• Pay Bills on Time: This is the most critical factor that affects your credit score. Set up automatic payments to ensure you never miss a due date.

• Reduce Credit Card Balances: Ideally, you should use no more than 30% of your available credit. For example, if your credit limit is $5,000, try to keep your balance below $1,500.

• Keep Old Credit Accounts Open: The longer your credit history, the better your score. Even if you're not using a card, keeping the account open can benefit your score.

Remember to check your credit score more often. Only 33% of people have checked their credit score within the past years, while only 21% monitor it monthly.  

If possible, check it monthly to track your progress. You can make the monitoring even easier by leveraging free tools like Credit Karma or Experian. Regular monitoring will help you understand where your credit stands and identify areas for improvement.

7. Make Use of Financial Apps

As you pursue financial freedom, using financial apps can make the journey more fun and success more likely. This is because finance apps can simplify your financial life, making it easier to track spending, save for goals, and even invest — all from the palm of your hand.

The National Endowment for Financial Education (NEFE) highlights that 64% of adults are leveraging these apps to help them manage their finances better, and you just can’t ignore their essence in obtaining your financial freedom.

These apps can help you in different areas of financial management, from budgeting and savings to investing. 

Let’s look at some of the top picks:

• For Budgeting: Mint and PocketGuard automatically sync with your bank accounts, categorize your expenses, and generate monthly reports. You can also consider some of the other options mentioned earlier. 

• For Saving: Apps like Qapital or Digit round up your purchases to the nearest dollar and save the difference automatically.

• For Investing: Apps like Acorns or Robinhood allow you to start investing with small amounts, while Betterment offers robo-advisor services to create a diversified investment portfolio.

To determine which app is best for you, think about your goals. If budgeting is your priority, Mint might be the best option. If you’re looking to automate savings, Digit or Qapital may be the better choice.

8. Build an Emergency Fund

Emergencies will always come, and it’s always good to have an emergency fund account to cater to such needs whenever they arise. Having an emergency fund account keeps you from falling into debt and helps you avoid some of the financial mistakes that can happen when responding to an emergency.

Surprisingly, 25% of people don’t have this type of account. And for those with one, 32% have less savings than they had a year ago, with only 44% of them able to afford emergency expenses of over $1,000, if a report by Bankrate is anything to go by. 

What does this mean? While an emergency account is good, it’s even better if you can finance it to create an adequate cushion for unanticipated occurrences. The rule of thumb is that your emergency funds should be able to finance your “average” lifestyle for three to 6 months.

9. Acquaint Yourself With Financial Education 

Luigi Wewege, the President of Caye International Bank, said that “for long-lasting economic freedom, you need to invest in financial education. Multiple studies suggest that only a few people have knowledge literacy, which may be why most are still struggling to break out from financial bondage.”

And thankfully, financial education needs not to be overwhelming. With only simple tips, you can grow your financial knowledge, which you can apply to your economic life. 

For instance, you can dedicate 10-15 minutes daily to reading or listening to financial content. Whether it’s a book like Rich Dad Poor Dad, articles from Investopedia, or podcasts like The Dave Ramsey Show, consistent learning is key. This habit builds a financial knowledge base over time and exposes you to different strategies, helping you make better decisions with your money. 

In addition, you can engage in financial conversations with others, whether it’s family, friends, or financial advisors. This helps broaden your understanding of different financial strategies. Plus, learning from others’ experiences can provide valuable insights and open your mind to new money management techniques.

10. Celebrate Small Wins and Stay Consistent

Achieving financial freedom is a long-term journey that requires discipline, patience, and persistence. While staying focused on big goals is essential, celebrating small wins along the way can keep you motivated and help build momentum. 

Here’s how you can leverage small victories to maintain consistency and stay on track:

• Recognize Your Progress, No Matter How Small: Celebrate when you hit milestones — whether it’s paying off a small debt, reaching a savings target, or sticking to your budget for the entire month. And remember the celebration doesn’t need to be expensive — perhaps a special meal, a day out, or a new book.

• Track Your Financial Achievements: If possible, use a visual presentation to see how you’re faring. Seeing your progress visually can make the journey more tangible and encourage you to keep going. Apps like You Need a Budget or Mint can show how far you’ve come.

• Reflect on How Far You’ve Come: Take time each month or quarter to reflect on your progress. Review where you started and where you are now.

• Stay Consistent with Small, Daily Actions: Consistency is key. Commit to small daily actions, like reviewing your budget, tracking your expenses, or making automatic savings contributions.

Consistency and small wins are essential for building lasting financial habits. While it can be tempting to focus solely on big goals, celebrating the smaller milestones along the way makes the process more rewarding and sustainable. 

Conclusion

Achieving financial freedom doesn’t require drastic changes; it’s about making consistent, small improvements. By budgeting, tracking expenses, and optimizing subscriptions, you can gain control of your finances. 

Maintaining a good credit score and educating yourself on basic financial concepts empowers you to make smarter choices, while celebrating small wins keeps you motivated. 

Financial freedom is built over time through steady, manageable steps, and with patience and consistency, you can transform your financial future and confidently pursue your goals.