Do you have the skills to pay the bills?
Here are some good money management skills to have on your journey towards financial freedom.
Good Money Management Skills to Have with Your Money
Let’s make this a quiz. Keep track of how many skill you have and we’ll give you your score below. Are you a True Money Nerd?
- Calculate your net worth–Your net worth is your assets, minus your liabilities. Knowing your net worth can be a great motivator to speed up debt payoff. Use this free tool from Empower to track your net worth.
- Balance a checkbook–To balance your checkbook you need to reconcile the balance you have in your check register with the balance that your bank has. The big differences usually come down to uncashed checks and pending deposits.
- Create a zero-based budget–This technique gives every dollar a job, so you know exactly what all of your money is doing for you.
- Track your spending–Use budgeting software or another tool, such as an Excel spreadsheet, to monitor and record all your transactions.
- List your monthly expenses–In order to understand where your money goes each month, you must create a list of each of your bills and expenses.
- See all of your accounts in one place–Find an application or tool that can aggregate all your accounts in one place. This will help you have a better understanding of your spending habits.
- Eliminate unused expenses–This could include a Hulu subscription you have only used once or that gym membership you keep meaning to cancel. Make sure each expense is something you value. Consider Truebill as a service to help you with this.
- Get a late fee waived–Try calling your credit card company or bank when you are faced with a late fee. Most of the time they will be willing to work with you and waive the fee.
- Get hardcore frugal–Live off what you need instead of what you want. If you strip down your spending to the basics, this could lead to debt elimination and a simpler life.
- Call and lower your TV, Internet service, and phone bills–Cable and phone providers are willing to negotiate due to competition. They want to keep your business around, so call and see how low you can get your bill.
- Haggle for the lowest price—Try to negotiate the lower prices for goods or services. Be polite and respectful.
- Spend based on your values–Determining your money values early on will help create a strong financial future. You want to make sure your financial goals and your budget is aligned with your values.
- Implement a “sleep on it” rule–Wait 24 hours before you make a purchase. This gives you time to make sure it is a thought-out purchase.
- Learn from your money mistakes–Have credit card debt that you struggle to pay off or did you make a bad investment? Use your mistake as a learning experience for the future so you can do better next time.
- Locate an online coupon or promo code–Before purchasing anything online make sure to search for a promotional code. Sometimes you can search in Google for coupons.
- Use your smartphone to save money–Everything from coupons to ATM locators can be found on your phone. Make sure you are taking advantage of these savings opportunities.
- Get cash back for the things you already buy–1. Did you know if you set up certain purchases for auto-delivery they may give you a discount? Make sure you do your research before you purchasing something you buy often.
- Make a grocery list–Sticking to a grocery list can save you hundreds at the store. This gives your shopping trip a direction and you won’t buy unnecessary items.
- Clip coupons–Everyone gets coupons sent directly to their house. Spend a few minutes each day looking for coupons for items you buy regularly.
- Get free shipping–Many companies offer free shipping with a purchase amount or membership. Consider the fine print to see how you can receive free shipping on your purchases.
- Find a fee-free ATM–If you must take out cash, plan ahead. Go to the bank or an in-network ATM.
- Find the cheapest gas in your zip code–This may take a little planning but it is worth it to save even 10 cents a gallon.
- Negotiate for a new or used car–There are plenty of applications that show you fair market value for the car you are about to purchase. Do your research before you head to the dealership.
- Know when it’s smart to rent a car–Is it better to add miles on your car or rent from a local provider? Determine how much you will be driving and if the cost would be worth renting a car.
- Live within your means–Don’t try to keep up with the Joneses. For all you know, they’re struggling! Do what is right for your budget and lifestyle.
- Create accountability for your finances–Surrounding yourself with like-minded people will encourage you to stay financially responsible.
- Take care of your stuff so it will last longer–Everything from cleaning your clothes properly to buying damage-free cases for your electronics could help you save money in the long run.
- Delay gratification–Do you really need a new computer today or can you save for it for the next 6 months? By planning for big purchases, you can prevent debt.
- Create SMART money goals–SMART goals are Specific, Measurable, Achievable, Realistic, and Time-Limited. Your money goals should meet these criteria.
- Get your three credit reports for free–Going over your credit report can prevent identity theft and mistakes that affect your credit score.
- Get your credit score for free–Your credit score is a good basic metric for your financial health. You should know your credit score, because creditors, landlords, and even employers may be judging you based on it.
- Fix errors on your credit report–If there is an error on your credit report you can reach out to a reporting agency and explain the situation–in writing. Make sure you provide appropriate evidence.
- Know the factors making up your credit score–Understand how to read your credit score. This will help you understand where you can make improvements. Check out Experian Boost to see how your score could be improved. And check out our ultimate guide to credit.
- Stop the junk mail–Opt-out of your junk mail. Not only will that save trees, but it will reduce the spending temptations coming into your home.
- Find your credit card interest rate–If you have $1000 of credit card debt and your interest is 15% you are wasting $150 a year. Is this worth it to you? Sometimes you can lower your rate just by calling and asking.
- Prioritize your debts–List all of your debts so you know exactly what you owe and to whom. Then decide what order to tackle your debt to maximize your motivation to stay on track.
- Understand compounding interest–When you invest, the interest you earn on your principal will earn its own interest, which makes your money work even harder for you.
- Create a debt snowball or avalanche–Pay off your debts in order from the smallest balance to the largest (for the debt snowball) or from the highest interest rate to the lowest (for the debt avalanche). Either way, you will be motivated to get your debt completely paid off.
- Transfer a high-interest balance–There are several credit cards that offer a 0% balance transfer, which can help you reduce the interest you pay and motivate you to pay off your balance quickly before the term is over.
- Call and lower your interest rates–You will never know if you don’t try. A lot of companies are willing to work with you on your interest rates if you just call and make the effort.
- Set up an amortization schedule–This is a schedule that details each periodic payment on a loan. It is helpful for seeing your debt dwindling.
- Find the best mortgage rates–Rates are constantly changing and being updated. Do a little research and find the best rate for you and your family.
- Find your car’s Blue Book value–The Kelley Blue Book is a resource used by consumers and insurers that establishes valuation guidelines for the automotive industry. Knowing your car’s Blue Book value will help you know if you are carrying the appropriate amount of insurance.
- Perform basic car maintenance–By performing basic maintenance on your car, you can help prevent damage. Think of it as keeping your car healthy and in shape.
- Sell your car for maximum price–Taking good care of your car throughout its life and keeping track of all of the maintenance records, you have a better chance of selling your car for top dollar.
- Find your home’s estimated value–Whether you are considering a move or planning to stay put, it’s a good idea to know the approximate value of your home. That will help guide your decisions, both when you sell and when you decide if expensive home improvement is worth your while.
- Perform basic home maintenance–Just like with your car you want to take precautionary measures to keep your house “healthy”.
- Avoid private mortgage insurance–This type of insurance protects the lender, not you. Be careful what you are purchasing.
- Determine when it’s time to refinance–Refinancing can be a great financial decision depending on your situation. Calculate all options before moving forward. You can check out Fiona to compare interest rates for several lenders at the same time.
- Explain what type of mortgage you have–Understand the ins and outs of your mortgage, so you are not hit with costly surprises and you can plan ahead early mortgage payoff or the possibility of refinancing.
- Create a plan to pay off your mortgage early–Sit down and evaluate your budget. You may see that you could move some funds around to pay off your mortgage earlier and invest more in your retirement accounts.
- Escrow your own property taxes and insurance–By handling your own property taxes and insurance you can be in full control of your finances.
- Change your insurance deductibles–When you have a higher deductible your monthly rate will be lower. Consider this when planning your budget
- Get a quote for cheaper car insurance–Shopping around for car insurance could save you hundreds of dollars a year. Not a bad return for doing a little research. You can search auto insurance companies directly like Esurance an Allstate Company.
- Buy life insurance–Does your family that rely on you financially? If so, you need to find the right type of life insurance for your financial situation and protect them. Protect your most important asset, you!
- Create your last will and testament–You never know what can happen. Creating a will can protect your loved ones in case something happens to you.
- Take a home inventory for insurance purposes–Accidents happen. If you were to lose your house today would you know everything in it worth value? Taking an inventory can make sure you have everything accounted for.
- Understand the “pay yourself first” concept–Make your savings and investments a priority by paying yourself first. Spend what’s left after that. You’ll thank yourself later.
- Set up an automated savings transfer–Automating your savings takes the hassle out of saving every month. This also ensures it gets completed every month and you are not shorting yourself.
- Set up a direct deposit–Direct depositing your paycheck helps with the flow of your funds. Automation makes budgeting easier and more efficient.
- Create an emergency fund–You never know when an extra expense will come up. Creating a cushion for accidents will help save you stress.
- Get more for your savings–Your money should work for you! Find a bank with better interest rates, or put your savings into a money market account that will allow it to grow.
- Create a diversified retirement portfolio–Sitting down with a financial advisor or Robo-Advisor, like M1 Finance, can help you determine the right asset allocation for your lifestyle. Diversification helps with the volatility of the market.
- Balance your retirement portfolio–Balancing (and re-balancing) your portfolio means keeping your asset allocation consistent with your risk tolerance and preferred mix of investments. You need to re-balance your portfolio about once or twice a year.
- Find a fund’s expense ratio–Find out the annual fee that your funds charge to their shareholders.
- Ask for a raise–You have worked hard, added value to your company, and now you deserve to be rewarded. Go into your boss’s office prepared and ready for negotiation.
- Rollover your 401K–Switch jobs recently? Don’t forget to rollover your 401K from your previous employer so that you remain in control of your retirement accounts.
- Change your 401K contribution %–When is the last time you increased the amount you are saving for retirement? Plan on increasing your savings by 1% every six months until you have maximized your annual contributions.
- Get your employer match–If you are only contributing 3% of your income to your 401k but your employer matches up to 6%, you are missing out on free money.
- Calculate your annual contribution limits–Tax-advantaged retirement accounts have annual contribution limits. You need to know what those limits are so you can maximize your contributions.
- Calculate your income needs in retirement–Determine the amount of income you will need once you retire. Include all your debt that you will have paid off by the time you retire.
- Calculate your “number”–How much do you need to retire? Set a life goal for retirement, then calculate how much you will need to meet that goal to figure out your “number.”
- Stay cool when the market crashes–Investing is a long-term game. Don’t let the media scare you into cashing out your investments. Stay calm.
- Dollar-cost average–Investing your money on a set schedule, with a fixed amount or percentage of your income, will maximize your invested dollars.
- Understand stocks vs bonds–Stocks are ownership or interest in a corporation, whereas bonds are a form of long-term debt from corporations that they are paying off over time.
- Understand index funds vs mutual funds vs ETFs–Which of these investments you include in your portfolio should be determined by your financial situation and risk tolerance.
- Find and talk to a fee-only Certified Financial Planner–You don’t want an advisor that make commissions by selling you unnecessary products. Talking to a fee-only advisor makes the issue of payment much clearer. Already have an advisor? See their fee score using StackUp.ai.
- Find and talk to a Certified Public Accountant–Taxes can be sticky. Make sure you have a trusted tax professional that can help you understand your tax implications.
- Avoid unnecessary taxes on your investments–Working with a tax professional and a financial advisor will help you understand how taxes can affect your investments.
- Explain the difference between a Roth and Traditional IRA–Traditional IRA contributions are tax deductible for both Federal and State. Roth IRAs provide no tax break for contributions but withdrawals and earnings are normally tax-free
- Complete you tax return–You may need to use some kind of software or consult with a professional, but you need to be able to complete your tax return each year.
- Maximize your deductions–Consider donating to your favorite charity to help increase your tax deductions.
- Understand your marginal tax rate–Your taxes are defined by a tax bracket. When you move up into the next tax bracket, everything you earn over the previous bracket’s ceiling is taxed at the higher rate–but every below that ceiling is taxed at the lower rate.
- Calculate your effective tax rate–Since American taxation is progressive, your effective tax rate is not the percentage listed in your tax bracket. Effective tax rate is the average rate at which your earned income is taxed. You can determine this by dividing the dollar amount you paid in taxes by the dollar amount of your earned income.
- List things on craigslist.org and eBay–Time to declutter. The less stuff you have the simpler your life can be as well as help you earn some extra cash.
- Donate things to your local Goodwill–Downsizing your closets can have tax benefits. The more you donate the more you can write off.
- Give more money each year–The more money you give to charity the more you can deduct from your taxes. Giving larger amounts can have big tax benefits.
- Have a garage sale–This is a great way to make some extra cash after decluttering. You can donate everything that doesn’t sell to Goodwill.
- Find a reputable charity–Giving not only fills your soul but it can have tax benefits as well.
- Set up a CD ladder–Certificates of deposits are short-term investments that offer liquidity and can be a good strategy for your savings account. The CD Ladder strategy allows you to keep your money growing and working for you.
- Calculate your daily and hourly salary–Knowing this can help you determine if a purchase is worth the amount of time you had to work for it.
- Find out what salary you should be making–Research other jobs in a similar position to see if you are getting paid fairly. If not, consider negotiating your salary with your employer.
- Find legit extra income opportunities–Find something that you’re interested in and figure out how to make money doing it.
- Start a business with no money–All you need is an idea and a willingness to work.
- Make time to bring in extra money–A side hustle will help bump up your income. You can make money while doing something you love.
- Understand the importance of diversifying income–What would you do if you lost your job or could no longer work? Having multiple streams of income can help ease your mind and wallet.
- Teach your kids about money–Teaching your kids to have strong financial habits starting from early childhood will set them up for a bright financial future.
- Talk to your (future) spouse about money–Having an open dialogue about money will make your relationship strong and ensure your financial goals are aligned. After all, money issues are one of the top reasons for divorce.
- Set up a FSA or HSA for your medical expenses–Setting aside money into a flexible spending account or health savings account can help with the high prices of health care and family care.
- Negotiate a cash price for medical services–Many surgeries or medical procedures can be negotiated ahead of time. Make sure you do your research before scheduling your surgery.
- Put people and relationships before money–Making your relationships a priority will lead to a more contented and fulfilled life. That’s why you should know what you value and make your financial plans based on those values.
Score Your Money Management Skills Level
Total up how many money management skills you possess and use the list below to score your money skill level.
0-20 Money Goob
21-40 Money Dweeb
41-60 Money Dork
61-80 Money Geek
81+ Total Money Nerd
How many skills do you have? I know I missed a few. List some more good skills to have with money in the comments below…