7 Money Management Tips | Capital One (2024)

December 19, 2023 |9 min read

    If money’s a source of worry in your life, you’re not alone. The Capital One Mind Over Money study showed that most of the respondents—77%, in fact—felt anxiety about their finances.

    The good news is that there are steps you can take to take control of your money and your financial anxiety. Here are seven tips to help you manage money more effectively.

    Key takeaways

    • Money management is all the ways you handle your finances through budgeting, spending, saving, investing, using credit and paying off debt.
    • Don’t let financial anxiety stop you from being intentional about your money. When you approach money management and financial planning in an informed, strategic way, it can help set you up for a bright financial future.
    • There are strategies and tools you can use to help you create a budget, track your spending, make a plan to save, pay off debt and establish good credit habits.

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    What is money management?

    Money management is all the ways you budget, spend, save and invest your money. It also includes how you use credit and pay off debt. In short, it’s how you handle your finances.

    Finding ways to better manage your money can have positive effects on your finances and lower your stress about money.

    How to manage your money better

    These seven practical money management tips are here to help you take control of your finances.

    1. Make a budget

    According to the Capital One Mind Over Money study, people dealing with financial stress struggle more with budgeting. They also feel less in control of their money and tend to spend their paychecks more impulsively.

    Creating a budget is a great first step in developing healthier money habits. According to the Consumer Financial Protection Bureau (CFPB), “Budgeting helps ensure that you’ll have enough money for the things you need and the things you want, while still building your savings for future goals.”

    If making a budget feels overwhelming, start with these simple steps:

    • Add up your monthly income. This includes your salary at your job plus other sources of income like bonuses, tax refunds or income from side work.
    • Add up your monthly expenses. These can include expenses in the major categories like housing, food, student loans and transportation. For monthly payments that aren’t always the same, like entertainment and utilities, you could use an average from previous months.
    • Subtract your expenses from your income. This amount will be the starting place for your budget. Anything left over is where you can start if you’re paying down debt and building up savings.

    Think of your budget as a living document. That way, you can make adjustments if you need to, like when you eliminate or add a monthly expense.

    There are also some common budgeting strategies that may help, like the 50/30/20 rule. According to this approach, necessities like rent, insurance and food should take up 50% of your income. And 30% of your income can go toward things you want, like entertainment. The last 20% of your income should be put into savings.

    The 50/30/20 rule is just one way to look at budgeting. If you want to learn more, check out these 14 budgeting tips.

    2. Track your spending

    Tracking your spending may help you avoid overspending and stay within your budget. The Capital One Mind Over Money study found that sticking to healthy money habits when you feel confident about your finances can help you stay the course when things get more challenging.

    Keeping track of your spending doesn’t have to be complicated. You can record your expenses digitally with one of the numerous apps available online. If you have a Capital One card, you could use the free digital features that help you track your money. If you prefer a non-digital option, you can simply track everything in a notebook.

    It can also help to separate your expenses into categories. That way, you’ll see exactly where your money is going and where you may be spending too much.

    3. Save for retirement

    The Capital One Mind Over Money study found that many Americans are worried about their financial future. In fact, 68% of respondents said they’re worried they won’t have enough money to retire.

    Retirement accounts are one way to save for retirement. Here are a few types of retirement accounts it may help to know about:

    • 401(k) plan through your employer. With a 401(k), you can deposit pretax dollars through a regular deduction from your paycheck. Beth Sabin, an executive at Capital One, says, “If you have a company match through your 401(k), this can be a great place to start by contributing until you have your full match.” She also recommends upping your contribution by one percentage point to see if that’s doable for you. If it is, you might increase it by another percentage point to accelerate your savings.
    • 403(b) plan. Like 401(k) plans, 403(b) plans are employer sponsored. One difference is that 403(b) plans are offered by public schools and some organizations that are tax-exempt. Contributions to traditional 403(b) plans are tax-deferred—just like they are with traditional 401(k) plans. So you don’t have to pay taxes on the contributions or earnings until you withdraw funds from the account.
    • Individual retirement account (IRA). Contributions to a traditional IRA are tax-deferred. A traditional IRA is an account that’s generally self-directed and not sponsored by an employer. Once you retire and start making withdrawals, the money will be taxed at your regular income tax rate.
    • Roth IRA. While contributions to a Roth IRA aren’t tax deductible when you make them, you may be able to withdraw your money tax-free during your retirement years.

    4. Save for emergencies

    Making sure you have money put away in an emergency fund for unexpected life events, like needing major home repairs, may help you reduce your financial anxiety.

    Here are a few tips to help you start saving:

    • Remember that interest rates can vary. It may be wise to shop around for a savings account. If you find an account with a better rate, the extra interest can add up over time. Some banks even offer high-yield savings accounts.
    • Put extra income into your account. When you get a tax refund or a bonus at your job, you could deposit it into your savings account to give your emergency fund a boost.
    • Set up automatic savings. With the help of your employer, you may be able to set up automatic transfers from your paycheck to your savings account. That way, the money will still be accessible to you when you need it, but you may be less tempted to use it for nonemergencies.

    5. Plan to pay off debt

    Paying off debt may also help you better manage your finances and money-related stress. Here are three strategies for paying off debt:

    • The snowball method focuses on paying off your smallest balances first. You still make the minimum payments on all of your debts. And you use any extra money to pay off your smallest balance. Then you use the money you’ve freed up to pay off your next-smallest balance and so on. This could mean debts with higher interest rates might wind up taking longer to pay off. And that could cost you more in the long run.
    • The debt avalanche method—also called the highest-interest-rate method—starts with listing your debts based on their interest rates, from highest to lowest. You put your money toward the debt with the highest interest rate first. Once that’s paid off, those extra funds can be used to pay off the next debt on your list. You also continue to make the minimum payments on all your debts.
    • Debt consolidation rolls multiple debts into one account. It can help you simplify your payments and may also help you save on interest. Keep in mind that there may be fees associated with debt consolidation. It won’t erase your debt, and it doesn’t always make it less expensive.

    6. Establish good credit habits

    Credit can be a major part of financial health. And working on improving your credit scores can help set you up for a brighter financial future.

    Lenders may use your credit scores to help decide whether to approve you for credit and what terms to offer you. Your credit scores can even come into play when it comes to things like renting an apartment or applying for a job.

    Here are a few good credit habits:

    • Pay your bills on time, every time. Late payments can impact your credit scores and trigger late fees and penalty APRs.
    • Don’t get close to your credit limits. The CFPB recommends keeping your credit utilization ratio below 30%.
    • Work at establishing a long credit history. Before closing a credit account, make sure to think through how it may affect your credit scores.
    • Only apply for the credit you need. Applying for a new line of credit can trigger a hard inquiry, which can impact your scores. And too many hard inquiries, especially in a short period of time, can have a larger negative effect on your credit scores.

    7. Monitor your credit

    Regularly monitoring your credit is another important part of credit health. CreditWise from CapitalOne offers an easy way to access your TransUnion® credit report and VantageScore® 3.0 credit score without hurting your credit scores.

    You can even explore the potential impact of financial decisions, like getting a mortgage, before you make them with the CreditWise Simulator. CreditWise is free for everyone, whether you’re a Capital One customer or not.

    Money management in a nutshell

    Remember, you’re not alone if you’re feeling stressed about money. Reaching your financial goals takes time and consistency. And adopting a positive financial mindset may help you stick to your goals and better manage your money.

    As you work on your finances, remember that CreditWise can help you monitor your credit and track your progress. For even more financial lessons, check out these free financial literacy courses from Khan Academy and Capital One. The courses are self-paced, and they cover budgets, credit and everything in between.

    Khan Academy Financial Literacy course

    Find practical tips and step-by-step guidance in this free online course to help you budget and save like a pro.

    Get started

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    7 Money Management Tips | Capital One (2024)


    7 Money Management Tips | Capital One? ›

    The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.

    What is the 50 30 20 rule? ›

    The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.

    What are 4 principles of money management? ›

    It is important to be prepared for what to expect when it comes to the four principles of finance: income, savings, spending and investment. "Following these core principles of personal finance can help you maintain your finances at a healthy level".

    What is the first step in money management? ›

    Create a budget

    A budget is a tool that allows you to track your income and expenses in a given period and make the needed adjustments along the way. It will also help you set spending limits and plan ahead for special events or other needs in the future.

    What does successful money management mean? ›

    Successful money management is not about being perfect. It is about being disciplined but also giving yourself enough flexibility to make adjustments when needed and setting yourself up for when life throws things your way you are not expecting.

    What is the 40 40 20 budget rule? ›

    The 40/40/20 rule comes in during the saving phase of his wealth creation formula. Cardone says that from your gross income, 40% should be set aside for taxes, 40% should be saved, and you should live off of the remaining 20%.

    How to budget $4,000 a month? ›

    making $4,000 a month using the 75 10 15 method. 75% goes towards your needs, so use $3,000 towards housing bills, transport, and groceries. 10% goes towards want. So $400 to spend on dining out, entertainment, and hobbies.

    What is the biggest waste of money? ›

    To help you identify where you might need to shore up your budget, here are some of the biggest wastes of your money.
    • Always Opting for Extended Warranties. ...
    • Too Much Bulk Buying. ...
    • Routinely Choosing Convenience Over Savings. ...
    • Impulsive Buying. ...
    • Failing To Budget Your Money. ...
    • Not Comparing Prices Before Buying.
    Jul 15, 2022

    What are the 3 golden rules of money management? ›

    Understand the difference between needs and wants, live within your income, and don't take on any unnecessary debt. Simples. Get the savings habit by paying yourself first. On payday, transfer money to your savings account even before you pay bills.

    What is the number one rule of money management? ›

    Pay Yourself First (PYF) - PYF means exactly what it says: you deposit your savings goal amount(s) before paying other expenses. In other words, savings is given the same "respect," or even more, as a high-priority bill such as a mortgage or rent payment.

    What is the easiest way to manage money? ›

    These seven practical money management tips are here to help you take control of your finances.
    • Make a budget. ...
    • Track your spending. ...
    • Save for retirement. ...
    • Save for emergencies. ...
    • Plan to pay off debt. ...
    • Establish good credit habits. ...
    • Monitor your credit.

    What are the 5 stages of money? ›

    There are more than five stages of money's evolution. Still, five notable stages include: commodity money (i.e., grains, livestock), metallic money (i.e., coins), paper money, credit and plastic forms of currency, and digital money.

    What is poor money management? ›

    Poor financial management happens when credit facilities are used to pay for items that an individual cannot afford out of their income. Get advice now. Credit cards, personal loans, store cards, catalogues and overdrafts are all ways in which people can get money to pay for items they couldn't usually afford.

    What does Dave Ramsey say to do with your money? ›

    Give 15% of Every Paycheck to Your Future Self

    Once you're free of debt and sitting on enough savings to survive at least a quarter of a year, Ramsey says the most important thing you can do with your paycheck is to save 15% of it — each and every pay period — in a tax-advantaged account.

    What does poor money management lead to? ›

    There are multiple negative consequences of poor financial planning which could be anything from overspending and lack of retirement funds to unmanageable debt or even bankruptcy. But taking complete control of your finances may seem like a complex task to take on.

    What is a 50 30 20 budget example? ›

    Applying the 50/30/20 rule would give them a monthly budget of: 50% for mandatory expenses = $2,500. 20% to savings and debt repayment = $1,000. 30% for wants and discretionary spending = $1,500.

    Is the 50 30 20 rule outdated? ›

    But amid ongoing inflation, the 50/30/20 method no longer feels feasible for families who say they're struggling to make ends meet. Financial experts agree — and some say it may be time to adjust the percentages accordingly, to 60/30/10.

    When should you not use the 50 30 20 rule? ›

    The 50/30/20 rule can be a good budgeting method for some, but it may not work for your unique monthly expenses. Depending on your income and where you live, earmarking 50% of your income for your needs may not be enough.

    Does the 50 30 20 rule still apply? ›

    Yes, the 50/30/20 rule can be used to save for long-term goals. Allocate a portion of the 20% to savings specifically for your long-term goals, such as a down payment on a house, education funds, or investments. The rule is intentionally meant to bring focus to savings.

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