How To Manage Your Money (5 Steps To Crush Your Financial Goals)

Last Updated May 1, 2025 by Davina Kelly

Feeling overwhelmed by your finances and wondering how to make your money work for you? Learning how to manage your money will stop you from feeling like you’re constantly playing catch up. 

And it doesn’t have to be stressful or confusing, it’s about having the right plan. 

Between paying bills, saving for the future and treating yourself occasionally, it can feel like there’s no way to balance it all. 

But with smart strategies and a clear routine, you can take control of your money and set yourself up for success. 

In this post, I’m going to walk you through how to manage your money every month, step by step. 

Whether you’re trying to get out of debt, build savings or simply stop living paycheck to paycheck, these tips will help you feel confident and organised when it comes to your finances. 

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How To Manage Your Money (5 Easy Steps):

1. Calculate Your Net Income

Before you learn how to manage your money, you need to know exactly how much money you have to work with. 

Many people make the mistake of budgeting based on their gross income (the amount before taxes and deductions), but what you really have to spend is your net income, the amount that actually hits your bank account.

To calculate this number list all your income.

This includes income from your main job, side hustles, freelancing gigs, investments and any other sources.

Here’s an example:

• Paycheck from main job: $3,000/month
• Side hustle income: $250/month
• Freelancing: $500/month
• Dividends: $200/month
• Total income: $3,950

If you’re self-employed, calculate your income after tax to avoid budgeting based on an inflated figure as you need to deduct taxes before defining your goals to maintain realistic expectations. 

2. Allocate Your Money 

Once you know your total net income, it’s time to divide it into three main categories.

This step ensures every dollar has a purpose which makes it easier to avoid overspending. 

Category 1: Needs (Essential Expenses)

This category is for the non-negotiable expenses required for your day-to-day living.

These are the basics you absolutely cannot skip.

Examples include:

• Housing: Rent or mortgage payments
• Utilities: Electricity, water, gas and internet
• Transportation: Car payments, fuel, public transport
• Groceries: Weekly food expenses
• Insurance: Health, home or car insurance premiums

Tip: Automate your payments: Set up direct debits for your bills to ensure they’re paid on time without effort to reduce stress.

Category 2: Future You

This is where you focus on building financial security for your future.

It’s easy to let savings slide to the bottom of your priority list, but building a strong financial foundation is essential.

Treat your savings and investments like bills that need to be paid every month.

Think of this as the money you’re sending to your future self to control the life you dream of. 

How to build your future category:

Build an emergency fund: Save for unexpected expenses like medical bills or car repairs.

Start small – $500 or $1,000 can make a big difference and aim for 3 – 6 months of living expenses over time. 

Related: How To Build an Emergency Fund

Investing: Invest in index fund and contribute to a retirement account to grow your wealth. 

Related: A Complete Beginners Guide To Investing In Index Funds

Big Goals: Whether it’s a down payment on a house, a new car or a dream vacation, this is where you save for those bigger life milestones. 

Tip: Pay yourself first. Automate savings by setting up an automatic transfer to a separate account as soon as you get paid.

This way, saving becomes effortless and you won’t need to rely on willpower. 

Category 3: Fun Money

Life isn’t just about paying bills and saving for the future, It’s also about having fun.

This category is all about enjoying your hard-earned money. 

Think of it as guilt-free spending on things that make you happy. 

Examples include:

• Subscriptions: Netflix, Amazon Prime, Spotify
• Entertainment: Eating out, theatre, dinners out with friends
• Self-care: Facials, manicures, spa days
• Travel: Weekend getaways or vacations

If you ever feel tempted to overspend in this area, remind yourself that “fun” now shouldn’t jeopardise “fun” later. Balance is key. 

Tip: Allocate a certain amount for your fun money and keep it in a separate account. 

Grab a copy of my FREE budget template below to help you allocate your money.

3. Set Clear Financial Goals

Now that you’ve divided your income, it’s time to set some goals.

Setting goals is one of the most powerful steps you can take when learning how to manage your money. 

Goals give your money purpose. Without a clear plan, it’s easy to blow through your paycheck without making meaningful progress toward what truly matters to you.

Having money goals also matters because:

Direction: Goals give you a roadmap. They help you decide where your money should go each month.

Motivation: When you know what you’re working toward, it’s easier to stick to your budget and avoid unnecessary spending.

Accountability: Goals allow you to measure progress and hold yourself accountable. 

Types of Financial Goals:

Short-Term Goals (0-1 year):

• Build an emergency fund
• Pay off high-interest debt
• Save for a vacation

Medium-Term Goals (1-5 years):

• Buy a car
• Save for a house deposit
• Pay off student loans

Long-Term Goals (5+ years):

• Retire early
• Build wealth through investments
• Fund your kid’s education (if that’s in your future)

Think about what matters most to you. Is it financial security? Freedom to travel? Owning a home?

Aligning your goals with your values will make it easier to stay motivated. 

Use the SMART framework for goal-setting: Specific, Measurable, Achievable, Relevant and Time-bound. 

Instead of saying “I want to save more”, set a goal like, “I will save $5,000 for my emergency fund by December 31st.”

This gives your goal clarity, structure and a clear deadline which will make it easier to stay focused and actually follow through.

Related: 10 Financial Goal Examples

4. Create a Budget

Budgeting is super important when it comes to managing your money.

Your budget is the bridge between your paycheck and your financial goals. 

It doesn’t have to be complicated or restrictive.

It’s a simple way to make sure your spending aligns with your goals and priorities. 

Start with your goals. Ask yourself, ”What am I trying to achieve with this money”?

Your budget should reflect those goals. For example:

If you’re saving for a house cut back on “fun” expenses and allocate more to savings.

Paying off debt? Prioritise extra payments in your budget.

Once you’ve decided which goal to work on, choose a budget method that works for you.

• 50/30/20 Rule: Allocate 50% of income to needs, 30% to wants, and 20% to savings.
• Zero-Based Budgeting: Every dollar is assigned a job, so income minus expenses equals zero.
• Envelope System: Use cash envelopes for different categories (great for avoiding overspending).

You can check out the best budgeting methods for more options. 

Next, include all your fixed expenses like rent and variable expenses like groceries.

Don’t forget annual costs like insurance premiums or holiday gifts, divide them by 12 and set aside money each month. 

Finally, adjust as needed. If your “needs” are eating up more than 50% of your income, look for ways to cut back.

Could you find a cheaper apartment? Or cook at home more often? 

These small tweaks can make a big difference and give you more breathing room in your budget.

5. Monitor and Reflect

Budgeting isn’t a set it and forget it process.

Checking in with your finances regularly is essential to staying on track.

Create a tracker that categorises your spending into the three categories (as mentioned in step 3).

This will allow you to see your transactions and ensure you’re sticking to your plan. 

Use colour coding to identify areas where you’re overspending or under saving. 

Review your progress each month and ask yourself these questions:

• Did I stick to my budget?
• Did I pay my bills on time?
• Where did I overspend and how can I adjust?
• Did I save as much as planned?
• Did I make progress towards my goals?

If you’re on track celebrate small wins.

For example, if you’ve saved more than usual or paid off a credit card balance, celebrate.

These victories deserve recognition. Reward yourself in a small, meaningful way without derailing your budget. 

Reflection is also important because life changes and so do your priorities.

Revisit your goals every few months to ensure they still make sense. 

Then adjust your plan as needed to stay aligned with what matters to you. 

Final Thoughts

Learning how to manage your money is essential for reaching your financial goals. Managing your money isn’t about perfection, it’s about progress.

Start where you are, use the tools and tips in this post and take one step closer to financial freedom every time you get paid.  

Other Posts You May Like:

The Ultimate Payday Routine To Maximise Your Money

7 Best Budgeting Methods for Beginners

10 Best Financial Goal Examples

How To Build an Emergency Fund Fast