Financial Lit 101 Guest: How to Manage Money to Live Life on Your Terms

Money seems to go in and out in what seems like an instant. Your direct deposit hits your bank account, you pay all your bills, buy coffee, go out to dinner with friends, and before you know it, you’re left wondering where your money has gone. Managing every dollar that comes into your bank account empowers you to live life on your terms. Here are some steps to help you start managing your money to live the life you want.

Analyze your spending to see where your money goes

First things first, before you can create a plan for your money, also known as a budget, it helps to see where exactly your money goes.

You may be surprised to see just how much you spend in specific areas. Do you like ordering take-out or eating at your favorite spots for breakfast, lunch, and dinner, but you’re still spending $200+ per month on groceries when you prefer eating out with friends? A spend analysis will help you prioritize what you value so you can make the adjustments needed to do more of what gives you joy.

Here are some steps you can take to complete a spend analysis:

1. Review the last 3 monthly statements for all of your bank and credit card accounts
2. Make a list of categories for your purchases, such as food, transportation, and entertainment
3. Assign each purchase within the month to a category
4. Add up the purchases in each category over the last 3 months to see just how much you spent in each category in 3 months

Analyzing your spending helps you see the things you are spending your hard-earned money on that you may not value as much as you once thought. A spend analysis empowers you to make the changes and allocate your money to things that you truly value more.

You will be able to increase line items in your budget for the things that you love and decrease or even remove spending that doesn’t align with what is important to you.

Knowing where your money has been can be helpful when you start creating a plan for your money.

Create a budget that aligns with your values

Now that you have seen where your money goes and what you value, you can now create a plan for your money. Often, we hear how a budget is restrictive and limits our ability to live the life that we want, but that doesn’t have to be true. A budget should prioritize what aligns with your values and helps you to live the life you want to live. You have the power to tell your money where to go and do more of the things that bring you joy.

Here are two of our favorite budgeting methods, find the one that works best for you:

1. 50/30/20 Budget: This budget allows you to break down your expenses into 3 categories…needs, wants and savings. With this method, 50 percent of your income goes towards your needs, like housing and food; 30 percent of your monthly income is devoted to your wants, these can be things like nights out with friends; 20 percent of your income is put into savings. This method gives you an easy-to-follow breakdown of how to allocate your money in a given month.
2. Cash Envelope System: This budgeting system places cash as “king” to help you organize and prioritize your spending. Each dollar is put into envelopes labeled with a line item in your budget, for example, gas, rent payment, and groceries. The money in the envelopes will be used to pay for your expenses in place of debit or credit cards. This method helps to limit overspending since you only have the amount in the envelopes to spend on a purchase. You eliminate accruing interest on your purchases like when you use a credit card.

Analyzing your past spending and creating a budget will put you on track to manage your money so you can live life on your terms. Are you ready to start getting intentional with your money?

About Anjie & RJ | Rich By Intention (@richbyintention)

Anjie and RJ are a millennial, married couple, and the founders of Rich by Intention. Their mission is to empower couples to manage their money and everyday life with intention by reducing debt, saving money, and investing for their future.

After paying off $123K of student loan debt in a year, they are now on a path to financial freedom. Their story has been featured in Business Insider, Black Enterprise, and most recently, Good Morning America.

RJ and Anjie are hosts of the award-nominated Rich by Intention Podcast, where they share the stories of powerful and ambitious people to inspire listeners to take action to build the life they desire.

Rich by Intention is so much deeper than money and building wealth. Their hope is to encourage couples to be rich in their marriage, rich in parenthood, rich in life, rich in purpose, and ultimately rich by intention.

This guest post is written by Anjie & RJ, founders of Rich by Intention. Any opinions, findings, and conclusions expressed in this article are those of the guest writers, and do not necessarily reflect the views of KeyBank. Our guest writers, Anjie & RJ have promoted Laurel Road and received compensation in the past.