I’m a financial planner and this is how I manage my own money

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  • My job is to help others manage their finances, but I always take enough time to manage my own.
  • I set realistic financial goals and stick to a detailed and strict budget to achieve my goals.
  • I also automatically save 30% of my income and review my portfolios and progress every year.
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Managing your money can seem daunting and time-consuming, especially when there’s a ton of information available. But taking control of your financial well-being will better prepare you for the future.

I’m a financial planner, and while I generally help others manage their money, I always make sure to set aside time to manage my own finances. Here are the four things I do to manage my money effectively.

1. I set realistic and flexible financial goals

Everyone should have financial goals, but your goals should make sense for you and your financial situation. They should match your life and what you value in life.

I certainly don’t want to rent forever – so one of my goals is to save for my first home. Another of my goals is to retire early. Once I set those goals, I break them down into manageable steps to get there.

For example, I used a calculator to predict the amount of money I would need in retirement, and I set aside money each month accordingly. I also invest money each month which I hope will serve as a down payment on my first home.

Financial goals can be big or small – I recently saved up to buy a pair of shoes I’ve wanted for a while, and I’m putting money aside in a savings account for a vacation in Japan this next year. The purpose of setting a goal is really to motivate you and keep you on track.

2. I respect my budget

There isn’t just one right way to create a budget, but there is one right way to use a budget: use it consistently. Regularly recording your spending and savings will help you better understand where your money is going and coming from. Identifying your spending trends is key to building better money habits.

I recommend that you choose the budgeting method that works for you and stick to it. Personally, I budget the old-fashioned way, in a spreadsheet that I created myself.

I use fairly granular tracking – for example, I have a line item specifically for Amazon purchases and another for media subscriptions. While this level of detail doesn’t work for everyone, it helps me identify exactly where I’m spending the most money and helps me find areas to cut back on.

I usually enter my purchases daily so I don’t forget them. At the end of each month, I’m going to go back and review my monthly spending and see how well I’m doing towards meeting my bigger financial goals. This way I can make adjustments for the following month.

3. I made savings automatic

I currently have an emergency fund with about four months worth of expenses and a high yield savings account for “fun” purchases like travel or luxury clothes. I have three retirement accounts – a 401(k), a Roth IRA, and a Roth 401(k) – and two investment portfolios.

I save about 30% of my gross income — 13% in my retirement accounts and the remaining 17% in my investments and savings. I regularly deposit money into all these accounts, but I never have to think about it, because I make all my contributions automatic.

It only takes a few minutes to set up, but saves me from forgetting to bring cash. It also helps me prioritize my savings and reduces the impulse to spend money instead.

I also make all my bill payments automatic – the last thing you want to deal with is a missed rent payment.

4. I review my financial progress every year

At the end of each year, I step back and reflect on the last 365 days of my financial plan. I review my goals and review how I follow through to achieve those goals. This is also the time when I will also make adjustments to my plan.

I will pay particular attention to the allocation of my investment portfolio – if I think it needs to be rebalanced, I will generally try to sell my shares before the end of the year so that I can cushion any investment losses on my income taxes.

I also try to take a moment to congratulate myself on any positive progress I’ve made, big or small. Rewarding myself for sticking to my goals will reinforce my good habits for years to come.

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