Improving Finances: 5 Ways to Manage Money in the Second Half of 2020

Financial Advice


8 min. read

By: FCU Team

As you make your way through life, you count your milestones along the way—whether it’s graduating college, buying a car or closing on your first home. But oftentimes, these big milestones come with an even bigger price tag that could set you back on your financial journey. Fortunately, there are short- and long-term solutions to freeing or keeping yourself from debt, and it starts with knowing how to manage your money. Keep reading for an in-depth look at the top five ways to get control of your money, so you can strive toward your next big milestone in life.

1. Understand Your Financial Situation

First, you need to know exactly where you stand in terms of personal finances. How much money is coming in each month, and how much is going out?

These important questions can help you understand the reality of your financial security. For example, if you're only making $100 more per month than what you're spending, your investing little to no money toward your financial future. While it's better than being in the hole, you can't expect to build a fortune on a $100 monthly surplus.

Revenue Versus Expenses

Let's start by taking a look at your monthly revenue. How much money do you make after taxes each month? This includes everything from your paycheck to things like child support, alimony, disability, and any other sources of income you have. 

Next, you need to look at how much money you have going out. This includes everything from bills and recurring payments to grocery costs and fuel. Where is your money going each month?

Use three months' worth of bank account statements to get an average cash flow representation.


Now, you need to calculate your total debt. This is money that you've borrowed that needs to be paid back. For example:

  • Mortgage
  • Car loans
  • Credit card debt
  • School loans
  • Personal loans
  • Home equity lines of credit
  • Medical/healthcare debt

Your monthly debt to income ratio consists of your bills (from debts) each month versus your monthly revenue. This figure can significantly impact your ability to get qualified for loans, mortgages, rentals and more.

Monthly Bills and Other Expenses

Improving finances also means knowing how much money is going out to recurring payments outside of debt. These payments can account for thousands of dollars in monthly expenses. These include bills, such as:

  • Rent (if you don't have a mortgage)
  • Utilities
  • Internet
  • Phone 
  • Cable
  • Streaming services (Netflix, Hulu, Etc.)

Outside of bills, you also have other recurring or frequent expenses. These are completely based on the individual and their spending habits, and can include:

  • Groceries
  • Fuel
  • Dining out
  • Shopping
  • And more

These are the areas where people can really afford to cut back to save money. FCU’s online banking features can help you keep track of your spending habits, pay bills automatically, and gain access to free budgeting tools, so you can manage your money on your terms.

2. Set Financial Goals

To manage money more effectively, you need to establish financial goals. What are you working toward? Is it to become debt-free, save for a big vacation, or to become a millionaire by the time you retire?

Whatever your goals are, you need to think "SMART," which stands for specific, measurable, achievable, realistic, and time bound.

Short Term Goals

First, focus on short-term or long-term goals. There's nothing wrong with having long-term goals like becoming a millionaire or being 100% debt-free. However, you need short-term goals to pave the way toward long-term success. 

For example, if you want to be debt-free, consider the following short-term SMART goals:

  • Put a minimum of $100 extra dollars toward debt each month
  • Put a freeze on all credit card spending 
  • Cut back on dining out and put the money saved toward debt
  • Pay off your smallest three or four debts in the first year
  • Use any tax return money to pay off debt

These goals don't represent huge changes, but they will lead you there over time.

Long Term Goals

To create a list of short-term goals, you need a big picture goal to give you a direction. Though these types of goals aren't accomplished overnight, they also need to be time-bound. Unfortunately, without a deadline, we tend to procrastinate goals and minimize our motivations.

For example, if your goal is to be debt-free but you don't have a deadline, it'll be easy to have that extra meal out or charge that coat on your credit card. Alternatively, if your goal is to be debt-free in two years, there's a sense of urgency. You'll think twice about unnecessary expenditures.

3. Create a Budget

Creating a budget that works for you.Creating a budget is one of the most important steps for improving finances. Look at it as a map to financial freedom. While you may not think you need a map, operating without one thus far has to lead you into a poor financial situation.

However, once created, you must strictly follow your budget, or it will all be for nothing. Therefore, allow some wiggle room in your budget to ensure it is practical and sustainable. 

Build an Emergency Fund

Start out by creating an emergency fund to cover emergency issues like car trouble, home repairs, and emergency vet fees. Financial experts believe that a proper emergency savings fund is about 3-5 months of living expenses in one account for unforeseen emergencies.

Having an emergency fund prepares you for random financial necessities that pop up at the most inopportune times. You can pay for them in cash, rather than being forced to borrow money or use credit. 

Once you've paid off your debt, we suggest building your emergency fund up high enough that it will cover three months' worth of your total expenses. This will protect you in the event you can't work, whether you're injured, laid off, etc. 

Set Aside Funds for Necessary Bills and Recurring Payments

In your budget, you need to set aside the exact amount of money needed for bills and other recurring payments. Don't even consider this portion of your revenue as income. Yes, you've earned it, but it's already designated for something other than your bank account.

Resign a Non-Negotiable Amount to Put into Savings Each Month

It's a good idea to put money into your savings account. Each month, you should have a firm amount that automatically transfers into savings directly from your paycheck or from your checking account on a given date. This can also be used to bolster your emergency fund.

How much you put in depends on what other investments you contribute to, whether or not you're paying off debt, and how much cash you have left after your bills and expenses.

Give Yourself an Allowance for Non-Essentials

Creating a budget that's practical and sustainable to manage money means allowing yourself some grace. We're not saying you should eat out every weekend or spend hundreds of dollars shopping. However, you shouldn't cut yourself off completely. 

Give yourself a small percentage of the leftover funds after bills are paid. This money is to be used however you want.

4. Improve Your Financial Outlook

While spending less than you earn sounds obvious, nearly 80% of Americans are living paycheck to paycheck. Clearly, the majority of us are missing something. Over and over again, we fail to live below (or even within) our means.

Let's talk about your cash flow a little more intently. Improving finances is about maximizing your income and minimizing your expenses. Here are a few steps you can take to improve your financial outlook.

Improve Your Credit Score

What is a credit score or credit history?

To put it simply, there are three credit bureaus (Equifax, Experian, and TransUnion) that track your income and debt. They have access to your financial information via creditors, lenders, public records, credit cards, banks, and more. 

They assign you a credit score based on your debt to income ratio, your payment history to lenders, credit applications, credit card standings, and more. A low score will increase your interest rates when applying for mortgages, car loans, credit cards, and most other lines of credit. High interest rates result in the borrower paying excessive more money toward interest alone, rather than the amount borrowed.

Improve your credit score to ensure you're getting the best rates on necessary loans.

Cut Back on Expenses

To improve your financial outlook, you'll likely have to start cutting back on how much you're spending each month. There are simple things you can do to save money, such as:

  • Prepare meals at home instead of dining out
  • Don't stop for coffee, make it at home
  • Stop putting things on credit
  • Use a strict grocery list every time you go shopping
  • Cancel unnecessary services and subscriptions 

If your total monthly debt payments are keeping you in a vicious cycle of living paycheck to paycheck, consider applying for a debt consolidation loan. They can condense most of your debt into a single, more manageable payment.

Find Ways to Earn More Money

To meet your financial goals quickly and efficiently, you may need to find ways to increase your income. Not everyone has the option of cutting back on expenses like those listed above. In this case, improving finances means making more money.

Fortunately, there are a lot of options for people looking to increase their income. For example, you could:

  • Apply for a second part-time job in town
  • Create a side gig working for yourself (dog walking, babysitting, house cleaning, etc.)
  • Look for remote part-time work (writing, answering phone calls, managing social media profiles for businesses, etc.)
  • Drive for Lyft or Uber
  • Fill out paid online surveys
  • Rent your car out to people
  • Sell unwanted or unneeded possessions

There are a lot of opportunities out there for people who are driven and creative enough to earn extra money on the side. It just depends on how important your financial goals are and how much you're willing to devote to them.

5. Start Planning for Your Long-Term Financial Security

Finally, to manage money responsibly, you also need to think about your future. You need to take steps to ensure your financial security for when you're older and ready to retire. This provides a peace of mind that can also lead to early and/or luxurious retirement.

Create a Debt Payoff Strategy

You need to come up with a plan to pay off your debt. The debt snowball and debt avalanche plans are two common debt reduction strategies that you could use to accomplish this.

The debt snowball plan is all about building momentum by paying off smaller debts first. You'd devote any extra money you have towards your smallest debt. When that one is paid off, you transition to your next smallest debt. Each month, the extra money (debt snowball) grows bigger. The bigger the snowball, the more effective at paying the next debt you become.

The debt avalanche differs from the debt snowball method in that you instead devote extra money towards paying the debt with the highest interest rate. If you have debts of wildly varying interest rates and sizes, this method can help you to pay off those pesky high interest rate debts faster, therefore saving you money in the long run.

Each method has its pros and cons, so be sure to research which might be the best fit for your financial situation. In the end, when you are debt-free, it means you're no longer paying interest rates, which can equate to hundreds of thousands of dollars over a lifetime. 

Invest Your Money in Retirement Accounts

There's nothing wrong with having a personal savings account. However, you'll also want to invest some of your money each month toward a retirement plan. If you work full-time, your employer most likely offers a 401k or alternative retirement plan.

If not, Florida Credit Union can help you look into different retirement investment options, such as IRAs that offer a range of tax benefits.

Get Health and Life Insurance

Finally, improving finances means being prepared for all of life's curveballs. You need to invest in quality health and life insurance. While most of us hope to never become chronically ill or get injured in a way that alters our lives, we can't predict the future. 

Health insurance will help cover the costs of your medical expenses, rather than leaving you liable for the entire bill. Medical bills are the number-one reason people consider taking cash out of their retirement plans.

We also recommend getting a good life insurance policy for you and your significant other. Florida Credit Union partners with life insurance experts to get you the lowest rate possible, so you can secure life insurance that fits your budget.

Do You Want More Help with Improving Finances?

Remember, improving finances is a long journey for most people. It doesn't happen overnight. Learning how to manage money is a discipline that takes time, dedication, and sacrifice.

However, it's important to know that there are resources out there for people like you. Look into our financial education course today to see how we can help improve your financial fitness. And if you're ready to look into your investment options, we have investment services to guide you down the right path.