Figuring out how to manage your personal finances is never easy.

Most of us don’t have formal education experience in “money.” Even having a college degree in something like business or finance doesn’t translate well to how to manage your personal finances.

That leaves the average person in a bad spot when it comes to making good decisions with their money, because they simply don’t have the right systems or frameworks in place. 

You might be in this spot right now, too. But you don’t have to stick with average or ordinary when it comes to your money.

How Most People Figure Out Their Finances

What we learn about money management at an individual level usually comes from what our families of orgin modeled for us. (And that might not be a good thing, depending on the financial habits of your parents.)

Of course, the more motivated and proactive among us may try to Google search their way to a good financial education. It’s true that we’ve never had more access to more information than we do today.

That sounds good in theory. But in practice, it might not be a good thing either.

For one, it’s just a massive amount of information to sift through. Trying to take it all in is like trying to drink water from a fire hose. 

Then there’s the reality that anyone can put anything on the internet. And they most certainly do, whether their claims or pieces of advice are based in facts or coming from actual expertise — or, more often, definitely not.

Information is only as good as the wisdom you have to interpret those facts, to put them in the context of your life: your goals, your needs, your preferences, your challenges, your limitations.

So once you sort what’s true from what’s false, you also have to dig a layer deeper.

You need to determine, of what’s accurate and reliable, what actually applies to your specific situation.

Managing Your Personal Finances Is Hard—But Achievable, with the Right Tools

In short, managing your personal finances is not easy. And yet, your money is not something you can choose to ignore. 

Here’s the good news:

Learning to manage your personal finances — and then managing them well — is possible. Not easy, but something you can achieve.

It’s not about doing anything super fancy or complicated. It’s about knowing the fundamental and mastering them.

It’s also about having the right structure in place, which is why we’re explaining our 5-piece framework that will help you manage your personal finances like a financial advisor.

(And while we usually say there are no secrets to building wealth, there is one big thing that tends to separate those who succeed from those who don’t. We’ll dig into that at the end.)

If you want to understand what you need to do right now to best manage your money, let’s start working through the framework together.

Start Here: Focus on What You Can Control

You have to begin by keeping your focus on what you can control. If you can master this, you improve your odds of succeeding in any situation you find yourself in.

For example:

• You cannot control what house prices are doing or what your local real estate market looks like. You can control whether or not you do the necessary financial planning that puts you in a position to understand the priority order of your goals and provides a specific action plan to achieving them.

• You cannot control the overall market reaction to whatever current event and crisis is in the news. There will always be something bad happening somewhere. You can control whether or not you stick to your investment strategy and continue to carry out the plan to get to your end goal.

• You cannot control what the overall economy does and how that might impact your individual jobs. You can control whether or not you prepare for an emergency or worse-case situation before it actually happens.

Hopefully this can get you thinking about what you can and cannot control in your own life. None of this is to say you should just ignore anything you can’t control (or, worse, to give up and think that your problems are outside of your influence). 

The point is that by focusing on what you can change, you:

• give yourself a clear starting point for taking action.
• avoid some analysis paralysis, because you narrow in to a limited set of items instead of being overwhelmed by all possible factors that influence a situation.
• aren’t so easily distracted by things that won’t move the needle as much.
• can be more proactive and plan ahead, so you’re prepared and protected when things don’t go your way (for more on this, see our guide to building a bulletproof financial plan here).

This concept of focusing on what you can control brings to mind this quote attributed to 8th-century Buddhist monk Shantideva:

“If you can solve your problem, then what is the need of worrying? If you cannot solve it, then what is the use of worrying?”

Before you do anything else, consider what falls within your ability to influence, act on, and do something about.

You have limited resources. Be it time, energy, or money, you have some of each but in finite amounts. Focusing on what you can control is one way to ensure you direct those precious resources to their productive, effective, and positive ends.

Evaluate Your Current Cash Flow

Your cash flow is made up of money coming in and money going out. You can influence both sides of the flow by focusing on income and expenses.

Let’s start with spending.

A critical step to take if you want to better manage your personal finances is to give a good hard honest look at your current spending.

If you’re overspending or even spending what you make (and breaking even each month), that’s a sign things need to change.

That might mean cutting back and cleaning up non-essential purchases so you can create a surplus cash flow. Once you have more money available to use, you can direct that toward saving and investing. 

(Here’s our guideline for what you neeed to save each year to be financially successful.)

Sound harsh, or at least, not much fun? That’s understandable. But if you want to manage your money well, creating a bigger gap between what you save and what you spend is a critical first step. 

Remember that:

• You get to decide what stays and what goes. There is no one right way to make some spending adjustments. If you really love and feel satisfied by spending on something in particular even though you know you don’t need it, that’s okay. It’s all about what you value and prioritize.
• You can cut back on discretionary spending in degrees. Nothing says you need to slash and burn your way through your spending habits. Making small reductions to how much you spend rather than cutting things out entirely is a more sustainable way to start freeing up cash flow to direct to growing your wealth.

Consider Avenues for Increasing Income

Now, let’s look at the income side of the cash flow equation. Usually, you have more direct control over how much you spend than you do over how much you make… but that doesn’t mean you have no control over your income.

Believe it or not, there are actions you can take to influence how much money you make.

If you own your own business, you may be able to hustle for new opportunities — or you could pivot to serve a new need during a difficult time.

If you work for a company, now may be a good time to step up and demonstrate your leadership skills or seek out increased responsibility. This experience could provide good leverage for negotiating for a raise in the future.

Or, if you’re like most of our clients and work in tech, biotech, law, or finance and you’ve spent about 3 years in your current position - it could be time to start job hunting.

In certain careers, changing positions is the main strategy for upping your income, as each change in position (and company) provides an opportunity to leverage your increased experience for increased compensation.

You can’t snap your fingers and manifest more money. But you can exert some influence here to make it easier to manage your personal finances. You can proactively seek out opportunities to position yourself for increased income in the near future or more earnings right now.

Just don’t expect quick fixes or get-rich-quick schemes to work. Building real wealth takes real time and effort — and you can do it. It is possible if you keep the right mindset and are willing to put in the work.

Be Proactive About Protecting Against and Planning for Emergencies

One of our core mottos at BYH is:

Be proactive, not reactive.

Don’t wait around for something to happen to you, and then scramble to respond and keep up. Look at what you can do right now to get ahead of the curve and plan for the future.

Building a sufficient emergency fund is one of the simplest but most effective steps you can take on this front.

Having cash reserves can make the difference between weathering a storm and being beaten down by it. We don’t necessarily believe cash is king, but access to enough liquidity to get through tough times is important.

This podcast episode covers everything you need to know about how much cash you need to keep on hand.

In addition to maintaining the right cash balance, a good practice we advise for anyone who feels concerned about how to best navigate an emergency or unexpected event (like job loss or reduction of income) is to build a worst-case scenario budget that you can deploy anytime.

This is a version of your current budget, but stripped down to bare bones. It should focus primarily on your needs-based expenses, with a few critical discretionary purchases accounted for as well.

Ideally, you can build your worst-case scenario budget during a time when you don’t need it. You’ll likely have the time and space you need to think rationally and make good choices with what you cut and what you keep.

Start making it a practice to get very intentional and mindful about the other spending you do. Carefully consider each purchase, track every dollar that goes out the door — and when you feel a pang of buyer’s remorse, note it. Whatever you spent on that caused the feeling is a great candidate to be cut from future line items in your budget.

Then, you can have it ready to roll in an emergency situation.

Don’t Just Save: Invest to Grow Wealth

Building a solid savings habit is a critical step in managing your money well. Stashing cash is important to protecting yourself against some inevitable downside risks that we all face in life, but it’s more of a defensive play.

You need some offensive moves if you want to get ahead in the future. That’s where investing comes in.

Part of successfully managing your money is deploying a portion of it into assets that can grow in value over time. Our most basic suggestion here is ot contribute a (relatively high) percentage of your income to long-term investments within a globally diversified portfolio made of low-cost mutual funds and exchange-traded funds (ETFs).

Of course, investing gets far more complex than that and general advice only gets you so far in this realm. The precise investment strategy that works for you depends on your specific financial plan. 

A custom financial plan informs what you need and when you need it — and that, in turn, determines what your precise investment portfolio should look like, the level of risk you can or cannot take, and what you need to do over time to maintain your investments so you have the assets you need to achieve what you want.

BONUS: A Secret Tip to Use If You Want to Level Up Your Financial Situation

This framework will help you manage your money better than the average person. But it only skims the surface of what proper money management looks like.

If you want to get serious about creating a proper financial plan, managing your money to grow wealth, and having the financial means to enjoy the life you want, then you need to get much more strategic and dive far deeper than the starting points outlined here.

At Beyond Your Hammock, our clients know the important of prioritizing their financial planning. They also know it’s a complex undertaking where expert guidance and support can make a material difference to their balance sheets.

That’s why they don’t try to add one more thing on their plates to try to balance (and inevitably let slip through the cracks).

They offload the work of ongoing planning and money management to their advisors, so they have one less thing to worry about, second-guess, or stress over not getting done.

How different would your day-to-day feel if you could:

• Have an actual system to manage your personal finances, including spending, saving, and investing that allows you to enjoy more of what you want in life now, without jeopardizing your future financial security
• Understand the true costs and benefits of each decision you need to make when you reach critical inflection points in life — like when you’re looking at a career change, starting a business, beginning a family, buying a home, or working toward financial freedom
• Plan for opportunities to boost your net worth and mitigate risks along the way, all while keeping your goals and values in mind so your financial strategy reflects what matters most to you

You’d probably say the same things our clients do — things like that sound something like,

The BYH team helps you make financial and investment decisions to feel good about.

BYH has been instrumental in all things financial planning, and mapping out the many goals we have for our family.

BYH has had a positive impact on helping us shape our financial future.

Working with BYH, I’ve been able to make smart investment decisions that I don’t think I would’ve been able to do on my own.

BYH has been super helpful in helping me think about finances, building a plan to get to where I wanted to be, and providing the structure so it all felt easy.

BYH has been able to help us determine our values, clarify our goals, and make a realistic plan. We now have great visibility into our total financial picture and confidence that the decisions we make will help us meet our objectives.

Our financial planning process and investment management strategies that provide a realistic path for achieving what’s most important to you.

Together, we’ll collaborate to create a customized roadmap from where you are today to where you want to go tomorrow.

Ready to take control of your money, gain clarity on what’s next, and grow your wealth?

Book a complimentary consultation with BYH here.

It’s the first step to getting professional guidance to achieve your specific vision of what you want for your life, all while growing your wealth to support you now and well into the future.