Worrying about money is a common problem, but it doesn’t have to be. While you may always worry about whether you can afford something, being strategic about your personal finances can alleviate most financial worries. By educating yourself about where you stand financially and how you can improve your money situation, you can secure a fulfilling financial future.

7 Best Practices for Managing Personal Finances

Have a Plan

This usually begins with a budget. You can afford anything that fits within your monthly income. The trick is making sure that your budget includes the right things. Too often, people budget out 100 percent of their take-home pay on their lifestyle choices. In reality, that figure should be closer to 50:30:20. Around half of your income should go towards essentials, such as rent, groceries, insurance, or car payment. Reserve roughly 30 percent for your lifestyle expenses, like new clothes or dining out – really, any cost that is optional. Finally, take 20 percent and save it. Put that money in an emergency fund and save for retirement.

Limit Debt

Take steps to limit your debt. Think about the budget mentioned above. Where does a credit card payment fit in if you only have half of your take-home pay for all the essentials? Short answer: it doesn’t. Only take on debt that you can afford and only when you must. Otherwise, you are hurting yourself in the long run.

Make a Plan

Remember, surviving is not the end goal; you want to thrive. The best way to do that is to have a budget, limit your debt, and make a plan to reach your financial goals. First, identify your goals and strategize how to reach them. For instance, if you want to be a homeowner, you will need enough savings to make a down payment and afford closing costs, minor repairs, and moving fees. If you are unsure how to build your financial future, consider using one of the many money management tools out there. Many banks have financial planners that will happily talk to you about your finances, or you can talk to family, friends, or another money mentor.

Take an Online Course

If you don’t know how to use money management tools effectively or you don’t understand what they mean, educate yourself. There are hundreds of online courses that can help you understand your personal finances better. You can also find courses that will help you implement smarter money management strategies.

Protect your Identity

Managing your personal finances involves more than the dollars and cents of the matter. You also need to look out for your future financial health. Protecting your identity is a big part of that. One issue could cause years of extra expenses and headaches that could have been prevented through a few cautionary measures, like subscribing to LifeLock, an identity theft protection service.

Save for Rainy Days

The same way that you should protect your identity to safeguard your future financial health, you should also save for a rainy day. Unexpected expenses can bankrupt someone who isn’t prepared. Even if you have a credit card or a home equity loan you can access to cover necessary costs, like a roof leak or a burst water pipe, the interest rate can be killer, and you will have a new payment to figure into your budget. Using the money you have saved just in case will help you weather the metaphorical storm and get back to your life.

Remember Retirement

Make sure you are setting something aside for the future too. Start saving for retirement as early as possible. Thanks to the power of compounding interest, even consistently saving a small amount can equate to a small fortune given a few decades.

Managing Personal Finances

Effectively managing your personal finances isn’t hard, but it does take planning. Put in the work to protect your financial future today. Create a budget, make a plan, save some money, and protect your identity. Your future depends on you!