Know Where Your Money Goes
Getting a handle on your money starts with knowing exactly where it’s going. Before you can build wealth or make smart financial moves, you need a clear picture of your income and spending behavior.
Start with Tracking
Tracking your expenses is the foundation of financial awareness. Think of it as a money diary:
Record every expense yes, even the $4 coffee
Review your spending weekly or monthly
Identify patterns and pinpoint areas to cut back
Whether you earn a little or a lot, tracking keeps your finances grounded in reality.
Try These Budgeting Strategies
Once you have a grasp on where your money goes, it’s time to give your dollars a plan.
50/30/20 Rule: Split your income into 50% needs, 30% wants, and 20% savings or debt repayment
Zero Based Budgeting: Assign every dollar a purpose before the month begins your income minus expenses should equal zero
Pick a method that aligns with your lifestyle and helps you stick with it long term.
Tools That Can Help
Not sure where to start? You don’t need expensive software.
Spreadsheets: Great for customization and visibility
Budgeting apps: Tools like Mint, YNAB (You Need a Budget), or EveryDollar streamline tracking and connect to your accounts
Use whichever tool you’re most likely to keep using consistently.
Further Reading
Build your foundation with this helpful guide: Financial Foundation Basics
Crush High Interest Debt First
Credit card debt is the financial equivalent of trying to climb a mountain with a backpack full of bricks. With average interest rates hovering near 20%, it’s the most expensive kind of debt you can carry and it compounds fast. If ignored, it quietly grows in the background, eating up your future income. That’s why rule number one: attack it like it’s your biggest threat. Because it is.
There are two main ways to tackle debt: the avalanche method and the snowball method. Avalanche targets the highest interest balances first, which saves you the most money over time. Snowball goes after the smallest balances for quick psychological wins. Pick the one that fits your mindset as long as you stay aggressive about it.
Minimum payments may seem manageable, but they’re a mental trap. Paying only the minimum on a $5,000 balance at 20% interest could take over 20 years to pay off and you’ll pay more than double in interest. That’s why staying passive with credit card debt is a slow bleed.
All of this hits your credit score too. High utilization (owing a lot compared to your total limit), late payments, or accounts sent to collections will drag down your score. This affects everything from loan rates to rental applications. Keep your utilization under 30%, pay on time, and don’t close old accounts unless you have to. Your credit score won’t fix your debt but protecting it keeps your financial options open while you dig out.
Build Up an Emergency Fund (Seriously)
An emergency fund isn’t a luxury it’s the base layer of any stable financial plan. You want three to six months’ worth of essential living expenses set aside. That means rent, groceries, utilities, minimum debt payments the basics. It’s what keeps a layoff, medical bill, or major car repair from turning into a full blown financial crisis.
Now, where should you stash it? Not under your mattress. Go with a high yield savings account. One that’s FDIC insured, lets you access your money when you need it, but still earns a little interest. Don’t mix it with your daily checking account it needs to be at arm’s length to prevent casual dipping.
If you’re living paycheck to paycheck, building an emergency fund can sound impossible. Start small. Set a goal of $500. Try saving $10 $20 a week. Automatically transfer a tiny amount every payday. Sell a few things you don’t use. Pick up a side gig, if feasible. The key is consistency, not perfection. Momentum matters.
Before you move on, make sure your foundation is solid. Start here: Financial Foundation Basics.
Understand How Credit Works
Your credit score is basically your financial reputation. Most people think it only matters when you’re trying to get a loan or a credit card, but it goes way beyond that. Landlords check it. Insurance companies factor it into premiums. Some employers even look at it when making hiring decisions. In short your score can open doors or quietly shut them.
Here’s what impacts it: on time payments (hugely important), how much debt you carry compared to your credit limit (called credit utilization), length of credit history, types of credit you use, and any hard inquiries. A missed payment? That sticks. Maxed out card? Big red flag. But paying off balances consistently? That’s gold.
If you’re starting from zero, don’t panic just be smart. Consider a secured credit card or become an authorized user on a responsible person’s account. Use it for small purchases and pay the balance in full. Avoid applying for five cards at once or carrying a balance just to “show activity.” Credit is a tool. Use it with precision, and it’ll quietly work in your favor.
Learn to Invest (Start Small)
You don’t need a finance degree or big money to start investing. But you do need patience, discipline, and a basic understanding of what actually works. First off: forget trying to “time the market.” Most professionals can’t do it consistently, and you won’t either. “Time in the market” staying invested for the long haul almost always beats jumping in and out. Slow and steady wins this race.
So where do you start? Look at low cost, diversified options like ETFs (exchange traded funds), index funds, and Roth IRAs. ETFs and index funds track the market and require almost no maintenance. Roth IRAs let your money grow tax free, which adds up over decades. You don’t need to pick individual stocks to get solid returns.
Now let’s make sense of compound interest. Think of it like a snowball as your investment grows, it earns more money, which gets reinvested and grows again. Over time, growth accelerates. It’s not magic, just math. But the catch? It takes time. The earlier you start, the more powerful it becomes.
Finally, ignore the noise. Emotional investing is a trap. So are TikTok gurus promising 10x returns in a week. Real investing is boring and that’s a good thing. The goal isn’t to impress anyone. The goal is to build wealth steadily. So start small. Stick with it. Let time do the heavy lifting.
Get Comfortable with Financial Lingo
You don’t need to be a Wall Street analyst to understand the numbers that run your life. But you do need to know the basics. Let’s start with three essentials:
Net worth = what you own minus what you owe. Your assets (cash, car, retirement accounts) minus your liabilities (student loans, credit cards, mortgage). It’s your financial snapshot.
Cash flow = what’s coming in vs. what’s going out. If your monthly spending exceeds your income, it’s a red flag.
Liquidity = how easily you can access your money. Cash is fully liquid. A house? Not so much.
A basic financial statement will lay this out for you. Think of it as a cheat sheet for adult life: it shows where your money stands and helps guide decisions. Don’t ignore it. And if you don’t know how to read one, learn plenty of free resources can walk you through the structure.
Finally, red flags. If your expenses grow faster than your income, if you’re using credit to cover basics, or if your net worth hasn’t moved in a year that’s your cue. It’s not about perfection. It’s about knowing where you stand so you can adjust before things unravel.
Financial Adulting Is a Skill Train It
You’re not failing. You’re building. That’s the mindset shift most people need in their 20s and early 30s. Financial literacy isn’t a magical talent it’s a skill set you train over time. There’s no scoreboard or finish line, just a direction: better.
One of the smartest moves you can make early on is automation. Set up auto transfers for your savings, retirement contributions, and bill payments. Eliminate the decision fatigue. Treat your money like a system, not a mood.
At the same time, spend with intention. Not every dollar has to be optimized, but each one should reflect a choice. That $15 lunch? Fine. Just be honest about what trade offs you’re making.
And here’s the payoff: consistency compounds. Build habits today that reduce stress tomorrow. You’ll buy freedom in the future not just with money, but with time, options, and sanity. Adulting with your money doesn’t mean having it all figured out. It means you’ve shown up for the reps.