Personal Finance Management


  1.  Introduction to Personal Finance Management

“I think, therefore I earn.” -Albert Einstein As we have all learned by now, being good at math counts. But I’d like to suggest that there is more than numbers involved – it’s not so much a skill as a mindset. Humans use their brains, and the decisions we make throughout life are often determined by our mental processes. These decisions extend to the way we handle our finances , and whether or not we will succeed in managing them well.

The average American household carries more than $8,000 in credit card debt . And it is easy to see why: high interest rates, the occasional emergencies that require a sudden surge of funds for unexpected costs (car repair), and the ever-present temptations to spend make credit cards a very appealing option for many consumers. This mindset is the key to the problem – that these purchases are “needed” when in reality, they are just “wants.”

This guide discusses why having a proper mindset toward your money, and acting on it as such, is so important. We will discuss the Personal Finance Management system which provides all of the necessary tools for handling your money well, and we will conclude with a summary of the main points of this guide.

  1.  What is personal finance management? Managing your money well, and why it is important.

The term “personal finance” can be defined as the economic state an individual finds themselves in over their lifetime . Specifically, the kind of debt they carry, the amount of savings they have built up to provide for future costs, and the general financial stability in which they operate . For many people, this means a lifetime in debt, never having enough money when it is necessary (for emergencies), and struggling with the inability to save for retirement.

Financial stress can lead to all sorts of health problems, causing us to miss work and even affect our personal lives . But isn’t this all about how much money we make? Shouldn’t it be that if we just had more money, everything would be better? No. The problem is not the income level, but how people manage their finances with what they have. Frugality is the key to retirement , even if you don’t make a lot of money.

  1.  How to manage your money well

Before we can get into this, let’s establish something: Frugality is not about being cheap . It has nothing to do with going out and buying the cheapest version of something, or refusing to spend money because you think everything is too expensive. Frugality is about taking stock of your life, identifying what expenses are necessary and which ones are unnecessary , and deciding how important it is to have those things . Once you have identified that, you can make decisions about where you want to spend your money – on the really important things (essentials), and on the things that could possibly be postponed or done without. This allows people to start saving for retirement early, pay off all of their debt , and live below their means .

To begin your journey into a frugal lifestyle, you must first take stock of what you own. For each item in your possession, ask yourself, “What is this worth?” Then ask yourself if you use it enough to justify its current value. If the answer is no, sell that item (via Ebay, garage sale, or on Craigslist) and put the money towards something more important . Some people keep a “pile of shame” – a box of items that they don’t use and don’t want to sell, but cannot bring themselves to throw away. If you find yourself in this situation, start small – just dedicate a drawer or an area of your house as the “pile,” and begin sorting through it once a week (or however often seems best for you). This forces us to confront our feelings about what we own, and reduces the temptation to keep too much.

Once you have identified items that are not worth their value to you, you can begin selling them and re-allocating that money towards different things . This is where the frugality mindset comes in. People who live frugally have a different thought process when it comes to money. They think about needs and wants , not just what is available to buy in a specific moment . And the key difference between those who live within their means, and those who do not? The former group has identified that they need very little to be happy, while the latter assumes that they “need” more than they actually do .

  1.  How to improve your personal finance management

Take stock of what you have and use, sell items that are not worth the value, and ask yourself if you really need it before purchasing something else . This is how to manage your money well – identify needs versus wants , reduce any unnecessary spending , and get rid of anything you don’t use to free up the money for something that is actually important .


Top tips for saving money:

  1. Make a budget:
  2. Start by writing down all the fixed expenses (i.e., housing, health insurance, and car payments), variable expenses (i.e., groceries, gasoline, and entertainment)
  3. Then make a list of your short-term savings goals – you might want to buy a new phone or take a mini vacation next month
  4. When prioritizing the expenses, rank them from most important to least important
  5. Combine the items on your list that are similar (i.e., vacuum cleaner and shampoo), then organize them by priority
  6. Subtract the total of all this from your monthly income to see how much you have left to spend on variable expenses
  7. Once your variable expenses are paid, save the rest of your money for short-term and long-term goals
  8. Stop going to Starbucks:
  9. If you’re used to stopping by Starbucks every day, commit to only buy drinks on Tuesdays or Sundays
  10. Also try bringing in a thermos to pour into your own mug
  11. Cook at home:
  12. Instead of eating out for lunch and dinner every day, make ahead meals you can take to work or school – a simple baked potato can be delicious with just salt and pepper!
  13. Or have a kitchen barbecue with friends – everyone brings their favourite side dish and you can spend time together instead of being stuck in a crowded restaurant
  14. If you have to eat out, go somewhere with a set menu and order the cheapest thing (usually an appetizer)
  15. You shouldn’t feel guilty about saving money – most restaurants will reduce their prices for it!
  16. Also be aware that some places will make you buy a drink, even if you aren’t interested in buying one
  17. Start a vegetable garden:
  18. Pick a sunny area of your yard (or find an indoor option) and get some seeds
  19. If you have limited space, use containers or build raised beds or wooden planters
  20. Watch YouTube videos for unique ideas
  21. After your harvest, make a salad with what you picked or freeze it
  22. Then cook up those veggies without worrying about the cost the next time they’re in season!
  23. Get a free library card:
  24. If you have a smartphone, download an app that allows you to borrow e-books for free
  25. Also visit the physical library as often as you can to borrow books, DVDs, and magazines
  26. When you finish reading one book or DVD, trade it in for something else instead of buying it second hand (or at all)
  27. Alternatively, get your friends together to start a social library – everyone brings a book or two and you can swap as many times as you’d like
  28. Never buy a second-hand book that the library or Amazon has available for free in e-book form
  29. Finally, ask your local library if they have any other programs to support libraries (i.e., “Librarian for a Day”)
  30. Get rid of your land line:
  31. If you have cell phone service with unlimited calling, you don’t need it
  32. Or if you only use your home phone to talk to family members and friends, cancel the service and sign up for Skype
  33. While you’re at it, get rid of your cable TV
  34. To keep news and sports updates, download podcasts
  35. Or alternatively, watch sporting events for free online
  36. Cut the cord:
  37. Cancel Netflix
  38. Then cancel your gym membership – if you prefer group exercise classes, try something at home like yoga or dance videos
  39. Raise your deductible:
  40. If you have car insurance, increase your deductible from $500 to $1,000
  41. This will lower your monthly payments between 25-50% (or more)!
  42. Alternatively, drop collision from your coverage if you have savings or a low-risk occupation that doesn’t require it
  43. If you don’t have a car, check to see if you’re paying for comprehensive coverage and/or rental insurance
  44. Or you can look into what it would take to cancel your auto insurance entirely
  45. Shop at big box stores:
  46. While convenience may come at a price, you’ll still be spending less than if you bought in bulk or at a convenience store
  47. Also, skip the impulse buy by only shopping with a list
  48. Avoid brands that are on sale – stick to what you normally buy (unless it’s healthier or frugal)
  49. If buying in bulk is cheaper, buy smaller amounts of items with long expiration dates
  50. Or choose the cheapest brand out of those that you regularly buy
  51. If you’re not sure if buying in bulk is worth it, find a friend to split the costs and supplies with! (i.e., snacks or other non-perishable groceries)
  52. Cut out the middleman:
  53. Shop for your next car online instead of at a dealership to save thousands off retail price
  54. If you can’t find what you want online, have someone keep an eye out while doing errands and let you know if they see it in the paper
  55. Buy clothes from factory outlets, thrift stores, or online garage sales
  56. Or buy from thrift stores but only shop if you need something specific and price compare with Amazon before buying
  57. If you can’t find what you want in your size at a thrift store, find a friend who’s willing to share clothes (i.e., split costs, get twice as much for your money, increase wardrobe options)
  58. Finally, buy groceries from a grocery delivery service or via Amazon Fresh
  59. Use up items before buying new ones:
  60. If you find yourself running out of toothpaste or soap frequently, buy it in bulk and ask friends/family if they need some too
  61. If that fails, buy cheaper products and get free toothpaste or soap when you order a pizza
  62. To avoid buying groceries, cook from what you already have in the pantry and freezer
  63. Or choose to only eat out on Friday nights instead of every night (or in general)
  64. If you’re throwing out edible food anyway, offer your extra groceries to people in need via an online group like the Gleaning Network
  65. Get creative with using up everything you already have – instead of going out to lunch at work everyday, try brown bagging it (i.e., make healthy meals at home and bring them with you) for an entire week



It is incredibly easy to spend more than you earn, and even easier to let your credit card debts grow out of control until they become insurmountable. But by becoming a frugal person, learning how to manage your finances with what you have, and identifying needs versus wants, you can begin saving for retirement , paying off any debt that you might have, and living a happier life with less .

Frugality is the key to retirement , even if you don’t make a lot of money.


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