How to Manage Money Wisely: 3 Tips to Improve Finances

This article is an excerpt from the Shortform book guide to "We Should All Be Millionaires" by Rachel Rodgers. Shortform has the world's best summaries and analyses of books you should be reading.

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Are your finances out of order? How can you manage money wisely?

We Should All Be Millionaires by Rachel Rodgers says that taking responsibility for your finances is crucial for being confident with your spending habits. Without any organization, you’ll never be able to reach your financial goals.

Continue reading to learn how to manage money wisely.

Take Responsibility for Your Finances

Rodgers writes that you must take responsibility for properly managing your finances. Knowing how to manage money wisely will give you confidence in your financial knowledge and help you spend your money. When you know what’s happening with your finances, you won’t live in uncertainty and doubt your spending decisions. To gain control over your money, you must record and organize your finances with accounting systems so that you can make informed decisions and meet your financial goals.

(Shortform note: You might worry that you don’t know how to manage your finances or use accounting systems. However, experts argue that to build confidence in anything, you must act even if you don’t feel ready. In The Confidence Code, Katty Kay and Claire Shipman write that women often have an inaccurate perception of their abilities and that confidence comes as a result of action, not the other way around. When you take responsibility for your finances, you’re taking actions that require you to trust and have confidence in your ability to handle money, which will, in turn, help you become even more confident about your financial affairs.)

Rodgers provides three tips on how to manage your finances:

Tip #1: Check your bank accounts daily. Rodgers recommends getting a bookkeeping software or hiring a bookkeeper to help you keep track of your finances. This allows you to monitor your progress toward your financial goals and detect potential challenges early on.

(Shortform note: An additional way you can monitor your bank accounts and keep track of your finances is to set up bank account alerts, which provide you with updates that allow you to act immediately and make better financial decisions. Different banks offer different alerts that you can receive through email or text that automatically inform you about any changes to your account.)

Tip #2: Schedule a regular time each week to review your net worth, credit score, and recent spending habits. This helps you better understand how your spending affects your wealth, enabling you to make decisions that save you money. Additionally, when you see positive changes, you’ll be more motivated to continue tracking your wealth.

(Shortform note: When reviewing your finances for the week, T. Harv Eker recommends you reflect on one thing that went well and one thing that didn’t. Reflecting on things that went well can motivate you, as Rodgers suggests. Reflecting on things that didn’t go well helps you practice taking responsibility for your financial situation and learn from your actions so you can find solutions to meet your financial goals.)

Tip #3: If you have debt, stop feeling ashamed about it. Rodgers argues that shame is counterproductive and makes it harder for you to confront your debt, which you must do if you want to erase it. Reframe your debt in a positive light. Doing this helps you accept your financial situation and take action to resolve your debt. For example, if you have mortgage debt, you might reframe it by recognizing that you want your family to live in a nice home and be well provided for. When you see it this way, you’ll feel empowered to work toward eliminating it.

(Shortform note: While Rodgers argues that you should reframe your current debt positively so that you can confront it, in The Simple Path to Wealth, JL Collins argues that you should avoid seeing debt as good or normal. Normalizing debt makes it likely that you’ll accrue more debt and thus limit your options in life, he argues. However you choose to view your debts, Collins provides a method on how to pay them off: First, rank your debts based on interest rate, from highest to lowest. Then, prioritize paying off the highest-interest debt first while paying the minimum balance for the rest of your debts. This method saves you the most money, he argues.)

How to Manage Money Wisely: 3 Tips to Improve Finances