Take Control of Your Finances With These 5 Smart Money Tips

Want to know a secret? Being smarter with your money can be easy. 

You don't need to be a professional stockbroker or have an economics degree to manage your money wisely — just a few simple changes can add up to make a big difference.

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1. Open a High-Yield Savings Account

First things first: Where you keep your money sets the foundation for your finances. 

If you use any old checking or savings account without paying attention to fees and interest rates, you're probably losing money. 

Keeping money in a bank account that pays 0% or 0.1% annual interest — as many banks do — means that inflation reduces the value of your money. Add in monthly account maintenance fees and overdraft fees, and the situation gets even worse. 

Instead, you can flip the script by opening a high-yield savings account (HYSA). These accounts pay way higher annual percentage yields (APYs) than regular savings and checking accounts.

For example, the SoFi Checking and Savings Account pays up to 4.30% APY, with no fees or minimum balance required.

Let's say you put $1,000 into an HYSA paying 4.5% APY. After a year, you'd end up with $1,045, whereas if you put $1,000 into a regular savings account paying 0.1% APY, you’d only have earned an extra $1 after a full year.

Many banks and credit unions offer HYSAs that don't charge monthly maintenance fees, so that $45 in interest is yours to keep, aside from taxes. 

Plus, separating your savings into a different account could help you avoid the temptation of raiding those funds.

Or, if you really want to avoid the temptation of withdrawing your savings, open a certificate of deposit (CD). 

These are specialized savings accounts that generally have stricter rules around accessing your money — but that can be a good thing.

CDs have set terms of several months or years, and if you withdraw before then, you’ll have to pay a fee or forfeit some of the interest you’ve earned. This penalty can help you stick to your savings plan.

Plus, the interest rate is locked with a CD, whereas regular HYSA rates can fluctuate.

For example, you might put $1,000 into a two-year CD with a 4.5% APY. That means you're guaranteed to earn that APY if you keep your money in the CD for the full two years. After two years, your $1,000 would be $1,092, before taxes.

READ MORE: Are CDs Worth It?

2. Get Used to Budgeting

At first, budgeting might feel like homework, but it is one of the most important ways to understand where your money is going so that you can ultimately save more. 

To get over the initial hurdle, it helps to set a goal.

Maybe you want to save for a vacation, pay off your student loans, or figure out why you have such a high credit card statement every month. 

Once you know your “why,” you can begin to budget with purpose. If you're unsure where to start, my Magic Budgeting System helps you automatically calculate your income, expenses, and savings — giving you crystal clarity and total control over your finances.

Keep in mind that budgeting isn't just about finding expenses to cut or making yourself feel guilty for everything you buy. It's about helping you reach your goals and stick to a plan.

There are two sides to the budgeting equation — income and expenses. Some expenses are fixed or at least hard to change, like your rent, while others are optional, like ordering from food delivery apps.

When you start budgeting, you'll see how these puzzle pieces fit together. Maybe your income is high, but your fixed expenses are also high — which is why it feels like you don't have any money for fun. 

In that case, maybe lowering your fixed expenses, like selling your car and buying a lower-cost option, frees up room.

Or maybe you didn't realize how much you're spending every month on variable expenses, like shopping and going out to eat. In that case, making some cuts might be more tolerable if you see how it can help you reach your goals. 

It's also possible that you realize your income isn't high enough, so you'll decide to negotiate a raise, change jobs, or start a side hustle to boost your income. 

3. Put Money Into an Emergency Fund

If you have an emergency, like unexpected medical expenses, your car breaks down, or you lose your job, having an emergency fund reduces your risk of going into debt.

Experts suggest saving three to six months' worth of expenses in your emergency fund, but this is one aspect where the “personal” part of personal finance comes into play. 

Some people feel more comfortable with even larger emergency funds, and some base their emergency funds only on necessities like rent, car payments, and groceries. 

Maybe you're someone who prefers to build in a cushion for discretionary expenses too — because even if you lose your job, it might not be realistic to cut off all your fun spending. 

While there's some flexibility in how much you decide to save, the important thing is to have something set aside for emergencies. 

You can stack smart money savings tips here, too — put your emergency savings into a high-yield savings account so that the money grows without you having to do any extra work.

READ MORE: How Much Should I Put In My Emergency Fund Per Month?

4. Pay Off High-Interest Debt

Pay off any high-interest debt as soon as possible. The longer you wait, the more you'll pay in interest over the long run. And the sooner you pay off your debt, the sooner you'll free up room in your budget.

Sometimes high-interest debt is sneaky because your monthly payment might be low. But the interest eats at you over time. 

Suppose you have $5,000 in credit card debt with a 25% annual percentage rate (APR). If you paid $200 per month, it would take you almost three years to pay off the debt, and you'd pay over $2,000 in interest, on top of the $5,000 balance! 

But if you upped your payments to $400 per month, you'd reduce the balance faster, which reduces the amount of interest you're charged. 

In this case, you'd pay off the debt in 15 months — less than half the time — while only paying $852 in interest.

Some debt might be worth paying off slower, such as if you have a 3% mortgage rate. By making the minimum payments and keeping your money in an HYSA that pays more than the mortgage rate, you're coming out ahead. 

But if you have high-interest debt that exceeds what you can reasonably earn in interest or investments, it's usually smart to tackle that debt as fast as possible.

READ MORE: Why It’s Hard to Get Out of Debt With Only Minimum Payments

5. Start Investing Today

Investing is one of the best ways to grow your money, as you can typically earn more than you could in a high-yield savings account. And it doesn't have to be nearly as complicated or intimidating as some people make it out to be. 

While there's a risk of losing money — so you probably don't want to put your emergency savings into investments, for instance — over time investments tend to gain value, which is why you want to invest for retirement.

On average, the S&P 500, which includes the stocks of 500 of the largest companies in the U.S., provides roughly 8-10% average annual returns. You can choose a low-cost, diversified index fund that tracks the S&P 500 to nearly match these returns. 

Investing apps like Webull make it easy to get started. You can even buy fractional shares for just a few dollars.

Over time, your investments build on themselves, thanks to the power of compound returns. After 30 years, if you had 10% gains every year, $1,000 would turn into over $17,000. 

But if you wait to start investing and only have, say, 10 years until retirement, then $1,000 only turns into around $2,600 at a 10% annual gain.

You can use my free investing calculator to see how much you could earn depending on how long you invest.

READ MORE: Where to Start Investing: Effective Money Growth for Beginners

TL;DR: Smart Money Management Tips

Being smarter with your money is really about doing the simple things well. You don't need to know hot stock tips or come up with some never-been-done-before savings strategy. 

Following the basics — like choosing a high-yield savings account, making a budget, building an emergency fund, paying down high-interest debt, and investing in diversified, low-cost funds — can shore up your finances and relieve money stress.

For more smart money tips, check out these episodes of the Erika Taught Me podcast:

• Why Getting Rich is Easy And Being Patient is So Hard
• How to Become Better With Money
• Escape the Cycle That Keeps You BROKE

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