How to Manage Your Money

By managing your money wisely, your future self will thank you. In a challenging time of rising prices, seemingly unlimited credit, and temptations to spend, learning to manage money is not just a good skill to have, it’s a tool for survival. 

Whether you’re living paycheck to paycheck or already putting a bit aside, this article will teach you the basic principles of smart money management, so you can stop worrying and start having real financial freedom. 

So, stick around, because we’re explaining the tried-and-true 50/30/20 budgeting model, applying the difference between wants versus needs, and providing practical tips on how to save money while still enjoying life. 

If you’re tired of being broke or just want to be in control of finances once and for all, this article is for you.

50/30/20 Rule: A Simple Way to Manage Your Money

You can use the 50/30/20 rule to budget your money. This is a simple, practical organizational system recommended by financial experts from all over.  For a detailed guide on creating and sticking to a budget, consider the Consumer Financial Protection Bureau’s budgeting guide.

This budgeting system splits your income into three categories:

50% for needs

30% for wants

20% for saving and paying off debt

Let’s break this down so you can get going on it at this moment.

50% for Needs

This is the money you need to spend on compulsory expenses e.g., rent, groceries, gas for your car, electricity, some mode of transportation, insurance, and basic healthcare. 

If you spend over 50% of your income on needs, you should consider downsizing, negotiating bills, or find ways of earning more income.

By budgeting this way, you are managing your money with discipline, ensuring your needs are met first, and never falling behind what is essential.

30% for Wants

We will discuss this in the next section, but here is the main point: have fun while managing your money and being mindful of your spending habits.

20% for Saving and paying off Debt

This is the portion of your money to save for an emergency fund, investing for your future, and paying off high-interest debt. This is the part of the budget that will drastically change your financial situation. Beyond just saving, this is also where smart investing begins. Check out these 9 assets that will make you rich in 2025 and how to use them wisely to build long-term wealth

As you reach the end of this chapter I recommend you to keep track of your monthly income and apply this rule when spending. You can make this easy by using either spreadsheets, or free applications. By following the 50/30/20 principle, you’ll have a strong foundation to manage your money like an expert.

Needs: How to Control Them and Manage Your Money Better

Before you manage your money effectively, you must first define your needs which are the things you must cover in order to live, survive, and function each day as a human. These would be the essentials such as: 

Rent/Housing

Utilities (electric, water, gas)

Food/Groceries

Transportation (gas, bus fares, maintenance)

Basic clothing items

Insurance (health, car, .etc)

Loan payments (at least the minimum payments)

Tuition/fees for you or your dependants while in school

If you are spending greater than 50%, or half, of your take home pay on your needs it may be time to really take a hard look at your lifestyle and your consumption habits. For example, are you spending excessive amounts of money on rent for an apartment where you live alone? Are you ordering food in or using food delivery services at home instead of cooking for yourself?  

Reducing and cutting costs from your needs is where you can see the most impact. You want to evaluate your situation and mitigate your needs so they can be covered adequately and efficiently – but not excessively. 

When you start to manage your needs effectively, it is easier to make allowance for all the wants, your savings and a richer experience without going into debt. Money finally opens up ways to have the financial freedom to balance all of the roles you currently take on in your life or a life better suited to you and your preferences. It is all about being conscious and purposeful.

Wants: How to Manage Them and Your Money Better

Your financial well-being comes down to learning how to distinguish your wants from your needs, and it’s not always as simple as it sounds.

Let’s be honest: that new phone, those trendy shoes, and that third coffee of the day might seem like needs, but they’re not. Wants are anything that is not vital for one’s survival or basic well-being.

When you don’t control your wants, then your finances start to go haywire. So how do you keep the good wants in check?

1. Identify Your Wants

Take a look at your recent bank or M-Pesa statement and write down your recent purchases. Now, for each one, ask yourself:

Was this necessary? 

Did this benefit me in the long-run? 

If I had a choice, would I buy this again?

If the answer is no, then it was likely a want.

2. Create a Wants Budget

The 50/30/20 rule has you covered with the 30% buffer for wants, so YES, you can enjoy your life! But you need to manage your money, not by spending money on everything you want, but by not blowing your money on too many wants at once. Focus on only two or three of the enablers that bring you the most happiness. This might mean dining out, the gym, or even new books. 

Then cut the rest.

3. Delay Gratification

Impulse buying is a killer. When you wait 24–48 hours to purchase something non-essential, you’ll usually figure out you didn’t want it that badly.

This little habit can save you thousands a year and help you spend your money with purpose, not emotion.

4. Set Money Goals that trump your Wants

If you have a vision, whether it be to buy a car, build a house, or travel, you will inherently be more cautious with your spending. Managing your wants is not about punishment, it is about being strategic about what you choose to spend on.

So when you really want to manage your money, controlling your wants is one of the smartest things you can do.

Saving: The Backbone of How to Manage Your Money

Manage your money by making saving a mandatory part of your financial life. Saving is not about how much you earn—it is about how much you save. It does not matter if you earn $100, or $1000; where the money goes is what matters.

So, how do you make saving a habit? Let’s look at a few ways that actually work.

1. Pay Yourself first

This is just what it says , save before you spend. As soon as you get paid, transfer 10% -20% right away to your savings account. If you can automate it, even better. This is the rule of thumb for how to manage your money.

If you wait until the end, you will find something to spend your money on.

2. Create an Emergency Savings

Life is unpredictable. It can be a medical bill, job loss or simply a phone repair. These little things can wipe out your account. That’s why you need an emergency savings , 3 to 6 months’ worth of basic expenses (you won’t get a raise when your washing machine calls it quits). You will slightly build this fund every pay day.

Having this safety net is one of the best ways to manage your money with peace of mind.

 3. Use the Envelope Method

This old-fashioned technique still holds true. You label envelopes (physical or digital) for each category, Rent, Food, Transport, Savings, Wants, then fund each envelope with cash at the beginning of the month.

Once that envelope is empty—that’s it! Lack of discipline means that you can’t control your money at the moment.

4. Save for Short- and Long-Term Goals

Short-term Money Goals: buying a phone, vacation, tuition

Long-term Money Goals: buying a house, retirement, starting a business

This is another case where separating your account and contributions can work in your favor, so you know clearly what you’re saving for each time. If your goal has an image or shape or something visual, it is easy to visualize your progress and that should help keep you consistent.Better yet, you can boost your income to hit your savings goals faster by learning one of these top 5 high-income skills you can learn online for free.

5. Use “No Spend” Challenges

If you want to have a fun experience while saving, try a 7-day or 30-day “No Spend” challenge, where you don’t spend money on anything that isn’t essential. You might be shocked , It’s the first step with resetting your habits and learning how to manage your money in an even better way.

Saving isn’t boring , it’s freedom. Freedom can reduce anxiety and increase confidence while creating choices. And that is the pay-off when you carefully choose what to do with your money.

Conclusion

Learning how to manage your money may be one of the biggest life skills you’ll ever develop. 

You’ve now learned to apply the 50/30/20 rule, learn to manage your wants, and developed strong savings habits , you’ve got the tools to take control of your financial life.

It won’t happen overnight, but every decision you make adds up. Start small, stay consistent, and see your mindset and your money change.

Are you ready to manage your money like your future demands it? Because it does.