Understanding how to manage your money is a crucial skill that influences almost every aspect of your life. Financial literacy isn’t just about being able to read numbers on a spreadsheet—it’s about making informed decisions that allow you to achieve your goals and maintain financial stability. Whether you’re just starting out or looking to refine your financial habits, these tips will help set the foundation for a strong financial future.

1. Set Clear Financial Goals

The first step in gaining control of your finances is to set specific, measurable, and realistic goals. These goals might include saving for an emergency fund, paying off student loans, or investing for retirement. Break your goals down into short-term (less than 1 year), medium-term (1-5 years), and long-term (5+ years) categories. This way, you can prioritize and focus your efforts on what’s most important at each stage of your financial journey.

2. Create a Budget—and Stick to It

A budget is one of the most effective tools for managing your money. Start by listing your income and expenses, then allocate specific amounts to categories such as housing, food, transportation, and entertainment. Use apps like Mint or YNAB (You Need a Budget) to track your spending and identify areas where you might be overspending. A good rule of thumb is the 50/30/20 rule: allocate 50% of your income to needs, 30% to wants, and 20% to savings and debt repayment.

3. Build an Emergency Fund

Life is full of unexpected surprises, and having an emergency fund can be a financial lifesaver. Aim to save at least three to six months’ worth of living expenses in a separate, easily accessible savings account. This money should only be used for emergencies, such as car repairs, medical expenses, or unexpected job loss. Start small and contribute consistently until you reach your goal.

4. Understand and Manage Your Debt

Not all debt is bad—student loans and mortgages, for example, can be considered “good debt” because they have the potential to increase your future earning power or asset value. However, it’s essential to understand the terms and interest rates associated with your debts. Create a plan to pay off high-interest debt, like credit card balances, as quickly as possible. Consider using the snowball method (paying off smaller debts first) or the avalanche method (paying off debts with the highest interest rates first) to stay motivated.

5. Establish Credit and Maintain a Good Score

Your credit score is a key factor in your financial health. It affects your ability to get loans, rent an apartment, or even land certain jobs. To establish and maintain a good credit score, pay your bills on time, keep your credit card balances low, and avoid opening multiple new credit accounts in a short period. Check your credit report regularly for errors and address any issues that arise.