5 Money Management Skills for the 21st Century

See also: Budgeting Skills

Being able to manage money is something people are taught and learn, not something they are innately good at. It is an unfortunate fact of life, but a great many people (perhaps the majority) don't know how to manage their money well, even during good times.

The tumultuousness of the 21st Century is and will continue to demand many of the same, as well as some very different, approaches to financial management.

With that in mind, here are five money management skills for the 21st Century.

Budgeting in an Age of Uncertainty

A solid budget is the first step in gaining control of your finances. A budget is an estimate of your income and expenses over a certain time period. Depending on their revenue cycles, most people build a bi-weekly or monthly budget.

Managing your money well in the 21st Century requires good budgeting because we have seen how easy it is for supply chain disruptions and government monetary and fiscal strategy to send markets and prices into disarray. You need to be able to make and adjust budgets on the fly.

You can begin by using your pay stubs and bank records to determine how much money comes in and goes out each month. Then, for the next month, keep track of your expenditures, making sure that your monthly costs are less than your monthly income. You may save the extra money in your budget for a rainy day or start paying off your debt more aggressively.

Learning to be Clear About Your Spending

Assessing your financial status might be scary, but it's the only way to start changing your relationship with money. And while confronting the realities of where and how much you spend might be difficult, not knowing can lead to far more difficulties in the future. This is especially true if you are spending away your nest egg or rainy-day fund on things that you don't ultimately need and don't bring much in the way of marginal value or utility to your life.

Examine your bank and credit card statements from the previous year to see where your money went, including school loans, credit cards, mortgages, auto payments, and seasonal costs. If you find yourself spending money you don't have by using credit cards and not paying them off in full at the end of the month, consider ways to cut back on your spending, such as eating out less frequently, spending less on clothing, cancelling subscriptions, and only purchasing what you truly need. You can identify and fix unhealthy spending patterns by paying close attention to your money.

Working Toward Ambitious Financial Goals

While keeping to a budget puts you in charge of your money, establishing financial objectives offers you direction. Do you want to buy a house, pay off your debts, or retire someday? You should start making efforts now to improve your money management abilities and make such items a reality in the future.

Many people have written off reaching major financial milestones in their lifetime because of how daunting the future appears. While there is cause for concern, the only way to have a shot at financial security is to aim high and believe that you can get there. If you haven't already, the first step would be to open a savings account so you can start to save for a down payment on a house or contributing to a pension to prepare for retirement might result in a significant payout later in life.

Similarly, aiming to pay off your debt might help you achieve your other major financial objectives more quickly. Write down your objectives and return to them on a regular basis to evaluate your progress, celebrate triumphs, and re-prioritize to meet your changing requirements.

Active Investing

Active investing refers to the strategy of putting your money into one or more asset classes and then actively monitoring market conditions, ready to respond by either investing more or divesting, depending on what is most prudent. This is in opposition to passive investing or holding assets long-term, confident that stable markets will provide a consistent return over the long term. The days of being able to invest and, essentially, forget about those investments as they make a healthy return are over, at least for the foreseeable future, according to many analysts.

Money management in the 21st Century, therefore, will require investors to take a more active role in their portfolios and, consequently, spend more time learning the markets and learning how to be an active investor. Successful investing and growing of wealth and capital during the coming decades will require financial literacy that previous generations and many of those in current ones simply don't have.

Establishing an Emergency Fund

Before you begin working on any major financial objective, make sure you have money set aside for unforeseen expenditures such as medical bills, auto repairs, or a sudden loss of a job. To put it another way, you need an emergency fund. If the pandemic showed us anything, it was that unforeseen events can come along and deplete savings and force people into very uncomfortable financial situations.

Using credit cards or a personal loan to pay for emergencies converts a temporary setback into a long-term financial strain. Having an emergency fund can help to guarantee that unforeseen costs do not push you deeper into debt. Set away 3 to 6 months' worth of spending as a reasonable rule of thumb. With so much money saved, you should be able to cover the majority of your costs. And, thankfully, there are several methods to begin establishing an emergency fund, even on a tight budget.


Managing your money well is a skill and one that should be high on your list of ones to work on and develop at the best of times, let alone during these unprecedented and uncertain times we live in. You don't need a rigorous and expensive formal financial education in order to manage money well; there are plenty of resources, like this one, to help establish the fundamentals and point you in the right direction.

The next several decades are going to be interesting, to say the least. Best to start learning how to protect and grow your net worth now and be ready to take advantage of the opportunities that present themselves and avoid the inevitable threats.