Whether you are pink, green, purple, blue, young, middle aged or old, one thing that all have in common is money. Money is ubiquitous in our lives from having money to spend on gum or bus fare, to saving and getting a return on your investment.
We all have choices and how we view money, will depend on the choices made, our degree of wealth and motivation to earn or spend. We can make money work for us, or we can work for it. Again it is down to choice, attitude and outlook.
Before you start looking at investments, returns, 401k, IRA and all the other acronyms and investment vehicles, you should really concentrate on the basics and get your foundation of “wealth management” under control. Hone your money management skills and decision making so that you can consider all those investment vehicles at a later stage.
Here are some things to consider:
You can only spend a dollar once. Once you have handed it over in the store, you will need to replace that dollar given with another one earned. Easy logic to follow but unfortunately, a lot of people cannot comprehend this. If you do not have the money, you should not spend it. Humor me with an analogy. If you ask a favor of a friend or family, they quite often will help you and will not want anything from you in return. In the movies and television shows, when you ask a favor of someone who is not your friend, they will always want something in return. Now take that same analogy when you decide to use a credit card. On every purchase, you are using someone else’s money and they want to know what is in it for them. They will always want something in return and in this case it is generally $.20 extra for every dollar of their money you used. However, if you pay back the money immediately there is no interest, and this is where a lot of people fall down by only paying the minimum payment.
Your paycheck is not your budget. Any money you receive is not your budget. Think about it, in order to have money for the future, an emergency fund or savings, you have to put money to put into that fund. If your paycheck is your budget and you sped it all, even with simple math you will realize that $1000 coming in and $1000 going out means $0 left to invest, save or put in your emergency fund. More than 50 percent of all Americans do not have an emergency fund. Are you one of the 50 percent?
We do get accustomed to the amount of money in our pockets and do spend accordingly. But how about if we slightly alter our outlook and attitude? If you were able to change your budget by paying yourself first instead of spending your entire paycheck — which simply means taking 10, 20 or even 30 percent of your earnings and putting it into a savings account automatically each month. Since the money automatically becomes savings, and hasn’t been in your checking account, you don’t miss it and you adjust your spending accordingly while building up your reserves.
Put all your small change in a jar. You will be amazed at how quickly it adds up. I have a system at home where I will put all my quarters in a bag for laundry and my dimes, nickels and pennies go in a huge jar. Over a year, you will probably collect $100, which is a great way of saving and having extra money for unforeseen emergencies, gifts or even treating yourself.
Keep track of how much money you earned and what you spent your money on each month. This last point is probably the most difficult for a number of reasons. This should include all transactions. You will be surprised by how much money you actually received and what you need. If you are struggling to pay your rent, ask yourself do you really need those new shoes, cigarettes or alcohol? Can you find activities for free like walking, joining a library and taking advantage of their free books and other resources and if you want to learn? What classes are free for you to attend at local college etc? Once you have taken note of the previous month’s transactions, ask yourself where you can make better choices and find areas where you can save money. If your rent is too high, are there other places to live? If your car payment is too high, can you drive a cheaper car? Is your insurance due for renewal or can it be moved to another insurance company? When you did your grocery shopping, did you use the coupons that come through your door each day or take advantage of the items on sale in the store?
Unfortunately, as a nation, we want instant gratification and are quite often not prepared to put any effort in to get what we want. We have the need to buy. If we are not spending, we convince ourselves that are cheap and our lives are not getting better. We need to look beyond this. Instead of looking at price and thinking hey this is a bargain, think about whether you actually need the item and once you have bought it, how much enjoyment you will actually get from it.
There are 101 ways to save money. It is a personal thing, but if you are determined, you will find a way.Image Credits: Tim Pierce