Do you sometimes feel like you have no idea where your money goes? Ever had to survive on rice and beans until payday because you have nothing left after the weekend?
If that’s you, hello! Congrats on caring enough to read an article about money management. Awareness is the first step in getting out of debt and beginning to save money so you’ll never have to worry about surviving ‘til payday again.
I’m writing this article because not so long ago, I was you. When I started to dig myself out of the debt hole, I didn’t even know personal finance blogs existed. Instead, I read loads of personal finance books to help me make a plan to kill my credit card debt and save a cushy travel fund so I could backpack around Europe. I would spend my weekends scouring the aisles of my local bookshop and library, searching for an answer to my money problems.
I eventually found those answers, and they are much simpler than you might think.
5 Simple Ways to Rock Your Finances
Get a handle on what you actually earn
This may sound trite but many of us are living lifestyles way over our pay grade. It’s not hard to do with a credit card or two, allowing us to splurge on a new purse or Caribbean vacay whenever we want. For a very lucky few, this is totally OK. But for most of us on regular incomes, accessing credit to extend our lifestyles is a sure-fire way to end up in the red.
That’s not to say you can’t travel or buy nice things. You can do those things when you’ve saved the cash to pay for them upfront.
So, time for a reality check. The first step is figuring out the type of life you can afford to lead. If you just have 1 job, calculating your earnings is easy. Look at what you earn after deductions. That’s your number. Add in any extra jobs or regular income, but ignore things like tax deductions, a side-hustle or selling your stuff. What to do with that money is discussed later on.
Create a budget which forces you to live within your means
Budgeting is just making a plan of where your money is going. If this is your first time doing a budget, start simple. Sit down with a pen and paper and write down all your fixed expenses (housing costs, food, transport, utilities, car payments or other debt repayments). Add in a small allowance to keep you sane. Tally the number. If it’s less than your income, great! Use the difference to pay down debt or start a savings fund.
If your expenses are higher than your income, you’ll need to make savings in other categories. Food is typically the easiest category to save money followed by transport. If you can use public transit instead of owning (and paying the cost of maintaining) the savings can be huge.
Keep playing with the figures until you have your cost of living below your income. This is the only way to truly live within your means.
Make a rule for any extra income
If you’re anything like I was those little extras like tax returns or cash back receipts are quickly spent buying something wonderful. No more! I’ve found the best way to train my brain to ignore the extra money is by making a rule for all extra income. By stating something as simple as ‘Any money I receive over and above my regular income goes to my travel fund/credit card balance/house deposit fund’. Trust me, after seeing your savings balance increase (or debt decrease) it gets really addictive finding ways to earn extra money so you can continue the momentum.
Set a big goal for your money
Want to travel around Europe for the summer? Well, yeah of course you do but how can you actually afford that? By aligning your big audacious goal with your extra money rule, you’re already halfways there. Other ways to achieve your goal include getting a 2nd or 3rd job, starting a side hustle, earning gift cards online or slashing your expenses to bare bones level. You need big goals, goals that seem almost unachievable, to spur you into taking action.
Optimize and enjoy
Money management isn’t a destination. It’s a constantly adapting journey, which begins with awareness. As you become more savvy with your money, you’ll find ways to save that you never thought possible. There are countless ways to save money if you’re prepared to think differently. You might try to eat more vegetarian meals to save on groceries, you might even buy a bike and begin cycling to work.
In no time at all, you’ll be en route to your goal with a fat bank balance and frugal habits to propel you along.
About the Author: Emma wants to save $1 million dollars so she can retire her husband because he’s a much better cook than she is. She writes about her goal to save money, increase her income and travel the world at Money Can Buy Me Happiness.
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