One thing we all have to deal with in life is money. Whether we want to or not, it seems to be what our society has been built on and we better deal with it. So today I want to share 5 tips for money management that will make sure you save more and spend less.
I don’t even remember when I started earning money. I started by babysitting the neighbour kids, then got a paper route with my brother, and started working in a restaurant the day I turned 16. As I was not a super-social teen I managed to save most of my money and put it in a savings account. My parents explained the idea of compound interest and 1/2/5-year deposits quite early, and I made sure to use them.
When I went to uni, I got to a new level of money responsibility. While I got money from the government while I was studying, I managed to even save money then. I only worked on the weekends and the summer holidays, and for a while, I didn’t work at all so I could focus on my studies. I always knew I was saving my money for life after uni, and I am so glad that I did. Even if it meant living with a grocery budget of €40 a month.
So without further ado, let’s take a look at my 5 tips for money management!
1. Save first
The first one of my tips for money management is to save first and spend later.
The first 2 months of uni I figured I would just live as I wanted to and save the rest of my money at the end of the month. But as a famous Dutch quote says; at the end of my money, I had a bit of month left. While most people seem to live like this, it is one of the worst things you can do in money management.
Make a budget for the month. Consider your income and all your expenses. Even quarterly or yearly expenses if you have them. Break them down into monthly ones and count them in. Then you see what you can save. You can put it all in one savings account or spread it out in an account for holiday, an account for that renovation you want to do.
If your monthly expenses or income vary, just check your budget every month and see if there are big changes. If you have less income or higher expenses, figure out where you’re going to compensate for that. Are you going to cut into your savings or your takeout budget? Having guidelines on this can make it a lot easier for yourself.
Then set up automatic transfers from the account your income goes to, straight to your savings account. This way you don’t have to think about it. Also, set up automatic transfers for any reoccurring bills so you don’t have to worry about those.
I believe it is better to put your money into your savings account at the beginning of the month and take some out if you really have to, then to spend first and save later. It adds an extra ‘hurdle’ if you want to spend money from your savings and will make you think twice before doing it.
2. Invest wisely
The second of my tips for money management is to invest wisely! I think I first started investing when I was 21, and won’t forget the day I walked into the bank to open my account. But what a good move that was. Investing can be quite tricky so I don’t recommend you do it if you don’t know what’s going on. As easy as it may seem to make money from investments, it is just as easy to lose it.
I loved the book I will teach you to be rich, and I think it is one of the easiest financial books to read, along with the barefoot investor. You can also find information on youtube to learn about the market and how it works.
Take into account that they have written for their own financial systems so not all info might apply to you. Generally, though, the information on the stock market and ETFs is globally applicable.
If you do decide to invest, I recommend always keeping at least 3 months of expenses aside. You should only invest with money you don’t need. Start small until you’re a bit more comfortable.
3. Don’t bring your credit card
The third of my tips for money management is to leave your credit card at home. I understand this doesn’t work in all countries, but for me, it is really easy to not use a credit card. I only bring it when I know I’m going to make a bigger purchase, or when I’m on a trip.
Credit cards are sometimes seen as an easy option ‘if you don’t have money right now’ but that’s when they’re at their most dangerous. The fees and interest rates can be so high that your purchase becomes a lot more expensive.
It can make people feel luxurious and rich as they don’t have to think about the actual amounts they’re spending at the moment. But they’ll come back later, and it won’t be fun.
So leave it at home whenever you can. If you can’t, be sure to pay it off every week or month.
4. Understand your spending
The third of my tips for money management is to understand your spending. If you know what you’re spending on, you can see where you can save yourself some money.
That manicure you get done every week or every other week, that adds up in a year. Same with your coffee dates, your massages, or that $90 yoga membership.
Evaluate your expenses and think about whether they’re really worth the money. Is there anything you’re paying for that you could get for a lower price, or even free? Any brand items that are just as good generic?
Also, go over all your subscriptions. Do you really need the premium account when you can do just fine with the normal version? Do you need all those magazines, or do you just skim through and then cast it aside? Is your phone plan good for you or is it too extensive?
Ideally, you’d track your money for a month (or more) so you can really see. There are also apps that can do this for you if you connect your bank account to them.
5. Look for deals.
The third of my tips for money management is to be on the lookout for deals. There are a lot of websites that check prices and tell you if, and where, an item is for sale. Make use of these websites! This can be used for literally any item, from soup to shampoo.
There are also websites that keep an eye out for online sales of your favourite stores, or even your favourite items. You can also use cash-back services like eBates to get some money back from your purchases.
So those are the 5 tips for money management that have helped me get through 6 years of uni and 6 months of living abroad. Saving money doesn’t have to be hard, but it needs a bit of discipline. Set some guidelines for yourself and stick to them. For more tips on spending carefully, you can read this article on spending money consciously.