Money can bring us the best of times and also the worst of times. It really is a standard love, hate relationship and, unfortunately, money has the power to control us. The funny thing is that most of us know what we’re supposed to do when it comes to basic financial management, yet so many of us falter when it actually comes to applying our knowledge. Relationships with money can be hard.
Breaking bad habits and replacing them with good ones can be hard. Financial management requires a fair amount of discipline and savviness that isn’t a natural state of mind for most of us. When you take lack of discipline and add the overwhelming guilt you feel every time you tap that card to pay for something you know you don’t need, you’ve saddled yourself with a fair amount of financial management misery.
The problem with money is that we all desire it yet most of us have a pretty negative attitude towards it. Probably because we feel like we never have enough if it. We blame the taxman, the cost of living, the rising house prices and even our boss for our lack of money. But what if the key to successful money management is just changing the way we think about money.
You can say to yourself at the start of every pay cycle “this weeks’ going to be different”, but it never is. We can’t blame anyone for this, it’s pretty natural. Fortunately, there is plenty of financial advice and money tips out there to help us change the way we think about money. Let’s change that “it’s ok, I’ll get more next week” attitude to “every little bit counts”.
Before we can begin on our money changer journey, it’s a good idea to identify the most common unhealthy money habits we tend to adopt.
This one is a killer. How many of us have seen something online or in the window of a shop and thought’ I must have that’. When really, we mustn’t have it because we don’t need it and can’t afford it. But we buy it anyway because we’re only human and who doesn’t want a giant flamingo shaped neon lamp? Nonetheless, impulse purchases are all about emotion and, while they make us feel great at the time, our bank account suffers as a result.
Good financial management is all about budgeting. You’ll always struggle with your finances if you don’t have a budget in place and know how to stick to it. A budget allows you to see how much money you’re bringing in and where it’s all going. There are plenty of apps to help you do this. If you can see that all your money is going towards iTunes movies and take away foods, perhaps you need to rethink your spending habits? A budget is a great way to do that.
While credit cards can be a saving grace in times of emergency, they are really just cheeky little pieces of plastic that constantly burn a hole in your pocket. Unless you’re able to pay the balance off in full each month, using a credit card is one of the worst things you can do for your finances. Especially if you’re using them outside of emergencies to fund your impulse purchases or other avoidable expenses. Every dollar you spend on your credit card will cost you many more in interest. You could spend years of your life and thousands of dollar paying off purchases that you don’t even remember making.
Spending $15 on an easy takeaway meal might not seem like much if you’re in a rush, can’t be bothered cooking or satisfying a craving. However, if you start to make a habit of lazy spends like this, you’ll notice the strain it has on your bank account. Convenience is lovely but it comes with a price.
These include things like drinking, smoking gambling, eating out too much, and shopping splurges. Yes, all of these expenses are completely unnecessary, some are even damaging to our health, but we spend on them anyway. A naughty vice is basically anything that tempts you to spend money you know you shouldn’t be spending.
So, now we’ve established some of the most common unhealthy money habits, we’ll look at what we can do to change them. Let’s think money. So, short of trying to figure out how to make more money, how do we manage with what we already make?
Changing the way we think money can be difficult especially if we’re already set in our spending ways. However, adjusting the way you treat your money will reward you with endless financial, materialistic and mental benefits in the long wrong. The first thing you should do is establish if personal financial management is something you’re motivated to work towards or not. It’s like going on a diet or quitting smoking, it just won’t work unless it’s actually something you want to do for yourself. So, once you’re motivated, here’s our rookie financial advice for better financial management.
It may sound corny but forgiveness is vital for changing your money habits. Forgiveness will help prevent us from holding onto past mistakes and using them as excuses to make the same ones over and over again. It’s so easy to get down on ourselves when things go wrong. We tell ourselves that we’re deserving of it and then start to believe that nothing can be done to make things better, so we don’t even try. This is an example of a bad attitude towards money.
Money literally and unfortunately makes the world go round. Therefore, we should always do our best to see our finances in the most positive light possible. If you make a mistake, fix it, then learn from it and move on. There’s always bigger fish to fry.
You’ll already have a pretty good idea of what your personal and emotional priorities are when it comes to spending money. However, it is possible that you’re not fully aware of how your views and emotions are shaping your financial management. To figure this out simply record your thoughts that come up each time you make a money decision. Do you feel guilty? Excited? Excited but guilty? Or do you feel responsible and deserving? Whatever it is, write it down in your phone or somewhere and then you can use these to gain a better understanding of your true money attitudes. This will help you better identify the beliefs and habits that affect your ability to stick your money goals.
As we mentioned before, a budget is what will keep you from spending too much on cheese and not enough on your bills. The best way to set a budget is by first noting down your net income. Then listing all of your necessary regular expenses. The necessary expenses would be things like rent, groceries, regular bills (gym membership, internet bill, electricity bill, phone bill, insurance), petrol or other transportation costs and any other expenses you may have that can be considered ordinary and necessary. It also doesn’t matter how much you earn, you’ll always be able to budget. Even if you’re a low income earner or on Centrelink benefits.
Once you’ve made sure that all those expenses are covered for the week you can then set some savings goals. Then, see how much spending money you’ll have until your next payday. Obviously, you don’t want to be living off bread and butter. However, just make sure you’ve got enough money to cover your bills and meet your savings goals. You could even use a budgeting app if you need some help. Once your budget is set and you’re committed to it, you’ll be able to see what habits you need to change to work towards paying off debt and better personal financial management.
Out with the old and in with the new. It’s time to ditch the old bad habits and replace them with new, positive ones! Once you’ve established your saving goals, you can then put your plan of reaching them in action. Perhaps you want to go to New Zealand in the middle of the year, or even get a puppy? Once you have some goals, you’ll need to establish the habits that will help you achieve them. The best way to start this is by setting aside time each work, preferably on your payday, to sit down and go through the budget for the next week.
Work out the number each week for your expenses and savings and any other money goals you may have. Then what’s left over is your play money for the week. However much that may be, you’ll just have to make it work. It might be a good idea to transfer your savings money to a different count that you can’t access on an everyday basis, or send it to a trusted friend or family member to reduce the temptation of dipping into it.
The idea of budgeting can be enough to send someone running the other way. This is because the term budget normally brings the term restrictions to mind. Financial management isn’t about restrictions, it’s about managing your money in a way that you don’t have to make sacrifices. Budgeting doesn’t mean you need to adopt minimalist living, you just need to be a little more frugal with your spending. Yes, you may have to compromise, but these compromises will be rewarded in the long run. It’s best not to go into your better financial management with a negative mindset.
Don’t think about the thing you’re going to miss out on at the start because if you’ve decided to cut them out of your budget, they’re obviously not a huge priority. Instead, think about what you will gain a little further down the track. When you finally get to New Zealand or wake up to tiny little pitter patter from your new puppy, those little compromises you made at the start will seem like nothing at all.
This may also sound corny but daily money affirmations will help you to stay motivated on your journey to better personal financial management. Some great money affirmations include:
One thing we will leave you with is that changing money habits, with the aim of better financial management, is not always easy. It’s not just as simple as saving a bit more here or cutting back a bit there. Our behaviours in one area don’t happen in isolation to the rest of our lifestyle. Therefore, we need to look at our overall beliefs and behaviours in order to make last changes. So, let’s all work towards better financial management. Are you with us?
Also try our tips for teaching kids about money.
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Young entrepreneur Daniel Wessels is the CEO and Founder of Jacaranda Finance. Although only in his early thirties, Wessels’ determination and adaptability has led him to successfully pioneer a range of other enterprises both here and abroad.Read More
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