4 ‘don’t you dares’ to Start Improving Your Relationship with Money
Many millennials live paycheck to paycheck without worrying too much of the incoming and outgoing flow of cash. While this ‘living in the moment’ attitude is good philosophically, financially it might pose issues in the long-term. Where everyone is taught to be aspirational and earn money, little to no knowledge is imparted on how to manage that money efficiently.
For those who have just start earning, financial freedom is a bliss. To be able to live out life without worrying or being dependent on anyone is incredible. Introduce words like budget, savings, investing in this lifestyle, the taste might go bitter.
The book – The Financial Diet states that the best way of saving is to start early, to start young, where compounding can play its magic. Everyone dreams of a certain lifestyle, of things they see themselves with, but the question is are they absolutely necessary for you to survive? The answer will probably be ‘no’.
This article will help you understand 4 ‘don’t you dares’ so you are not running after money, but your money in turn is making money for you. Take charge of your finances and become your money’s boss.
- Don’t you dare spend more than you can afford
Having credit cards sounds fancy and rich. And who doesn’t want to feel that way? Having an extra line of credit just available for you? YES!
As dreamy as it sounds, if you’re not careful with your credit card, they might just become a responsibility rather than a possibility. Having credit card improves your credit score and can act as emergency fund, yes, but are you looking at it as extra money?
If you have a credit card, only make purchases that you know you can pay off in a month. If not, it’s best to rethink your purchase.
- Don’t you dare fall into the CEO lifestyle
What is CEO lifestyle, you might ask? As head of a company, a CEO is always concerned about what their lifestyle should look like, how they should present themselves, what should they own etc. Many people fall prey to this CEO lifestyle.
You might think that because I am doing ‘xyz’ job, I need to have ‘abc’ lifestyle. But who defined that? You need to define a budget for yourself depending on your sources of income. Easiest way is to have a budgeting app to track your spends and set financial goals. If not an app, just keep a note of all your expenses down to the smallest purchase. This will help you analyse where you are spending unnecessarily.
The Financial Diet gives another way of ensuring that you are not spending more than you should – the 50-30-20 rule. This plan says that 50% of your income should go to your fixed expenses like rent, utilities etc. 30% of your income should be spent on variable costs like groceries, night-outs etc. The remaining 20% should go into your savings. Now the percentage might differ for every person, but you get the idea.
Focus more on the life you can afford as compared to the lifestyle you think you should have.
- Don’t you dare go a week without checking your bank balance
Make a habit to check your bank balance at least twice every week. Doing this will keep you grounded on where you stand financially and if you should be making that purchase you have been debating on for a week. Don’t live in oblivion, scared to check your balance. If you are following a budget and keeping track of your spends, you would know exactly what number to expect in your bank account.
If you are new to this habit, you might not feel like continuing this after doing it once or twice. But that’s okay. Think of a person on a diet, blatantly ignoring the calorie count written on the chocolate. Knowing how unhealthy it is for their body, they choose to live in oblivion. To be on the financial diet, you need to face the dreaded part and pick it up from there.
- Don’t you dare imagine that savings will just magically appear
If you think that savings and investing sound too complicated right now and should be left off for your future self, that’s a big mistake. Present-you and future-you are not different people. Putting it off for now will just put pressure on you, only at a later stage.
When you are young, with minimal responsibilities, taking money out every month will not burn a hole in your pocket. Staring savings young is a secret to building wealth because it means your money has more time to multiply. To understand this, let’s look at the rule of 72 – this rule shows how long it will take any investment to double in value. Divide the number 72 by the annual interest rate, or return, you’ll receive on any investment or savings account.
So, the real question you should be asking yourself is, do I spend these $100 now or save $200 in ten-years-time, $400 in 20 years-time?