Until recently I’d never understood why and how people ran out of money.
Then I realized how interested I’ve always been in money: in kindergarten, (between wanting to be a mechanic and a trashman) I wanted to be a banker. And apart from it the richest man on Earth.
And I set out to reach my goal: I started to save money when I was 4 years old. I thought this was a good way to get rich because my parents were collecting discount coupons and my father would spend 2-3 hours doing the weekly shopping, making sure to always buy the best value. I thought my family was rich, back then.
At one point I made art from saving money: I’d spend less than 20 USD a month living at home and not more than 100 USD a month traveling, at age 18. I wanted to eliminate money from my life. But recently I’ve realized money is an excellent problem-solver and it can be used for charity.
Now I like money again. It can be a great asset to make the world a better place. With every penny we spend we make a little change somewhere.
1, Measure: monitor your income and expenses!
This is the apropos for me writing about money: I’ve measured all my income and expenses for 1 year. I’m too tired to make the accounting so I’ll write a separate post about it.
I’ve used the app My Finances.
2, Create an emergency fund
Tomorrow’s gonna come.
If you get your salary monthly and you have a tendency to spend it by or before the end of the month, create an emergency fund (of let’s say 1000 USD). Try not to touch this money no matter what kind of emergency comes. If you have to, fill it back again as soon as you have some income.
3, If saving money doesn’t make you feel better, make financial plans.
They should: as you realize they directly bring you closer to fulfilling your dreams. E.g.:
– I need 4000 USD for my boyfriend and me to visit Thailand for 4 weeks
– I need 25000 USD to get an apartment with a good mortgage
– I need 120 USD to buy the Christmas present my partner wants
4, When buying: focus on the benefit and never on the pleasure of buying
The pleasure of buying (when you have any higher goal in life that can be reached with the help of money) is like cheating on your love because you are drunk ’cause you can’t resist. Or eating a pork knuckle when on a no-meat diet. It’s an instant pleasure that you regret later.
When traveling last winter in Vietnam I’d usually pay 4 USD for a room for a night. I could have payed 40 (or 400) USD but all I wanted was a bed for a night. It didn’t make a difference that others were in the room. It didn’t matter that the location wasn’t perfect.
If all you need is a bed for a night – why would you pay for any extras?
More on this here: How much money do you need?
5, Be cautious when making your important financial decisions
All right, I know. It sounds pretty basic and quite dull.
But making financial decisions like: what kind of car, travel, apartment / house and when are one or few time occasions in your life. So you don’t have experience in making these decisions (unlike: which bar to hit; which washing powder to buy, etc.)
Take your time, think these decisions through. Talk to expert and pay for his advice. Bargain hard if you can.
Lowering on your future apartment’s price can mean a year without work in your life.
Going on a vacation in South-East Asia in January will cost you 10 times less than skiing in Switzerland.
Buying a really good used car can be a deal that will save you from looking at grocery prices ever again.
I have a friend with a quite good sense of money management up to a couple thousand dollars. When it came to a new apartment, he made a really bad deal that’s going to affect his life for the next 30 years. It would be better for him to care less about money on a daily basis but make one really good deal with the apartment with the same or less effort.
6, A penny saved is a penny earned
Buying the your 800 USD TV the next day when it has a “Red Friday” 10% discount means that you’ve earned 80 USD with this move. It sounds silly but it’s true.
7, Don’t try to be a millionaire!
Millionaires often fail or make decisions when they risk it all. Billionaires do it over and over again.
I can not teach you how to be like them. But the question is: do you really want to be like them?
I, for one, don’t.
Money is not a topic on which I’d like to spend several hours every day. Being a millionaire with all its perks – and risks wouldn’t be a life I’d want to live more than what I have now.
And most likely you wouldn’t either.
8, Don’t act like a millionaire!
I’ve met a guy with a new Samsung phone who went to the gas station to charge ’cause he had no electricity at home. Dirt-poor looking Cambodian teenagers often flash iPhones.
I’ve never had an iPhone or an expensive Android.
I need a device for calling, texting, Wifi, mobile data and some applications. I don’t need an expensive status symbol in my pocket… Do you need a 3000 USD watch? A Louis Vuitton bag? A 5 bedroom house? A Ferrari? A yacht? A hotel chain with your painting in the lobby?
And still in this section: never take a personal credit if not for investment. If you don’t have money for a big TV:
1, buy a smaller one,
2, wait until you have enough money for it.