It’s said that managing money and building wealth is 80% behavior and 20% head knowledge.
And if this is true then it explains why so many of us struggle with managing our finances.
I mean I understand that I’m supposed to spend less than I make, but what steps and
actions am I suppose to take that will actively help me develop the right behaviors?
Well if this is you then you’re in for a treat.
I have a value-packed conversation lined up for you and today I’m sharing 8 things you
can do to better manage your money.
So let’s jump right in without wasting any time.
Get clear about your money goals
One thing my wife and I have learned on this minimalist and financial journey is that you
have to take control of your life and your money.
And if you don’t then it will quickly spiral out of control with the blink of an eye.
And the best way to prevent this or begin to turn it around is through setting financial
goals.
So, what are your financial goals?
Do you have a plan that’s guiding your budget?
See, money is a tool that, when wielded wisely and purposefully, can open up doors of possibility
and adventure!
But it’s crucial that you’re clear about your short-term, mid-term, and long-term money
goals.
Short term could be: paying off debt, or cash flowing college or grad school, maybe it’s
paying for your wedding.
Mid-term could be: saving for a down payment on your first home or saving for that international
trip you’ve dreamt about.
Long-term: is all about investments and retirement.
Now if you haven’t broken down your money goals in this way then I highly want to encourage
you to do so.
When you’re clear about this, it makes taking the necessary actions to achieve them so much
more fun.
Budget with purpose
Budgeting monthly is a must if you want to manage your money properly.
Especially you have short-term, mid-term, and long-term goals you’re looking to accomplish.
Now the purpose piece in this is all about understanding the why.
But guess what?
Because you’ve already highlighted your money goals you’ve technically identified
your budgeting purpose as well.
For example, let’s say your short-term goal is to pay off debt.
Well, the purpose of your monthly budget is to help you pay off debt.
In this case, your why or the purpose of your budget is also your goal.
Remember budgeting is just a tool, but in order for it to work the way it is intended
to you have to use it in a way that serves a purpose.
Track your spending
So the way my wife and I do things in our life, is we budget first and foremost every
month.
We’ll sit down together, at our dining table right behind me, usually the last day of every
month depending on what day of the week it falls on and how that aligns with our schedule.
But we’ll sit down together and do a few different things:
1) we review the prior months' budgets to see how we did
2) we review all of our spendings from the prior month
3) we make adjustments if needed and write out our budget for the next month.
Now, why am I suggesting you track all your spending in addition to budgeting?
Well for us, and I’m speaking as if my wife is sitting next to me, but we do this because
it keeps us honest.
Every time we sit down to review our budget we use our expense log as we call it to accurately
fill in the actual spend column on our written budget.
Now we track all our spending within a shared workspace we created in Notion.
We each can access it on our phones or laptop and we set it up in a way that allows us to
filters and different views as Notion has this really cool database feature, but if
you’d like for me to walk you through what that looks like in detail in a future video
comment below and let me know.
Now we like doing this because like I said it keeps us honest.
If we overspent in a specific category on our budget we can quickly filter our expense
log, and see exactly why we went over the budget line by line.
This keeps us from having to save recipes or waste time going through our bank statements.
It’s all right there for us in Notion.
And because of that, we can then decide if we need to increase our budget in that category
for next month, or pay more attention to our spending habits so that way we don’t make
purchases that don’t serve a purpose next month.
Declutter your expenses
Whenever we discuss minimalism here on this channel, decluttering is usually a part of
that conversation, and for good reason.
But we’ve only ever talked about it in relation to stuff, people, or mental baggage.
I’ve never challenged the way you think about the phrase declutter in relation to
money until today.
Hence, declutter your expenses.
See if your goal is to live an intentional life, your best life with less.
Then you’re likely going to do everything in your power to remove those thoughts and
things from your life that are currently taking you away from that goal; or that have the
potential to, right?
So in the context of this conversation.
If your goal is to achieve financial independence.
Wouldn’t you do everything in your power to remove those things and activities from
your life that are taking your money away from that goal?
Think about subscriptions you pay for but don’t need or use.
Those wants at the grocery store that add more to your bill than you realize.
What about excessive gifts, memberships, restaurants, hair and nail care that you could yourself
and save some money if you really want to.
See, I’m not saying you can’t enjoy life and the things that interest you.
But if it’s not helping to reach your goals, be it financial independence or pay off debt.
Then I challenge you to be brutally honest with yourself and declutter your expenses.
Pay off debt
Here’s some interesting food for thought for you.
Debt will take you further than you want to go.
Keep longer than you want to stay
and cost you more than you want to pay.
So if you’re at all interested in learning how to manage your money and regain control
of your life then you have to pay off your debt.
There’s no way around that.
Now my wife and I prioritized this in our lives before we got married back when we were
just dating.
At the time we talking about marriage and the future we wanted to create for ourselves
but we knew that in order to do that we had to regain control of our finances.
So we both buckled down, got serious, and made a few sacrifices.
And as a result of that.
I was able to pay off $23,000 in 12 months and my wife paid off $19,000 in 17 months.
And we did all of this while we dating.
Now I’m sharing this with you in hopes that it plants a seed of encouragement and motivation
in you to pay off your debt and regain control of your life financially.
Build an emergency fund
An emergency fund is a money you have saved up for a rainy day.
Maybe your car breaks down, or there’s an issue with your home.
Medical expenses or there could be another lockdown due to COVID or some other virus
that really impacts our society.
See when you have an emergency fund it ensures that you’ll be able to cover those expenses
in the case of an emergency.
Without feeling fearful of the future or turning towards debt.
Now if you’re just starting out or you’re in the process of paying off debt then it’s
best to save a starter emergency fund of $1000.
So if you don’t have that, start there.
Save it in a separate savings or money market account and don’t touch it unless it’s
an emergency.
Once you have that and all of your debt is paid off, now it’s time to save up a fully-funded
emergency fund of 3-6 months of expenses.
And the same thing applies here, do not touch it unless it’s a serious emergency.
If you want me to share more content with you about managing money and saving and paying
off debt then comment below and let me know.
Spend with purpose.
A familiar concept in the minimalist community is to always do things with purpose and intention.
And this includes how you spend your money.
Now naturally you’re going to spend money on things you need.
Food, shelter, clothing, and transportation.
You can also extend this to things you love as well as a few wants.
But it’s imperative that you don’t waste your money on things that have “impulse
buy” written all over them.
So ask yourself, am I buying this for me?
Or because I’m trying to keep up with the Joneses?
Will this purchase serve a purpose in my life that will generate a positive long-term effect?
If I don’t buy this, will my experience of life suffer in any way?
See, we should always aim to make purposeful decisions to prevent purchases that aren’t
mindfully made.
Invest and give with wisdom
Never put your money into something that you don’t understand.
If you don’t know, learn.
Either on your own or with an advisor that has the heart of a teacher.
See, when you learn how to manage your money properly and amazing thing can begin to happen
in your life financially.
You can build wealth, change your family tree and give like you never gave before.
Keep growing, keep learning and always stay true to you.
I’ll see you in the next one.
Peace!