Some time a go a friend of mine told me this joke, which is actually true:
Q: How do you define a college student?
A: It’s that person who has to much month at the end of the money.
Sadly though, this applies to “grown ups” as well and in this difficult times there are more and more people who find themselves broke at the end of the month.
While the “golden rule” is to save up at least 10% of your income, the truth is that sometimes we forget about that or have no way to do it at all and end up clenching our butts while waiting for the next pay day.
I was actually one of those people who was happy to receive the new paycheck, spent all of it in less than 3 weeks and then wandering what the heck to eat until next month.
It was fun at first because it was a new experience but in time I got tired of not being able to go out, pay the bills in time or even buy food.
The best solution to this problem is, in my opinion, organising the money in such a way that they won’t finish early. I can’t even count the times I thought “finally, a normal month” and then got another bill or forgot to do something that requires spending money.
Organizing money is actually easy (or at least is should be).
The first step in organizing money is to write down all your important expenses: rent, bills (phone bill, gas bill, internet bill, etc.), bank rates (if you have those), insurrance and everything else that is important and can lead to trouble is you don’t pay.
These are the most important expenses. You can’t live without a roof over your head or without electricity…
From your total income, deduct all of these expenses. From now on you work with what is left of your salary.
The second step is to see what other expenses are left. Car fuel, monthly bus passes, magazines and newspapers, cosmetics.. things that are important to you but noone will come after you with a stick if you don’t pay.
Deduct these also and see what you have left.
Third step is to divide the remaining money into periods: divide it by 4 weeks, divide it by 10 days or however you like and allow a certain spending limit for each period. This way, after you buy food and other stuff (toilet paper is important, for instance 🙂 ) you see what you have left and if you consider you can afford a pair of new shoes or a new coat, go for it. If not, well it’s actually your choice but you can end up with no money at the end of the month again.
These are the 3 steps I actually take when organizing money that “come in” (and are always welcomed).
We have rent, 3 monthly bills and car insurance. That’s it. I think we can manage to live without extra TV chanels or special phone plans that cost a fortune.
After that there are some “transportation expanses”, important but affordable. Then there’s food and as long as we don’t eat lobsters for dinner we can manage to go out from time to time and have a drink or see a movie.
Organizing money is easy but not much fun especialy when you see how much of it you have to give away. That’s reality and it’s tough but you can see this as a wake up call. Maybe after seeing how little money are left after all the bill paying and other stuff you usually spend money on you can see where you could cut back and maybe put some aside for rainy days.
I think the most important part of good money management is also about investment as well. Forget about fancy cars because those are depreciating assets. Instead focus on something that can generate returns like shares, real estate. You might say that you don’t have the money to invest in it and it’s totally out of reach but if you save enough, it will give you a head start. Sometimes it is also “how much you can earn” that matters not how much you can save in a month. Actions are more important than words, thus start now implementing it.