No matter how many articles we read about saving money and how much we hate it when we spend money on useless junk, the holidays make it hard to keep our good financial habits. From going overboard with presents to wasting too much money on food, when it comes to celebrating, we’re doing everything and more.
Easter has just passed and left us all with some buyers remorse and light wallets. Fear not, there’s still something we can do (aside for learning to be more calculated the next time) to recover from this. Here are few of my ideas, please feel free to share your own secrets:
1. Don’t bet on good times
The entire world is in financial crisis and some countries have struggled for years in recession. What makes you think it will be better?
I’m still shocked to see how many people live in ‘la-la land” and squander money instead of saving it, only to find themselves trapped in a very bad place.
We were all used to a certain lifestyle few years ago, when everything seemed to work right. We had good jobs, we took loans for big houses and good cars, we spent money like crazy. Well, those times are over. We need to be more frugal and try save more. Otherwise …
2. Keep a spending journal
It’s been months since I started keeping my journal. It’s annoying to write all that stuff down and sometimes I dread doing it. But it helped me realize where my money goes. Few days ago my mother in law made fun of me for being ‘stranded’, even if few days ago I took a pay from a client that was bigger than her pension. Since now I KNOW where my money goes, I just opened AceMoney (my computer program I use) and showed here: groceries, company taxes, medication for my dog, fuel for the car. I didn’t buy anything for me, except for paying my swimming lessons, which were maybe 8% of the entire sum. So yeah, that’s why I was ‘broke’.
Years ago this helped me see what I’m doing wrong (I was paying for all kinds of small junk each day and all this ‘little money’ would amount to a big chuck of my monthly pay-check). Now it helps me track my business program, see how much everything costs, plan my budgets etc. I’ve become more careful with my money and this journal has really made the difference.
There are countless programs, apps and sites that help you with this, choose one that works best for you and start your journal today.
3. Write down what you owe and what other financial issues you have
Just like someone who’s starting a weight loss program: write down what your financial issues are right now: loans, other forms of debt. What did you loan the money for? Was it a home? A car? A business investment? Do you get anything from that or was it just money wasted?
It’s a very painful exercise, but it helps you find out exactly what’s wrong with your finances and plan your future. You can see how much money you have to pay each month, how much time until you’re debt free and can make some better plans. Maybe you’ll pay the student loans faster and then your house. Maybe you could solve the credit card debt etc.
By having a very clear and detailed view on your entire financial situation you can find solutions to pay your debt, save better, prepare for retirement.
4. Stop spending money on stuff you don’t need!
OK, enough with the journals and planning. It’s time to get down to business and really make a change in our ways. Stop spending money on useless crap, stop wasting it on stuff you don’t need. If you cannot be bothered to be more careful with your money, you’ll never save enough or (worse) get out of debt.
It’s irrelevant that your friends have a bigger TV or the latest iPhone. I for instance don’t have a smartphone and don’t plan on getting one too soon. But I have money saved and I have traveled more than others would in 2 lives. But they’re the ‘cool’ kids who change their gadgets twice a year, while I’m the ‘loser’ who’s saving money and traveling.
Whatever your real focus is (traveling, saving etc) it’s more important than few gadgets or making others admire you. If they cannot admire you for WHO you are, they’re useless and their opinion doesn’t matter.
It all comes down to this. Save! Even if you save 20 bucks this month, save it. You’ll start the next month with some money set aside and maybe can do even better. And once you’re used to it, you’ll notice it’s easier to just set money aside.
I hear people who say “I can’t save, I don’t earn enough”. Weird enough, I know people who earn 3 times less and save a lot. It doesn’t matter how much you make, what matters is to be focused and not forget that you’ll need a plan for when life throws you a punch. Getting sick or losing you job can mess up one’s finances. And only then you’ll find out how 10 times harder everything is when you have no savings to rely on.
Have short-term savings (trips, health issues, a new car), have long-term savings (pension, kids’ college), use envelopes, go to the bank, use jars, it doesn’t matter. Just make it a habit each month to save as much as you can. Don’t worry, you’ll always get to the point where something happens and you’ll thank your lucky star for your ‘cushion’.
6. Don’t get into more debt
It’s only logical: if you’re already in debt, stop adding more to your plate. Try to make your monthly payments and focus on getting debt free again. You’ll sleep better at night.
I know it’s an advice that might seem futile, but you’d be amazed to see how many people don’t bother think about it. Few weeks ago, when I was in a bank for a money transfer, I noticed a middle-aged couple discussing about a 2000 euro loan. They needed the money for something holiday related (probably) and were signing the papers. They and their bank counselor who was doing the paperwork were pretty load and, since the bank is also pretty small, I could hear everything.
What really made my eyes almost pop out was their question about the mortgage conditions at that bank. Hold on… so you weren’t able to save 2000 euro, so you’re taking a loan, but you’re also interested in a huge mortgage (at least 80-100K euro)? Now that’s good thinking …
7. Be consistent
Just like when losing weight: it doesn’t matter how much you plan on it or what kind of super-duper diet you’re on, what matters is to be consistent and put in the work, while also keeping an eye on the calories you eat every day.
It’s the same with saving money. Even if you don’t always go by the plan, make sure you’re back in your regular schedule and put in the work needed. If you’re doing it consistently for the next months/years, you’ll be amazed to see how much you can accomplish. And not matter what the future brings, you’ll be prepared.