A money management mindset? What on earth is that?
We often think that our money management strategy should be more in, less out. The truth is that it is not quite so cut and dry. Although it is ideal to have more money coming in each month than you spend, there are many other ways to adopt a money management mindset so that you can better establish security for the long term. Here are some useful tips!
Get Organised
One of the first and most important things you can do to change the way you handle finances is to get organised. This is when it pays to know how much you have and how much you spend. To get organised, start by making a spreadsheet that includes your monthly income and expenses. Once you know where you stand, you can make better, more informed decisions!
Consider Major Purchases Carefully
Life happens, and it’s sometimes necessary to make big purchases, even if we’re not really sure where we are financially. But that does not mean that you have to break the bank. If you need to buy a new home, for example, use an online calculator to plug in your income, debts, and how much cash you have available.
As a side note here, buying is often a better option than renting, even if you spend a little bit more each month. Remember, an owned property typically appreciates, but you’ll never get money back out of a rental.
Don’t Sacrifice Long-Term Needs for Immediate Wants
Getting to know your long-term needs versus your immediate wants is an important part of learning how to manage your money better. But how do you know the difference between wants and needs? Ask yourself if it’s something you can’t do without. If you can, it’s probably a want.
Something to keep in mind here is that wants sometimes fall into the category of need, and you should not feel bad about spending a small bit of money on things like a cup of coffee out with friends if it helps improve your overall mental state or enhances your quality of life.
Go Back to School to Increase Your Earning Potential
While you might not be quite here yet, if you know you need more money, it may be time to start planning your future career. Moving up the corporate ladder can help you earn more, and if you increase your salary and keep your expenses the same, you’ll be in a better position to save. There are opportunities for growth in all careers, including IT, a field in which earning a degree along with a certification will give you more opportunities and skills. The flexibility of online learning platforms can be a big help, so take some time to research your options – this page deserves a look.
Quit Comparing Yourself to Others
We often compare ourselves to other people, especially where success is concerned and this is not useful when it comes to having a money management mindset. As the OpenUp blog explains, there are many reasons for this, including simply wanting to reassure ourselves that we are where we should be. But no two people walk the same path, and you have to be okay with not being able to keep up with the proverbial Joneses.
Just because one person is ahead now doesn’t mean you’re behind, just that you’ve made different decisions and are on a different learning path where money is concerned. There is also the high likelihood that the people you think have it all figured out are actually overextending their budget just to maintain the status quo.
Don’t Hold onto Your Past Mistakes
It’s not hard to make money mistakes, especially when you’re first starting out. Take a look at this article and chart from Money Geek, which illustrates the average credit score by age. You can see that the average 20-year-old has a credit score of around 681. Fast forward to age 30, and that’s down to 663. Once you get out on your own, buy a house, buy a car, and have a family, it’s easy to miss things, such as a mortgage payment, or overextend your credit card. Don’t let your past mistakes ruin your future aspirations.
Remember, by paying your bills on time and reducing the amount of outstanding money you owe, you can begin to raise your credit score in just a month. By the end of a year, you can take even a 500 credit score and bump it up high enough to qualify for a home loan.
Understand that Small Savings Add Up
Every little bit you save counts, and you are probably spending money in ways that you’ve even forgotten. One example: your subscriptions. According to PC Mag, there are ways to see what you’re paying for. You may have subscriptions that only debit once per year that you’ve forgotten about, such as Amazon Prime.
There are also services online that can help you find things charging your credit card. Remember, even if it’s only £2.99 per month for an app, when combined with things like coupons and more conscientious spending, the small savings can add up quickly.
Put a Value on Your Time
Something that can help you better decide if you’re going to spend or save is assigning a value to your time. Let’s say that you earn £20 per hour at work. Are you comfortable working for a full eight hours to buy a pair of new shoes that you may only wear once or twice? Once you begin to look at your expenses in terms of the time it takes you to afford them, you may reconsider your spending priorities.
Ultimately, a money management mindset can drastically alter the way you handle your finances. Remember that money is not just about in and out, and you may sometimes have to spend more to save in the long run. You also have the power to earn more and maintain a lower standard of living so that you can get ahead. Simple steps above, such as going back to school, using financial calculators, and, perhaps most importantly, keeping your digital documents organised, can help you be a better budgeter and live comfortably within your means.
