Tuesday, 6 November 2012

Let's talk money!

I think the first time I started budgeting my money was when I graduated from college. Money borrowed from the government for educational and “miscellaneous” purposes were spent at an alarming rate during 4 years so it was a perfect time to educate myself about basic finance. And a good choice it was! By making right choices and saying “no” to many material possessions that I “wanted” not “needed”, I was able to pay off my hefty student loan in 3 years and put some money away for travels. Yes, I was fortunate enough to live with my family and do not pay rent but let’s admit there are plenty of young women and men who manage to accumulate debt even when they are given an opportunity to get ahead financially- in this case living at home. Having said that, I strongly believe that in today’s world you won’t be able to get ahead financially without knowledge about personal money management including a proper budgeting.

Set goals for your savings. For instance calculate how much you need for that long planned trip to Hawaii and see how much you have to put aside a week/month to reach your goal! Maybe you have a home renovation project in mind? It’s a lot easier to save if you can visualize your “destination”.

Create a budget and stick with it if just for a month or two. This is the best way to get a clear perspective on your financial situation and figure out what are your spending habits.

Set a direct deposit- if you don’t see it you won’t spend it! I discovered it when I was on the salary job at the bank. The money was deducted the same day my salary was deposited into my account. I didn't miss the money and I was pleasantly surprised to see accumulated sum after a few years!

Don’t be a “scrooge” instead learn how to spend your hard earned cash wisely.  Always think twice before making a purchase. Invest in good quality things- buying cheap clothes/shoes rarely pay off. Decide for yourself where you can splurge and where you can save. For example I will never buy cheap jeans or jewellery but I will do my own manicure/pedicure.  Dining out on a regular basis is a habit of many but it can also be quite depleting on your wallet.

Spend money on “experiences” including travel. If you have a choice- try to spend a good chunk of your savings on “experiences” rather than material things. It is a proven fact that we get a longer lasting happiness from actually experiencing life be it an adventure travel, a sporting event or a cooking class. Plus experiences create memories for many years and we rarely regret it unlike some impulse purchase at a department store.

Don’t try to keep up with the Joneses. Our desire to buy is constantly fueled by media/promotions/advertisement. We are being tricked into believing we need something to look and feel better. Moreover, we often try to keep up with neighbors or co-workers forgetting that it is an infinite race. Everyone should follow their path in life when it comes to spending money: there is no “one fits all” scenario.