Ever get the feeling that you missed the memo when it comes to making smart financial decisions? Sure, we all know that we need to budget, save and diversify our investments but do we have all the practical tools we need to make the most of our money?
As Sam Beckbessinger writes in her critically acclaimed book How to Manage Money like a F*cking Grownup: The Best Money Advice You Never Got: “We never have to pass a test to get our Money License before we can take a new credit card for a drive.” We start earning money, open a few bank accounts, and boom, we’re charging it. You may like to think you’ve developed some financial savvy over the years, but the odds are you’ve missed some key money management tips along the way. Yet, it’s never too late to fill the gaps.
Let’s start small:
- Be more conscious of your spending choices: Beckbessinger suggests dividing your expenses into categories like “grownup bills” and “freedom” to determine where exactly your money’s going. Then, determine whether the things you’re paying for bring you joy and or take you one step closer to your long-term goals. For example, are those designer shoes enhancing your life or are they just providing blisters mixed with a healthy dose of guilt? That’s where you cut expenses. Plus, research shows that paying for experiences as opposed to material possessions is more likely to boost your happiness.
- Automate your savings: The best-laid plans and all of that. Don’t plan to save, ensure that that a predetermined amount of your income – as much as you can afford – is set to go off your account every month to a high-interest savings vehicle. Invest in yourself. The sooner you start saving, the more you’ll earn on compound interest.
- Pay off debt first: There’s little sense in investing significant funds when you still owe a big on your credit card, your overdraft or that small business loan you took out in 2010. The amount of interest you’re paying on your debt is likely much higher than any you’ll earn on even high-performing stocks. Start with small debts and work your way up as you gain momentum. Just ensure you don’t neglect your emergency reserve fund as you always need some liquidity. And never use debt to fund your lifestyle.
