Hey, do you know where all your money went? No?
Then you might want to learn how to do personal finance right and probably not regret this decision when you retire. Or any major life change.
Budgeting is something which should be taught by parents at the early stages of childhood. In this post, I will also show you examples of how people have failed to take care of their budget, and how you can NOT be like them.
What is personal finance?
Put it real short and simple, personal finance is the most important skill to learn for your survival.
Another way to put it is: If you want to stay free of all tension from monetary problems (like no retirement funds, no savings, and $$ loans), then the only way is mange your budget. Learn how to make and stick to a budget.
No other way.
Why is financial planning important?
It is important because you need to know where your money goes. It is necessary to not make mindless purchases (like Fyre Festival tickets using your emergency fund) and have a clear path to whatever you want… like a car. Or a house. Maybe that professional makeup kit you have been dying to have.
To understand, let me give you an example of personal finance management gone WRONG.
Just under a million dollar debt
Bella is 29 years old. Just got married in like 3 months ago. Their household income is $250,000 annually.
$335,000 is her insurance loans.
$300,000 is her credit card and personal loans.
Let’s pretend to be Bella for a moment now. She just got married, works in the government policy making section and cannot afford to pay her bills on time.
She and her husband earn a handsome annual income, and they cannot afford to pay the bills.
She has student loans, insurance loans and credit card debt piled high up, and growing higher every time they miss a payment.
Do you wanna be like Bella? I bet you don’t.
Yeah, so to cut all the BS, this is why you need to learn personal finance management.
General Personal Finance Tips
The following tips can apply to anyone – married couples, families, and even bachelors. It’s usually the extension and disciplined implementation of these budgeting tips that make or break the paycheck.
1. Needs vs Wants
Every time you see a beautiful gown or new branded multi-featured smartwatch, open the dictionary app and see the definition and examples of “need” and “want”. Seriously. Read it aloud. Soak ‘em.
It’s all a matter of strict definitions of “need” and “want”. If we take Bella’s example, she has $300,000 as credit debt and personal loans alone, because she purchase things which FELT good ONLY FOR THE MOMENT.
Marketers are smart. They use the emotional component of all products to appeal to the show-off-to-peers generation and make you pay for it, literally all your life.
Read More: Planning for the Future Financially? Here’s How
2. AUTO-DEDUCT from your checking account
This I can vouch from my personal experience – the more you see the handsome balance in your account, you’ll be tempted to gratify yourself quickly… like I did. Now with this month’s payroll, I am gonna make up for all that lost savings (I got a huge-ass tattoo, he he).
Actually, I was just experimenting to find out how long can I really stop the temptation to empty my bank account.
Evidently, it didn’t work. Learn from my mistake, peeps.
This is how you save money without being broke, or feeling like it.
3. Have an emergency fund
Yes, emergency funds are an extremely important aspect of anyone earning. Anyone. You could be an 18-yr old and working in Mcdonald’s part-time, but you still have to save some amount. Save like 10-20% of whatever you got out.
And the most often asked question is “Is $1000 emergency fund enough for me?”.
Well, the answer is “it depends”.
Are you living in a city with high living expenses? Do you get a salary which allows you to survive in the said city?
Then a meagre amount of thousand bucks does no good. The best answer to the above question is “save upto 6 months (atleast) of living expenses stocked aside as an emergency fund.
Want to learn more? Read this article: Emergency funds: All your questions, answered
4. Start your RRSP early
Now, you may be thinking, “Man, I gotta put aside for my emergency fund savings fund AND retirement plans?? What am I gonna use for myself?”.
Well, Honey, perhaps you didn’t have to experience the recession (or worse, the depression) first hand, and after a bit of history digging, you’ll soon find out how nerve-wracking it was for broke AF people.
Canada lost more than 968,000 jobs in the span of just 8 months. All these people…if they didnt keep an emergency fund, they would have perhaps lived these 8 months a bit more peacefully.
Not having an emergency fund is just one of the worst financial decisions anybody can make, let alone Canadians. Want to make sure you don’t make them too? See what you are missing!
5. Have a money buddy
And no, this does not mean any person with whom you can go shopping. What I meant by a money buddy is someone who constantly reminds you about your financial status (like debts, earnings and savings).
6. Spend less than you earn
Yes, that includes your credit cards. Don’t be like Bella.
There is a huge difference in what you can AFFORD and what you can BUY. You can BUY all the things your paycheck does, until it finishes, but you cannot really AFFORD it. By saving, you can spend it later on, but the one month paycheck? Yeah, that for savings + necessities + some fun.
If only Bella knew about Chango…
Chango has an accounting and Safe To Spend section. Here, you can clearly see how much you can spend, per day, per category.
The best part is that there is a Financial Literacy section being developed. It means you just have to take two minutes, a few swipes, and you know financial terms without any sleep-inducing-jargon! We are still building that section…. HOWEVER, if you wanna be the FIRST one to know when Chango launches live, sign up for early access!!
If you haven’t got an emergency fund yet, build one. If your emergency fund has 6 months of worth living expenses stocked aside, start investing it now.
And one often overlooked is investing in higher studies.
And by higher studies, I don’t necessarily mean PhD and serious high focus ones. Take a diploma course. There’s bound to be one diploma or vocational course in whatever industry you are in Or learn a new skill. Maybe you could take a part-time course about digital marketing or data science. It’ll pay you eventually, like a higher raise or it’ll come in handy during an unexpected laid off.
8. Share the rent
Your first job is critical. Especially if you got it from the college placements. Yes, you may have a great post in a great well-known company, but living in a shared rented apartment cuts cost tremendously. Yes, roommate disagreements happen, but learning how to solve them is a part of life, isn’t it?
I live in a rented 4 BHK apartment with 7 more girls, and while it’s a lot more drama, it’s also a lot more money being saved.
If you are a married couple or living in your own house with your kids, you must still share the living expenses. We 8 girls do it, and we’re cool.
Tell us your thoughts!
That’s all for today, peeps! We hope you will implement these money saving tips and start budgeting with Chango soon!
Have you implemented any of the above tips? Do you have more to share? Please, I would LOVE to know what your struggles with personal finance were!
Hit the comments below!!