Do you find yourself frequently at the mercy of money rather than the other way around? The instant we get paid we find ourselves paying a huge chunk of our money toward our monthly bills. Many of us have multiple expenses we contribute to monthly, whether it be mortgage payments, rent, insurance, commute, you name it. And then at the end of it, we find ourselves with no money left. I mean, how annoying is that!
I have been at the mercy of money for years, it wasn’t until I sat down with my good ‘ole trusty calculator (actually, it’s just on my phone), that I finally figured out where my money was going and what those so-called ‘bills’ were. I was able to cut down on a bunch of things and still have money for the little luxuries in life (ex. travel).
In this post, I am revealing a dozen winning practices I have been incorporating into my life to manage my money. Before you read on, I want to remind you that there is no real formula to managing our money perfectly, what’s important is being mindful of your spendings and knowing where your money is going.
1. Come up with a Financial Plan
Before you can make a plan around your money, it is crucial to understand that our money generally fall within 4 categories of finances. They are: fixed expenses, variable expenses, debt, and savings. Understanding the crucial role each of these categories play is instrumental in helping you categorize your money and determine your budget:
These are the expenses in your life that are always the same every month, ie. your rent, phone payments, insurance, etc.
These are things that vary month-over-month and are usually occur one-time only. Think in terms of non-necessities such as entertainment, clothing, eating out, a birthday gift, you name it.
As much as we try to minimize this category in our life, there will always be debt at one point or another. Things that fall into this category include credit card balances, student loan repayments, and mortgage payments.
This is my favorite because these are money I KNOW I have. Do you need more savings? These numbers are great motivators to help you save.
Group your money into those 4 categories, I have a free planner at the end of this post that can help you with that.
Once you have those numbers down, you are in a great place in terms of understanding where your income is going. Take a look at those numbers, perhaps you want more savings, or maybe you need to focus on your debt first. Or perhaps you need to cut down on some of those fixed expenses.
Understanding the big picture is the foundation of getting started in managing our money, and it is important to do this exercise regularly so you are always up to speed in where your money is the next time you are about to splurge on those cute boots.
2. Cut down 10% of your spendings
Working hand-in-hand with #1 above (coming up with a financial plan), the art of saving more starts with small sacrifices. Find out what you can do to reduce at least 10% of your everyday spends such as utility bills, rent, groceries, entertainment, eating out, and shopping. See if you can make ends meet by constantly assessing how much is “enough”.
You don’t always have to get the most high-end or the best and most of everything, the main idea here is to live comfortably without spending more than you need. Trust me! You’d be surprised at how much money you will find yourself saving if you really control how you spend.
3. Eliminate the temptations
Being an ex-shopaholic, one of the strategies I found that really helped with limiting my spending was unsubscribing to all the shopping emails (you know, the “70% off 2-days only!”, “get our latest new arrivals!” kind of emails). And if you receive flyers, throw them out before even glancing at them! Of course, this also means avoid the mall unless you absolutely need to and if anytime you do fall into trap don’t forget to ask yourself “do I really need this?”, “is this worth more than traveling?” before dropping the wallet.
4. Start a Savings Fund
Whether you want to save for that next big vacation or save for the holiday shopping this year, I love this one because it doesn’t require you to drop a huge sum of money in one go. It’s a go-by-your-own-pace process, which means you can contribute to it as it works with your money.
Now you can do this on your own with a piggy bank or open a new savings account at your local bank. Most banks allow you to open unlimited saving accounts, simply open one for what you need to do (from Canada? I bank with Tangerine to keep my savings in check. Use my Tangerine Key 41599608S1 to get an extra $25 boost in your new account!).
Once you’ve figured out your budget from an earlier step and how much money you have left over from your paycheck to spare, you can start contributing to it. It’s simple as that!
Remember: do not feel obligated to contribute in the 100’s or 1000’s, any amount is better than no amount – the key is to contribute that amount to the new account consistently. For my pet fund (the money I save up for my dog, Mochi, for his vet visits, food, and other expenses), I contribute $50 to it biweekly. As the account is set up to automatically withdraw from my main bank account the moment my paycheck hits, I don’t have to worry about missing a contribution or accidentally spending my to-be-contribution.
5. Invest, invest, invest
Do you have a large savings account with a sum of money that’s just sitting there? Most saving accounts pay you interest on top of the money you have in the account, most of the time this amount is very minimal and as a result, the growth of your money is also very minimal.
Investments, on the other hand, are great alternatives to growing your savings at a much higher rate. For example, a $1000 savings might net you $1 every month in a regular savings account, while investing that same amount might net you $1 the first month, $1.1 the second month, and grow exponentially overtime. Of course, these numbers are arbitrary, and depends on the type of investment you are doing. Not to mention there are also a number of risk factors associated with investments if you don’t know what you are doing.
If you are new to investing, I highly recommend looking into opening an investment account at your local bank and start looking into options like mutual funds, GICs, and stocks. Depending on where you live, there might be different types of investments your country offers, ranging from high-risk to low-risk. Talking to a financial advisor to understand your options is a great way to get started.
6. Get a good credit card
Please be warned, credit cards could be your worst enemy if self-control is not your thing. As long as you can properly manage what you are putting on your credit card and paying it off in full every month, this is an excellent way to save lots of money.
There are many great credit cards available on the market: cashback and rewards are the two I love, but I am not going to lie, it can be a daunting task to pick one with the best reward rates and benefits.
Often affiliated with stores, airlines, and/or flight associations, credit cards are great for getting some money back (ie. cashback) or collecting reward points for a later purchase on everyday spends. I always try to put my large transactions such as flight tickets, home renovation purchases, furniture, etc. on credit cards as they are invaluable in getting me the biggest bang for my buck.
As long as you exercise due diligence in paying it off fully every month, you’d basically be using it for free to benefit from the cashback and/or reward points. Be aware that some cards do have annual fees imposed so take that into consideration when choosing a card as well.
7. Declutter your things
“The only way to get what you really want is to let go of what you don’t want.” – Iyania Vanzant.
There are 2 reasons why decluttering is so important: it helps us realize that our money is too precious to waste on things we may throw our down the line, and it gives us an excuse to sell the things we find that we no longer need.
Our view of the world is constantly evolving, just like how our sense of style, humor, needs and wants also evolve with it. It is through this realization when we are decluttering our things that we realize we don’t always need to buy everything we want at this very moment, we may lose interest in it one day like the things we’ve owned in the past.
My favorite book on this topic is Marie Kondo’s The Life-Changing Magic of Tidying Up. This book had changed my life in terms of determining what I need versus what I want. Through the exercises in the book, I was able to completely get rid of my shopaholic tendencies and indulge in a more minimalistic lifestyle. I highly recommend picking up this book if you had made the mistake of buying too much and you now find yourself with an abundance of things you want to get rid of.
And if you DO end up with a bunch of things you want to get rid of, this would be a great exercise to help you come up with some bonus cash by selling the things you no longer need.
8. Offer to do overtime
If your job offers you overtime pay and lots of opportunities to do overtime, do it! What I love about overtime is the fact that I don’t need to find another job for the extra income. Plus, many companies also offer 1.5x pay for overtime hours so you get more money while doing something you are already familiar with!
9. Get a friend to help
Sometimes we need that extra set of eyes to keep our money in check. Have a friend whom you trust to monitor your progress, get them to keep your bank cards for you if you are a bad spender, and ask them to remind you of the bigger picture when you are about to make a splurge.
To make saving even more efficient, if your friend is also trying to save money, challenge and motivate each other to save together.
10. Pick up a new (and free!) hobby
Distract yourself from potentially spending money by brainstorming a few activities you might enjoy and is free to pick up. Do you like photography? Explore your city and take pictures of its many sides. Do you like DIY? See if you can create something new from something you no longer want. Are you a foodie? Learn to cook at home with everyday ingredients. And my personal favorite since I love to travel and personal growth – I indulge in books, podcasts, and blogs related to those topics to motivate and inspire myself during the off-times instead of doing online shopping (which I shamefully admit is what I have done in the past).
11. Save all your pocket change
Got some pocket change? Start a change jar at home where you regularly deposit them into. Once your jar is filled up to the rim exchange it at the bank for a lump sum deposit to your saving account. It’s the perfect way to get rid of those pesky change and the most mindless way to save!
12. Be debt-free
If you have debt, whether it be student loans or past due payments, they should always be the utmost priority in being paid off first. The interests accumulated based off of these debts are detrimental in maintaining your savings, the worst you can expect by keeping them around is the risk of having to pay them off with the money you have worked so hard to save up.
Bonus. Start a side hustle
Got something you are super passionate about and would love to share with the world? Turn it into a side hustle or business venture. I don’t believe in instant successes but I do believe you can turn your passion into an income. For me, my side hustle is my creative business and this blog. I am in no way making a lot of money from these side hustles but I love them because I am doing something I am super passionate about and if you remember point #10 above (pick up a new and free hobby), it is at the end of the day, my favorite free hobby.
Put these tips in action by downloading the Monthly Financial Planner to keep track of your spends. Just enter your information below and get access right away!
Do you have any other tips to share on how you cultivate your own money habit? Share them in the comment section below!