Think money is easy, and making good money decisions is easy? Well, you’re wrong. Money is hard. It’s stressful, and emotional, and frustrating. And if you don’t resonate with this, this article isn’t for you.
Most people don’t think of money as an emotional object, but it really is. Money provides shelter for you and your family. It provides food and water and clothing. It even brings you the things that make you happy. And going without any of these things, well you can’t say that wouldn’t make you emotional.
Luckily, there is a lot of advice online about how to deal with money. But sorting through it all, and figuring out what works for you? That search can be overwhelming. Hopefully, this article will make your research simple, and maybe, you’ll end up thinking money is easy, like it should be.
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Skipping coffee or that avocado toast...won’t buy you a house.
No matter how broke you are, you need to find a way to treat yourself. You aren’t going to save up the down deposit for a house by saving your coffee money. Whether you want to pick up coffee on your way to work or you’d rather save for a nice dinner out at the end of the month, you have to pick something that makes you happy to spend your money.
The key to this is adding it specifically to your budget. You are going to have a lot better handle on your impulse purchases if you know you are treating yourself already. This will keep you from feeling deprived and help you have control over where your money is going.
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Money buys happiness, but happiness isn’t just about the short term.
When we have the basics covered, the rest of our money is available for things that make us happy. And when you go shopping, there is a lot of pleasure in buying items that will bring you short term happiness. You get a dopamine hit when you think you are getting a good deal, or when you are just “treating” yourself a little. This dopamine hit is addicting, and often ends with buyers remorse. And if you are trying to save money, the pleasure you get in the short term won't help you achieve your long term goals.
However, you can train yourself out of this cycle by giving yourself a little reward when you save money. Try keeping mints or candies in your pocket so when you go shopping and pass on that really good deal, you still get a little treat. Keeping a chart at home with stickers, or a thermometer chart that you fill in, to mark your long term savings can be surprisingly helpful as well. In the end, you'll be really proud of yourself for all the progress you've made.
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Sometimes, you have to buy the cheap stuff.
Anyone who grew up in a middle-class American household will tell you that you need to save your money for the quality items, so you don’t find yourself replacing them so often. While that is the ideal, that’s not going to happen all the time. Probably not even most of the time if you are just starting out with a budget.
Figure out what items are a priority to save up for. If you take the bus to work, you need a nice pair of walking shoes and a durable bag more than you need a quality vacuum cleaner or nice couch. So cheap out on the things that don’t matter. Buy baskets from the dollar store, and cleaning supplies too. If you realize one of your priorities is something that can’t wait for when you have more money, see what you can find at thrift and consignment stores before heading to Walmart. It’s okay if you can’t get the highest quality items on the market, just get the highest quality you can afford at the time.
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How do you budget?
Okay, this part is hard to write about because everyone seems to have a different thing that works for them. However, there are basically two theories that most people seem to have success working with: Zero Sum Budgeting and Envelope Budgeting.
Zero Sum Budgeting: Basically, you give every dollar that comes in every month a job. This requires you to know all of your expenses exactly, and it also requires you to know exactly how much you make every month. This doesn’t work well if your income varies from month to month, but a lot of people like knowing exactly where all of their money is going. It does give a lot of control. The reason I don’t use it anymore is largely that I don’t need that control; it was really helpful when I did.
Envelope Budgeting: Essentially, you bucket a certain amount of money for various expenses, like food, housing, clothing, fun activities, and when you run out of money in that envelope, you stop spending money on that category. A lot of people will physically use cash for this system, and using real envelopes is helpful in that case. Cash is also useful for vacation spending. However, there are a lot of banks that offer a budgeting service online, and they will alert you when you are close to hitting your spending limits for certain categories. Since they automatically track the type of spending you do anyway, this can be a pretty easy way for most people to keep track of their budgets. By the way, you decide what happens if you have any money leftover here. You can either roll it over into next month's budget, or put it directly into savings.
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Retirement investments ... seriously.
Yeah, I know, it’s weird that we mention investments in the same article we mention buying cheap shoes. But we have to. Investments will equal freedom. It's easy to see that when you are investing in education, but retirement? That's a million years away. However, I'm totally serious when I tell you to pay attention to your retirement NOW. If you have the ability to contribute to a 401K, do it. Even if it’s just $30 a month, every dollar you send there is an investment in your future. Don’t believe me?
Putting money in your retirement account might seem like a bad idea if you want to access that money, but it can bump your credit and show that you are a stable investment if you ever need a loan or a mortgage. In fact, there are mortgage programs that will let you access the money in your 401K to help finance a down deposit. (I don’t recommend using these programs, but they do exist.) On top of showing that you are a stable investment NOW, you’ll get the obvious benefit of having that money later on. And, heaven forbid, if you do get into a financial bind later on in your life, you CAN access your retirement money. Admittedly, the penalty is large, but depending on your situation, it could be worth it.
If you don’t have access to a 401K but do have the ability to set aside at least $50 dollars a month, talk to your bank about setting up an IRA account. It’s still a retirement account, just not employer funded, and the taxes are a little different. That said, you still get the benefits of your money making money for you, and the stable investments will make you look like a great investment too.
