15 money management lessons to change your life

Money Management Lessons to Change Your Life

Mike Tyson made more than 400 million dollars during his career. His current net worth is less than 10. Let that sink in.

When something can impact all areas of your life, why not spend some time educating yourself about it?

1. Don’t spend the money you don’t have #

I was about to get married in a few months and wanted a car replacement. After spending enough time in the market, I realized something. The cars I wanted were all out of my reach. Not because I wanted to buy Bugatti or something luxurious. But because I was already on a tight budget due to wedding arrangements. So I started to consider leasing one.

Son, I get you. You want to start a new chapter of your life with a shiny ride. You are young and with a regular job. So you think you can pay it off without problems. But let this be a learning moment. Don’t sell your future for the momentary excitement. Don’t ever spend the money you don’t have.

Think about it for a moment. How often do we sell our time in advance? How little thought do we put into actions that cause our future self to be anxious and stressed? And for what?

2. The Shaq Rule #

I’ve never played a basketball match. I’ve never watched one either. Yet I have massive respect for Michael “The Black Cat” Jordan, The Mamba Kobe Bryant, and Shaq. Each for a different reason.

Split whatever income you have into two parts. First is untouchable. That’s your tax money. Emergency fund if your taxes aren’t high. Simply not yours. Then split the second part into two further parts. The first one goes to savings. The second one you can spend on whatever you like.

Simple breakdown: Total income = $1,000 Taxes/emergency = $500 Savings = $250 Usable = $250

3. Don’t become the snake #

I’m all about saving, living below your means, and spending wisely. But I’m against being frugal to the point where you’re suffering.

Don’t become the snake sitting on top of your assets and not allowing anyone or anything near. Not even yourself.

Like most things in life, beauty is in balance. Decide how much you can save. You don’t have to put 80% of your income into savings. But make sure to have a saving goal that challenges you to be wise when shopping.

4. Can you afford it #

If you can doesn’t mean you should. There’s a difference between being able to buy something and affording it. There are several methods to keep your purchasing in control. My favorite is:

Can you buy it thrice without affecting anything in your life? If that’s the case and you want it, go for it. In other cases, refraining from it is in your best interest.

That’s only scratching the surface of the issue. If you can’t get rid of the impulse to spend money on lavish things, you may need to sit down with yourself. Think about your reasons.

5. Automated Savings #

Whatever you want to accomplish in life, depending on your emotions alone won’t get you far. You need systems you can rely on. You need to put yourself in positions where you can’t run back to your comfort zone.

So, set up automated transfers from your checking to your savings account. If you’d like to go the extra mile, make it difficult to stop the automated transactions. The more friction you can add the better. Then forget about it. Let the magic happen while you force yourself to live with the rest after the transfers. Things will add up sooner than you think.

6. Don’t trust yourself #

How can that be helpful? Well, when we’re infatuated to have something, be it a tech gadget or a fancy car, we begin to justify. We ignore all the red flags we can spot when we see someone else going through it. We only see what we want to. We only focus on reasons that urge us to spend the money.

One rule of thumb is considering the cost peruse. If an item is worth $1,000 and gets used 10 times in years, is $100 per use worth it?

You may want to buy a full kit of screwdrivers to give yourself a wide array of options, but how often will you use them? Unless your daily job depends on them, chances are you can get things done by borrowing them.

7. Give every dollar a job #

Often the reason for overspending is cluelessness about our goals. We rationalize our purchases based on how much money is sitting in an account. We do it without considering all other needs above our wants.

The moment your cheque arrives, assign a job to every single dollar down to zero. These assignments are the most necessary expenses. Food. Rent. Gas. Tuition. You name it.

When you break down your money like this, you’ll realize how little you have left to do whatever you like to do with. Your rationalization won’t be able to harm you anymore. It can no longer convince you to buy useless things because of the 500K laying in your account. That’s because you know only xK of that for shopping.

8. Make it visual #

The first step to managing your money right is tracking where it disappears. Have you ever paused to wonder why you’re still broke despite making much more money than a few years back? If you are unable to track how it is disappearing, you won’t be able to stop the cycle from repeating itself.

If you’re a notebook person, buy yourself a diary. If you’re more into technology, find a good app. Then start tracking as your life depends on it. Track every single penny without worrying about saving. This phase is for tracking purposes only. Don’t behave differently because expenses are being tracked. Live normally for a month or two.

Once your decided time has passed, now it is time to sit down and see where things are wrong. Cut back on useless expenses and you’ll make room for spending on what matters to you the most.

9. Invest the right way #

There are times to follow the herd and blend in and other times to go against the flow instead. Your investments can return higher rewards if you spot an ignored opportunity.

10. Accumulate assets, shed away liabilities #

We work for money when we have nothing. Some people never break out of this habit ever after becoming multi-millionaires.

Don’t let liabilities rot away the foundations of your goals. Shed them away with the highest intensity possible. Replace them with assets instead. Let the money work for you. Let it allow you to taste freedom.

11. Keep the doctor away #

12. Flip table #

The problem with broke thinking is calculating things in reverse.

Instead of this cycle, flip the script. I must save at least 25% of my income. Let’s see what I can do with the remaining 75%. That’s the way to go.

13. Auto payments are the devil #

The subscription services can cost serious money if left unchecked on auto payments mode. A wiser approach is to keep track of services you’re subscribed to. Then pay manually instead. Setup a day per month where you take care of all your financials.

14. Spread your eggs #

Never put all your money in one bank account. You’re only inviting the temptations to flood away all the cash. When there is no separation, you don’t know how much you want to spend on what. You’re also increasing the risk of losing everything in case your account gets hacked.

Create several accounts instead. An account for emergencies. A different account of possible investment opportunities. A dry run account if you want to quit your job and pursue personal projects. An account for leisure activities and so on.

When you divide your money into different categories, you’re assigning vague jobs to each dollar. This lowers your chances of going on irresponsible shopping sprees. In the end, you’ll have peace of mind and clarity about priorities.

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Writing about productivity, remote work, self-discoveries, and experiments -> http://sakytalks.com/

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SakyTalks

SakyTalks

Writing about productivity, remote work, self-discoveries, and experiments -> http://sakytalks.com/