15 money management lessons to change your life
Money can’t buy you happiness. But happiness can’t buy jack.
If you want to live a stress-free life, you’ll need money. It can also help you experience beautiful things, take care of your family, and contribute to society in a meaningful way. How much you need will vary.
In the modern world, the way you manage money often decides how well you do in life. You can’t work hard, make millions, and expect to live carefree forever.
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?
The following are some lessons I’ve picked over the years. They come from people I’ve met, books I’ve read, the internet, and places I don’t remember.
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.
I did some research and it seemed doable. I brought the idea to my dad with excitement. He patiently listened to me. When I finished, he took off his glasses, smiled, and said something I’ll never forget.
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.
Shaq in particular for valuable money lessons and his approach towards life. Try his savings method. It can put you ahead of people trying to fill up their internal holes with materialistic things.
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.
Why do you want a Rolex when your phone or a cheaper watch can do the same job? Why do you want a Lamborghini when a used Toyota or Camry can take you all the places without breaking your back?
You may need to get your priorities in order. There are better alternatives. Investment. Traveling. Experiences. A positive legacy. Leave the world in a better place.
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.
It doesn’t matter how much money you make. If it is staring at you only a click away, you’ll figure out ways to spend it by end of the month. You’ll rank everything above savings. The cheaper restaurant won’t taste good enough. The pointless expenses will turn into reasonable investments. You get the point.
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.
That’s why you can’t rely on your quick reasoning alone. You need to be practical instead.
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.
You may want to buy 50 books in bulk, take three years to go through them and never open the same book again. These books will be collecting dust once you’re done reading. There are better alternatives. For instance, you can join a library instead. Borrow the books you like. Read and return. Much more affordable.
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.
How about trying something different?
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.
There is a time to jump in blindly and a time to consult an expert. You should not be reckless with investments. Do your research and consult an expert in the industry. Weigh your options and consider the possibilities. Don’t lose your hard-earned money on a hunch.
Another thing to consider is having backup plans and emergency funds. Investments usually take time to return high-quality rewards. A backup plan ensures you can survive rough patches and boosts your chances of making it through.
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.
If you don’t make money work for you and your bank numbers aren’t growing while you sleep, you’ll always be sweating to make the next dollar.
Assets are properties, items, and investments that bring you revenue. Liabilities are nothing but items causing withdrawals. Leasing a car you can’t afford is a liability. Renting out an apartment is an asset.
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 #
An apple a day keeps the doctor away. Keeping the doctor away keeps loans, debts, and financial crises at bay :D
Healthcare can be expensive. There are more scams in the health industry than we care to admit. All your side hustles, investments, and assets mean nothing. All your goals and plans are worthless if you can’t protect your most important asset: your health.
I have nothing against doctors. But some professionals we should always hope to stay away from. The doctors and lawyers to name some. They will suck you dry and leave you with nothing but scars and regrets.
Take care of the body you can’t get rid of. Eat healthy foods. Exercise regularly and invest in quality sleep. You’ll need your body to be able to enjoy the fruits of good money management.
12. Flip table #
The problem with broke thinking is calculating things in reverse.
I want to replace my car. I want to take 4 vacations per year I want to fly business class I want to save 10% of my income but I don’t have anything left.
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.
I know it sounds counterintuitive. Shouldn’t we automate our lives? Yes. But don’t automate subscription services. It only takes a few minutes to take care of. You’ll sleep better knowing there aren’t any companies charging you while you sleep.
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.
Things that we own end up owning us.
Read that twice. Or two dozen times because it’s true. That’s how you avoid an endless pursuit of materialistic things. We’re meant to do more than flex. We’re put on this planet to create, thrive, lift others and change things for the better.
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Originally published at https://sakytalks.com/posts/15-money-management-lessons-to-change-your-life/ on March 10, 2022.