Breaking News: We all make mistakes when it comes to managing your money.
The problem is that far too many of us are not even aware of the sometimes catastrophic state of our personal finances. Nor of our lack of education regarding our relationship to money. And that’s where the problems begin …
Without knowing what mistakes you make every day with your money, changing things can be very difficult.
If you think you are the exception, take a look at the 6 signs below. You might not be as good a student as you think …
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You do not know exactly how much you spend each month
Can you answer this question:
“How much money do you spend each month on all types of expenses? “
We often think that as long as we do not spend more than we earn and are not exposed, everything is fine. But that’s not the only problem.
If you spend all that you earn, without being overdrafted but without saving, the bad news: your finances are bad. The problem is that if you do not really know how much you spend and in what, it will be very difficult to change things.
That’s why you should have a monthly budgeting solution that allows you to be a precise minimum in the calculation of your expenses and income.
To track your budget, you can use an application like Linxo, Bankin ‘or even a simple Excel spreadsheet. The bottom line is how much money you spend in each “category” each month.
In my personal monthly budget (for which I use You Need a Budget ), for example, I have the opportunity to see exactly how much I spend on average and month to month in food shopping, clothing, leisure …
Once you know how much you earn and how much you spend, you can easily see how much you can afford to save, invest and spend each month. This is the first step to learn how to manage your money well.
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You have planned to wait for more money before saving for the future
We have already talked about the magic of compound interest for your savings and investments. The worry is that the longer you wait before you start saving, the less money you will have in the long run. Because the goal is that the money you put aside will bring you back in the future.
You always have goals or dreams for the future: traveling abroad, buying a house, investing in a personal project … And these desires are inevitably a financial penchant that must be taken into account.
If you have not started putting money aside for each of your goals, the best time to start is now. Even if it is only $20 per month, starting as soon as possible will allow you to increase your capital gradually while leaving your money working for you thanks to the interest you will accumulate.
Certainly, it will be more comfortable to save once your income is higher, especially if you just finished your studies and get started in the workforce. But you can then gradually increase the amounts you put aside (spend $20 to $ 40, then $50 …) without impacting your lifestyle.
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You are terrified of investing
Investing can seem very impressive. And for good reason: the management of his money in general and the notion of investment in particular are never discussed or explained at school.
And yet, investing is a necessary step for anyone who wants to develop their capital and start accumulating wealth. The investment has a much higher growth potential than you could get through a traditional savings account.
Of course, it is not a question of placing your money on the stock market without any knowledge of the financial markets or the operation of the investment. In any case, you should be accompanied by professionals who will determine the best investments with you according to various factors, including your risk sensitivity.
Keep in mind that you will never win in the long run by letting your euros lose value on your Livret A.
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You do not have an emergency fund
No matter what your age, lifestyle or financial situation, you need an emergency fund .
Generally, it is recommended to have set aside on a saving account between 3 and 6 months of expenses in order to face possible financial problems or life chances. And if you think you’re safe from layoffs, medical emergencies, or expensive equipment replacement, this is not the case for anyone.
Having an emergency fund allows you to approach your personal finances much lighter and less stressful when dealing with unexpected expenses.
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You tend to spend too quickly (and without really thinking)
It is quite understandable to buy a new gadget, brand new clothes, or replace old furniture with trendy furniture.
But it’s even more important to be able to broaden your vision to focus on what really matters to you. And if you put the $70 that cost this coat (which you do not really need) aside for a personal project that is really important to you, even if it is longer-term?
Humans naturally have difficulties prioritizing sustainability in the future over pleasure in the short term. It is very easy to say that ” it is not eating out one night instead of cooking that will impact my finances “. But the problem is that (1) let’s be honest, it probably will not just be “one night” and (2) it’s the small savings, accumulated over time, that will allow you to really set aside (that’s in particular what the concept of the “Latte Factor” explains ).
Certainly, having beautiful things is great. But it is too often a waste of money. At the end of two weeks, once our rush of dopamine has subsided, we are easily aware of the futility of many of our expenses. So be careful with your expenses, and take the time to really think before buying something, even if you do not buy the same day.
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You have dozens of excuses for which you are a special case and can not manage your finances like the others
And yes, we see you coming:
- “I really wish I could do that, but I do not have time”
- “With my salary, for once, it’s really not possible to put aside”
- “The next few months, I’m going to have too much money to save money”
- “Right now, I need to enjoy life rather than deprive myself”
This is the reaction of many people when one approaches the sensitive subject of the management of personal finances.
“One of the biggest signs that you are bad with money, even if you think you are not, is that you always have a good reason for not being able to improve your financial situation,” says Eric Roberge , an American financier.
Your reasons may seem perfectly legitimate and convincing. But they are just an emotional reaction to a bigger problem. Admittedly, there are extenuating circumstances in each situation. But except extreme cases, there is always a different way of seeing and doing things.
Your salary this month is not high enough to save some money in a savings fund? Two options are available to you:
1. You think it’s a good excuse and you will not be able to save this month
2. You are looking for solutions. And if, just for a month, you do not buy your meals outside at noon but bring a meal from home to save a little on food? And if you sell some clothes or items you do not need?
Remember: those who fail find excuses, those who succeed find solutions.
