Wouldn’t it be great if all you had to do to take care of money would be to sit on it? Unfortunately its not quite (but really almost) that easy. Taking care of money has basically four steps. If you think about them whenever you do any thing that involves money, it will be easier to take care of it. Obviously, this is just an overview and hundreds of books have been written on each of these steps, but knowing this part is a good place to start.
Step 1: Start Taking Care of Money by Planning
Money, in and of itself, has little value. Its just metal or paper. You cant eat it, drive it or wear it. Its value lies in what it can get for us. What would you rather have than the money? Money means different things to different people and what matters to you may be completely different than what matters to me.
First identify what money can buy that matters most to you. Is it the ability to buy things, freedom from the fear of going without, security? How much money do you need to have what it is you want? What are the big things you want to save for or pay off: student loans- yours or your children’s, vacations, retirement, children, a home, a particular car? How much do you need to put aside for a rainy day (like if you get ill for a while, or lose your job, or decide to move to another state)?
LifeSkill Secrets reminds you that you can’t get there from here if you don’t know where there is and you don’t know where here is. So, how much do you need to save, or how much more do you need to make to save what you want to?
Step 2: Making It
You can’t take care of money it you don’t have it. We recently posted about budgeting: knowing how much you spend and how much you make. But if your income doesn’t cover your expenses there are only two things to do: Reduce expenses or increase income.
The best time to increase income is when you are young. You have more energy and (believe it or not) fewer calls on your income, so this is the best time to save. You might be able to reduce expenses by living with friends or at home. Most parents can get behind the idea of saving to pay off student loans or saving for a down payment on a future home. Just be sure you aren’t going out with friends 5 nights a week and blowing the savings in Margaritaville. In my generation it was easier to live independently right out of college than it is now, so explore your options. Better to live at home working 2 or 3 jobs at 22 or 26 than at 32 or 36, right?
Step 3: Saving It
Note that saving money comes BEFORE spending it. That is a basic rule for the care of money. You can’t save what you don’t have, and just as work will fill the time allotted for it, you will spend the money you have available. Figure out how much money you want to save and save it first. Its best if it goes right into a savings plan and/or savings account (depending on what you are saving for, how soon you need it and interest rates) before you even get your paycheck. It takes more discipline to do it once its in your hand, but you can do it if you know what you are saving for and it’s important TO YOU.
Step 4: Spending It
Care of money relies on some basic guidelines to spending money. Keep in mind that money you spend is not money you can use for anything else, so if you fritter your money away on things that only have a C or D value to you (fancy coffee, doughnuts, drinks), you won’t have it to save or spend on the things that really matter to you.
Ask yourself these four questions before you purchase anything:
Do I really need this?
A lot of what we buy is bought on whim. When I want things on Amazon, I put them in my cart and think about them while I ask the other questions. At this moment I think I have 10 pages of Save for Later items, most of which I will never purchase. I may have thought I really needed them at the time, but on careful consideration realized I’d rather have the money for something else more than those items.
Do I already have this?
When I was a fashion designer I learned an important lesson from my mentor: “If you like it the first time you see it, you will probably like it every time after that”. She told me this in response to my shock that so many of the fabrics that I sampled in New York looked similar to each other. The point is, if you like a royal blue shirt with a certain pocket, you will like it the next time you see it.
If you follow these two LifeSkill Secrets principles, it will be easy to check to be sure you don’t already have it:
- keep all things of a kind together
- a place for everything and everything in its place
Be sure to check what you have and “shop” your closets before you go shopping or purchase more. I actually once bought two of the exact same blouse (not at the same time or in the same store) and didn’t even realize it til like a month later.
Where am I going to put it?
I go to art fairs a lot and love to buy beautiful artwork, but the reality is, my house has little usable wall space. If you don’t really have a place to put it, don’t buy it. Have an answer for yourself before you purchase. This leads into the next question.
What will I give up for it?
Any time you purchase anything, you are giving up something else. That new pair of shoes could be the cute dress you saw last week that you really liked. Or giving up on those special coffees could mean you buy your Mom a nice gift for her birthday. Keep in mind that every purchase has 2 prices- the actual cost of the item, and what you can’t get if you buy it.
What will I give up for it is also an organizing question so your stuff doesn’t consume you. If you have a place for it, do you have the space for it? This is especially true of clothes. My son, for example, practically collects graphic tees. Periodically he has to give some up to bring in more or there just wouldn’t be room in the closet. Its best if you eliminate the old when you put away the new, then cleaning out is not such a chore.
If you take care of money, how and where you spend it and save it, it will take care of you. Like most things, it takes some planning and will seem a bit awkward at first, but will soon become second nature.
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