As vicenarians, there is a fact that we all have to face: the life that we want and the life that our money will let us have are probably not all that compatible. It’s not something that we like to think actively about, and we cope in different ways; some of us learn to shop sales, others live at home for as long as possible or pack a 675 square foot 2-bedroom apartment with 3 people (don’t do this, it sucks). Still others just give up and put everything on credit cards to maintain the standard of living that they had before they were supporting it on their own, only to realize later that they’ve got more debt than they can figure out how to pay down…and consequently can’t afford to pay for their wedding/move for their job/buy a new car/etc.
I don’t think this has much to do with the fact that we’re entitled or lazy or any of the rubbish that the older generations like to spout off about us. I think it has more to do with the fact that we’ve got the highest student loan debt in history, and many of us graduated into an economy that had no more to offer us than minimum-wage jobs. However, I do think that we have to adapt to our new conditions rather than falling into the trap of the credit card companies or living paycheck to paycheck and never saving a dime. I’ve had a good deal of success with this, and I’d like to share some of my key techniques in the hopes that others can benefit from them. As a note, I started living by these rules when I was making $4/hr more than minimum wage, so I’m convinced that they can be useful to people in most income brackets.
– THINK ABOUT WHETHER YOU NEED EVERY SINGLE PURCHASE YOU MAKE.
You have to learn to really think about whether you need or just want the things you buy. Do you need a brand new nightstand to go with the décor in your bedroom when a friend or relative has one you could adopt? Do you need a KitchenAid with all the attachments when you already have a working mixer? The answer is no. You don’t need brand new everything when you’re starting out on your own, and compromise here is healthy. I’m not saying never buy anything non-essential; what I’m saying is think “Do I need this?” before every purchase, and you’ll soon start to realize that maybe you don’t need all of the things you thought you did.
– HAVING THE CASH FOR SOMETHING DOESN’T MEAN YOU CAN AFFORD IT.
Affording something means that you can still pay your bills and feed yourself that month if you buy it. Right? WRONG! You also have to take into account whether or not you have savings, because you might think that you have the wiggle room to spend $300 on that totally amazing dress you’ve wanted for the last two months and that finally went on sale…but then your car breaks down. Or your laptop dies a miserable, sparky death. Or your cat gets sick. And then that $300 that could’ve helped with the repairs or the new battery or the vet bill is gone, and you have to put it on a credit card. Which brings me to my next point…
– CREDIT CARDS ARE EVIL.
The immediate caveat that I’ll give is “unless you are in a stable situation and can afford to pay off your balance every month”. I did not get a credit card until I was 24, and even then it was only because of a deal where the first year was 0% (if you have decent credit, you can often get these). I’ve gotten a couple more since, but I have not paid one cent of interest on any of the cards that I have because unless I’m still in the promotional 0% interest period, I pay the entire balance off every month. Credit cards are only good if you use them as a calculated tool, use their cash rewards against the balance, use them in place of expenses you’d already be making rather than justifying frivolities with them, and pay off the balance in full so all you’re doing is pushing some of your cash expenses back a month. Building credit only works if you’re actually careful about it, and too often people get a card to “help build credit” only to let it become a way to justify throwing all their money away.
– KEEP A BUDGET.
I have one in a Google spreadsheet that goes out for almost a year, with one line per week and a zillion different columns for money in and out. I update it every Monday so that I can always see how much money I will have on any given week- and if I see any that go below the minimum that I like to keep my checking account at, I find ways to alleviate the situation (generally by adjusting my spending prior to that point) so I’m always comfortable. I can’t stress enough how much this helped me get my expenses in check and keep them under control. You can find the template for the budget that I use with dummy values here.
– CONTRIBUTE TO YOUR SAVINGS EVERY MONTH.
This is probably the most important thing on the list. You need a savings account, and you need to be setting aside a portion of your wages to go into that account. It’s not an option, it is something that we all need to do. Because again, who knows when your car could need repairs- or need to be replaced completely? What if your pet needs surgery. What if your couch falls apart. Even if you put away $20 a month, at the end of a year you’ll have $240 for at least some kind of a cushion.
I’ll write on all of these topics in more depth later. In the meantime, what are your favorite tips for money management? Tweet me your thoughts @trickycrayon.[divider] [/divider]
A Massachusettsian by birth and by choice, Valerie is rooted in small-town New England life. She grew up thirty minutes south of Boston, went to college in a similar community ten minutes away, and eventually settled in a town that was right between the two when her post-college plans of teaching English in Japan didn’t pan out. The first few years after college were rough as she struggled to define herself as an employable member of society despite her degree in Asian Studies, but she has found her niche working in in tech support for medical software. In her spare time, she enjoys reading and/or watching fantasy (Harry Potter, Game of Thrones, and Tolkien are particular loves), playing with her rescued pit bull Pepper, helping her parents with their various gardening projects, visiting the ren faire where she used to work, and showing her New Hampshire-raised partner all the things there are to love about Southern New England. She’s passionate about personal finance and a lot of other things. You can find her on twitter at @trickycrayon.