I don’t think anyone is trying to sabotage themselves. I think most people want to live comfortably and enjoy what they do. However, many people aren’t happy with where their finances are at currently. Sometimes, though, we’re our own worst enemy when it comes to our finances.
It can be incredibly frustrating to see your checking account balance is close to zero as you wait for your next paycheck. You work hard and you want to be able to enjoy your money.
If you can make a small effort to change at least a few of your money habits, then you can not only keep from living paycheck to paycheck, but you can also increase your net worth.
Financial Management Skills
Here are some of the financial management skills you need to have to build your net worth and how you can overcome hurdles.
Keep Spending Under Control
Have you told yourself that you would track your spending and get it under control? For many people it’s a goal still unfulfilled. They worry that they have to go around and write down every single penny that they spend. It doesn’t have to be that way.
Tracking your spending for a month or even this past year can be done in about 15 minutes. Don’t believe me? Try Mint. Link your bank account securely and within 5 minutes you can have an analysis of your spending. Compare your spending month to month or last year – Mint allows you to see where you’re doing well at and where you’re behind.
When you know where you money is going to you have a clear idea of what needs to be fixed.
Have a Realistic Budget
How many times have you said you’re going to get your budget together? How many times have you’ve broken your budget? Most times we build these perfect budgets that include ridiculous and unrealistioc goals like saving 30% of our income when we’re struggling right now to keep our lunch spending in check. Instead of setting yourself for failure, make it easy to win.
If you already tracked your spending with Mint, you can use their goal feature and have them email you when you’re reaching your spending limit on something, like eating out. It’s great because it’s automated, so you don’t have to stress out.
By the way when you’re setting your goals, my advice would be to cut back on increments. If you spend $200 eating out each month, then set next month for $150, not$25. You’re more likely to succeed.
Save Money for an Emergency Fund
Stuff happens. No matter who you are, bumps are on the road of life and having a bit of savings can keep it a bump and not a roadblock.
Whether you’re making a lot of money or not, set aside a portion of your paycheck for savings. Make it an automated transfer and make it happen right after your paycheck get deposited. You’ll be grateful later when you have money to cover replacing your water pump.
Psychology of Money
Learning to avoid common mistakes when it comes to finances can put you ahead of your peers. I used Mint as an example since I’m a fan of theirs, but you should feel free to use what works for you.
Curious to see what affects your money making (or losing) decisions? Check other posts in the Money & Psychology series:
- Choosing Friends to Build Your Net Worth
- Decisions, Decisions – Making a Big Purchase
- Is Saving Really About Motivation?
- Ways We Spend Money Without Evening Knowing It (and How to Fix It)
- Barriers That Prevent us From Saving Money
- Dealing with the Stress of Financial Issues
- Getting Your Finances Ready for a New Job
How are you working through this economic mess? What tips can you share?