As a child, money was a source of stress for me. I did not receive an allowance nor was I allowed to earn any by helping out with chores. For this reason, I was not able to buy things that I wanted immediately and would get frustrated because I had to miss out on trends. However, as I started fifth grade, I started to receive an allowance every month. Although the amount was small and almost all of it went into my checking account, I still felt relieved to have a fixed income. Our past experiences with money affect the way we view it today. Reflecting on my history with money, I will be providing some financial tips to keep you from ending up in the street.
The first habit we’ll address is impulse spending. Although penny-pinching is miserable and we should be generous with ourselves, we have to be mindful about how we use our resources. Because of e-commerce, it has become very easy to purchase a wide range of items in a short period of time from the comfort of our phone. Ordering delivery and take-out coffee is as convenient as clicking a few buttons and picking it up on our way to school or work. We no longer have to spend hours strolling through the mall to update our wardrobes either. This can lead us to lose track of our spending, making it difficult to resist the desire to purchase items. If succumbing to temptation goes beyond our means, it can lead to financial ruin and an inability to pay our bills. To avoid such a situation, we must break this habit. This can involve having a spending plan, removing all shopping and delivery apps from our phones, tracking our spending and identifying triggers that lead to impulse spending.
Second, we cannot take debt lightly. As we get older, many people consider taking out loans to attend school, buy a car or a house, cover for emergencies or even to spend more than they earn. As we start jobs with a stable income, going into debt becomes an easier trap to fall into because our credit limit increases and more loans are advertised. However, debt is a serious matter. Although some debt is necessary, as it is nearly impossible to pay off a house or pay tuition instantaneously, we should do our best to not let it affect our life. Refraining from purchasing large, extravagant items and keeping up with loan payments can prevent the accumulation of debt and interest. Loans that are designed for living a life beyond our means, such as payday loans, should be refrained from altogether. These types of loans come with high interest rates and are not necessary as long as we are responsible with our spending. In the case of student loans, we can choose a school within our means, decide to get a useful degree, focus on school work in order to graduate on time, keep merit based scholarships, start gradually paying off loans and participate in tuition reimbursement programs.
Third, you must set boundaries. It is true that we should not be stingy with our loved ones. But this does not mean that we have to be overly generous when we can’t afford it. Not everyone has your best interest at heart and not being able to say “no” can lead to you being exploited. If people are aware that someone close to them is being irresponsible with money and expects their loved ones to rescue them out of the mess they created, the request should not be granted as it may hinder their ability to learn from the experience. People have to know how to set boundaries to make sure that others do not think that they are entitled to their money.
Fourth, you have to have a plan. Although it is true that thoughts about the future are daunting, it does not mean that it is okay to not have the future in mind. We know very little about what the future holds so we must take being financially ready seriously. Therefore, we must hold ourselves accountable. Everyone should have a monthly budget to prevent overspending, account for emergency savings, insured valuables and a retirement plan like a 401(k) or a Roth IRA. You should also continue to learn about personal finances and find ways to increase your assets and net worth, while investing responsibly.
As adults, we can no longer expect others to clean up our messes. Being good with money can be as easy as refraining from solving our emotional distress with retail therapy, treating shopping as a hobby and getting into unnecessary debt. We need to learn to say “no” and deny the urge to display our wealth through material objects.