It doesn’t matter if you just got a promotion and salary increase at your corporate job, or if you have a job that doesn’t pay well enough. You have to be more aware of your finances. Whatever income structure you have, having no financial fallback or plan is risky and unwise. Taking more control of your finances can start with two simple steps: spend wisely and save more. In addition, properly managing your finances is a huge step to take in being more in control and dealing with a quarter-life crisis.
The tips on spending wisely and saving more below are meant to serve as a guide to help you properly navigate your personal finances.
Choose Your Priorities
We all learned about opportunity cost and the hierarchy of needs in school or at least you’ve heard the phrase “you can’t eat your cake and have it”. What all these mean is that in life, you always have to make choices. So prioritize your financial needs and expenses if you wish to save money. Try to understand the difference between a want an a need and cut down on your “wants”. Get rid of frivolous expenses or downsize your shopping budget. Whatever you choose to do, make an informed choice on how you spend your money.
Make a budget
I talked about this last week. A budget outlines how your expenses measure up to your income which helps you take better control of your finances. Read more at about how to take control of your adult life.
Use Apps and Tools
There are lots of both free and paid apps that can help you track your expenses, budget, and save money. You can also set up automatic transfers with your bank. A lot of banks will transfer money from your current account to your savings whenever you get paid. The Mint app will track your spending and show you how much you spend on things like food, gas, etc each week. Below is one of my weekly reports from the Mint app from a while back
Don’t Keep up with the Joneses
You don’t have to keep up with the Social Joneses all the time. Drinks, brunch, lunch dates, dinner outings, club covers, group trips, concerts, etc. It’s all fun and good if you can afford it but if you can’t then don’t force it. Don’t spend your income meant for survival on social activities just to keep up appearances or just because you can’t say no. I assure you almost everyone around you is going through a quarter-life crisis and seasonal brokenness. You don’t need to put up a show for anyone. Reduce the frequency of your brunch dates if you have to, your good friends will understand and the avocado toast can wait…
Reduce Your Expenses
During my research, I found something called the La Carte Method of Saving where you make away with your subscriptions. I’m not going to advise you to punish yourself by depriving yourself of millennial basics like Netflix and Spotify Premium. But hey, if you’re dirt broke and need money for food please, by all means, cancel your subscription! The bills add up pretty quickly.
Reduce Your Rent
Another way to do this is by reducing your rent. Some theories that say your rent should be just 30% of your income, some say no more than 50%. This varies a lot and depends on your location, however, you can try to have cheaper accommodation by having roommates, staying in an averagely popular neighborhood, etc. This will open up more opportunities for you to save your current income. You might have to commute a little further but you’ll sleep better at night knowing you can afford to pay rent without breaking the bank.
Don’t set big savings goals that you can’t achieve but rather set smaller goals that you can track.
Invest In Quality not Quantity
As you get older and more mature, you start to realize the importance of buying quality items. Not only do they look better but they last longer. When you make a quality purchase, you cut down the expense of buying it over and over again. Some of the things that you should invest in are Sheets, Shoes, Backpacks, Underwear, a good Winter Coat, and Denim. You don’t have to buy all this all at once, but the next time you have to buy new Sheets, buy something of high quality and you’ll find you need to replace them less often.
Exception: Pizza Rolls. More is always better.
Don’t Automatically Spend New Income
You know that scene in movies where someone gets promoted or gets some money and they buy drinks for everyone at the bar, well that shouldn’t be you. Don’t immediately upgrade your lifestyle if you start earning more money. Instead, save it, invest it, or at least think it through properly before you spend it.
There is the philosophy I learned when I was 12 from the book Rich Dad Poor Dad: most people are stuck in the rat race because the more they earn the more they spend. Try saving that new money that’s coming in or at least part of it.
It’s Ok if you can’t Afford to Save Now
I know all this advice might seem futile or out of touch if you’re barely getting by on your current income. There are situations where having a savings account is a luxury. If that’s the case then you don’t have to stress about savings just yet. However when you finally can afford to save, and you will get there, remember what it feels like to be bone broke and start saving for rainy days.
Be Realistic and Honest with Yourself
Remember that time you promised yourself you’ll go running every morning by 7 am and never did? That’s what not being honest with yourself is like. Don’t set big goals that you can’t achieve but rather set smaller goals that you can track. Don’t read this and then decide to save 40% off your next income check. Drastic changes like that hardly get maintained, instead start small and grow from there.