“I make a good living, but I’m still constantly short of money.” Sound familiar?
We understand where the money is going and how we can solve this problem.
You don't set monetary goals for yourself.
It's pointless to save money just “to have it.” Since you work all week to get money, it would make sense to reward yourself for your work somehow.
You have a choice: “save money because that’s what responsible people do” or “spend it right now on something good.” And the second option sounds better.
Set a specific financial goal for yourself — then saving money will become a desired process.
It's better to save up for a trip to the beach next summer or to buy your dream house than to spend money on things you can afford right now but don't really want.
Write down your financial goals and mark them with amounts. Start saving money and remind yourself of these goals every time you feel like buying something you don't need.
You don't keep track of your finances.
If you have many bank accounts, it will be difficult for you to understand how much money you have in total.
You need metrics. If you’re trying to get in shape, you’ll be tracking things like your weight. The same approach should apply to your finances.
First of all, you need to determine the size of your net worth. This is the most important indicator in tracking your finances.
Net worth is the sum of all your savings (money and deposits) minus all debts (for example, loan payments).
Then, you should set a regular “check-in date” to track your net worth. Start by checking in weekly—once you start to understand your financial situation, you can reduce the frequency to once a month. This way, you'll know where you stand and whether your finances are growing.
You buy unnecessary things.
If you don't plan your finances, you're probably making unnecessary purchases that don't make your life better.
Think about what you buy for lunch. For example, you might habitually buy an overpriced salad. But is that salad actually making your day better?
Maybe it's worth taking food from home and saving up for something more important, like a vacation or buying a house?
Every expense is a sacrifice: when you buy one thing, you give up something else. Shop wisely and spend your hard-earned money on the things that really matter.
A great way to track your purchases is to keep a journal or install an app on your phone. Every time you buy something, write down how much it cost you and how much happier it made you (on a scale of 1 to 10). Check your records every week and mark any purchases that score less than a 7, then ditch them.
You are living beyond your means.
You may be living an expensive lifestyle. How to tell if you have it? Make a list of your fixed expenses. These include monthly payments, such as rent, tuition, phone bills, and gym memberships.
If the total of these expenses is more than half of your monthly salary, you are spending too much. Until you cut back on your monthly expenses, you will always have little money left over for everyday needs and savings—and you will always feel like you don’t have enough money.
Go through the list and see what you can cut back on. Maybe join a less expensive gym near your home? Or move into a cheaper apartment and rent it with someone?
You take out loans with high interest rates.
If you buy things on credit but don't pay off your monthly debt, it's no wonder you're living paycheck to paycheck. A huge amount of money is going to pay interest on a purchase you made months or years ago.
Many people would be happy to buy the desired item at a 20% discount. But few people realize that every year they will have to pay back the same 20% on the loan.
The next time you want to buy something very expensive that you don't have enough money for, calculate the cost of the item including the interest on the loan. Then ask yourself – is it worth it?
This article provides general information and advice regarding personal finance. It is intended for educational and informational purposes only. No information presented in this text should be construed as professional financial, investment, legal, or tax advice. Each person’s financial circumstances are unique, and advice that is appropriate for one person may not be appropriate or even harmful for another.
