Many people work hard for money only to spend it all on things they can’t even remember. For many, it seems like money has just disappeared into a black hole at the end of every month.
This is one of the biggest sources of stress for many people, and it forces them to hunt for the next paycheck, all to repeat the same cycle next month.
As money is limited, they are forced to work more to maintain their lifestyle, or even worse, to make sure they can pay rent and eat food.
All this happens for a single reason: They treat the money like a tool to solve their current problems, not more than that.
The average savings amount for working-age families is around $95,000. And that’s not all. According to a study performed in 2016, 69% of Americans had less than $1,000 in total savings, and 34% had no savings at all.
To solve this problem and be better at managing your money, you have to treat it like your business. When you have a company, you do not take all the benefits, and you want to make it grow and succeed. You also don’t buy unnecessary things, only those that help you achieve your goals.
In this article, I give you a list of 10 points that will help you start being good with money and see it as an opportunity to grow instead of just a problem-solver.
Identify your goals in life.
One main reason why many people are not good with money is that they don’t know what they want to achieve with it. And sounds logical; why should I save if I don’t have a good purpose of doing it?
When I started working, I always had a vision of what I wanted to do: first, have a computer, then have my own car, and above all, the main vision: not work forever.
That particular goal allowed me always to have money even when I saved for other goals. When you have life goals, spending on unnecessary things seems to delay your goals because you prioritize what really matters.
But you must be clear about what those goals are for you.
To identify your own life goals, write down and start thinking about all the things you want to achieve in 1, 5, and 10 years. It doesn’t matter how small or big those goals are. Then analyze if you can achieve those goals with your current budget and how you can improve it.
Do a one-month financial cleanse.
A financial cleanse is to drastically change how you handle money, analyze your failures, and get new savings opportunities.
This will help you understand that you are possibly spending money on unnecessary things and changing financial habits that are not worth it. Some examples of financial cleanse can be:
Go on a radical budget, like 50% of your income. Spend a whole month without eating out (even outings with your friends, turn them into movie night at home with homemade popcorn). Lasts a full month without automatic payment services. For example, Netflix, Hulu, Amazon Prime. And finally, prepare your coffee at home for a full month.
Making these drastic financial changes allowed me to understand what payments I was making that were not worth it and to change some habits in my life.
For example, I realized that I didn’t need more than one streaming service to watch series per month and spend less if I make my own coffee.
Know your professional industry and how to advance in it
No matter what you do, if you are an expert in your area, you can advance economically and professionally in it. Knowing your career strengths will help you focus your energies on being the best in your area.
Professional growth and career advancement offer some obvious and good benefits: Higher salaries, greater respect, more exciting projects. For that reason, if you want to grow your wealth, you have to educate yourself.
Christie Mims, a Career Coach, explains how you can do it:
Every year or two, spend some time really thinking about your career. Go out and warm up your network, check out new opportunities, and do some salary comparisons. You make smarter career decisions when you have real data. Also, if you are afraid or uncomfortable, you are probably onto something awesome! Fear means you are growing your comfort zone.
Set up an additional stream of income.
If you consider that with the job you currently have, you will not be able to retire in the next 10–15 years, then do not depend on that single income source.
If there’s anything the last decade has taught us, it’s that no job is safe. The economy takes wild swings beyond anyone’s control, and unfortunately for most people, their only source of income is from their day job.
According to Forbes, employees who stay in companies longer than two years get paid 50% less:
Staying employed at the same company for over two years on average is going to make you earn less over your lifetime by about 50% or more. Keep in mind that 50% is a conservative number at the lowest end of the spectrum. This is assuming that your career is only going to last 10 years. The longer you work, the greater the difference will become over your lifetime.
Living only on your employee salary is a sign of conformity. Not looking for other sources of income means that you have no aspirations or goals to grow.
Your past earnings shouldn’t dictate your knowledge, but the value of your performance today and how much that value commands in the current market.
Diversifying our income sources allows us to be riskier with other investments, to have unique opportunities, and achieve our goals faster.
Get over your fear of credit cards and get comfortable with them.
Personal finance experts spend a lot of energy trying to prevent us from using credit cards, but just because many people use credit cards irresponsibly and end up in debt.
However, contrary to popular belief, if you can use the plastic responsibly, it’s actually much better off paying with a credit card than with a debit card and keeping cash transactions to a minimum.
Learning to be good with money means taking all the opportunities and benefits that come your way, including all those who have credit cards. Once you know how to manage with them, you can get new savings and investment opportunities.
Make your bank accounts as smart as possible.
Automations came into the world to make our life easier. Using those tools wisely can help you save more money and make it harder to get it out. We also stop wasting time on basic manual processes to focus our energies on things that really matter.
For example, I have automated transfer part of my money to a savings account in my bank accounts and the fixed monthly payments that I have: internet, electricity, and all other basic services.
This allows me to focus on what I can invest when my payment arrives rather than what I should pay.
Another benefit of automatization is that they force us to work with the money we have when we are not consistent. That’s because if you don’t have to see this money in your account, then you don’t feel like you lost it. It is easier for your mind to start thinking about expenses with what exists in your account, no matter how little or big.
Treat your money as your business.
The goal of any business is growth. You start a company to create freedom, to be in control of your time, and to make an impact. When you achieve objectives and your first goals, you set higher ones.
When we treat money in the same way, we stop spending it on unnecessary things, we begin to learn new techniques to make it grow, and we prioritize expenses that help us educate ourselves.
The most successful entrepreneurs of the world aren’t the ones who impulsively quit their jobs to chase a get-rich-quick idea. They are the ones with an entrepreneurial mindset, a set of perspectives, and values that allow them to achieve greatness.
Some of the characteristics they develop to be successful with their business are the following:
An entrepreneur spends many more hours on average, analyzing and structuring their investments.
Entrepreneurs hardly take their financial situation for granted. They are always on the lookout for unfavorable changes, which causes them to dedicate time and effort to take care of their resources.
They have to take care of their own financial situation as no one else will do it for them.
Being an entrepreneur means taking more responsibilities and risks. Get out of their comfort zone and create additional income sources.
When we treat our money the same way, we start seeing it as an opportunity to grow instead of just a tool to solve an instant problem.
Write out your 5-year strategy for getting what you want.
“A spending plan is exactly like a budget but with that one crucial difference: It’s supporting something that matters to you.”— Kristin Wong
Every year I set a goal: Increase my annual income by at least 15% to travel. This has allowed me not to stay in my comfort zone because I want to achieve something I love to do and invent new ways to earn income, not necessarily from a work salary.
To create a savings plan that suits what I wanted to achieve, I made a list of everything I wanted to do in the next few years and how I would do it. This allowed me to make a realistic strategy and create a plan to achieve my goals.
Work on one major money hang-up.
We have all had a monetary problem at some point in our life. It can be as simple as having many subscription services or as complicated as a large debt that consumes all your salary.
Our ability to know that we have this problem and our determination to solve it is the key to success in our personal finances.
Every time we solve a problem with our finances, we have a new opportunity to save or invest that money that we wasted in the past. Also, we will learn what the best strategy for us is and how to manage ourselves better.
For example, one issue I had was having many subscription services that I didn’t even use. Knowing that I had this problem and searching for the best solution to solve it allow me to save more than $1200 annually just by canceling the ones that weren’t completely necessary.
Refresh your budget at least once a year
Who I was a year ago is not who I am now. I have new goals, new purposes, and I have accomplished many new things.
For this reason, maintaining the same budget for more than one year seems illogical to me. Reviewing it at least once at the beginning of the year helps me eliminate expenses that I previously considered necessary but now I don’t use it.
For example, last year, I was paying for a gym membership, but I had to cut it with the pandemic. I have learned to exercise at home, and that is why for now, that payment is unnecessary, and knowing it allows me to allocate that money to something different.
Final thoughts
Increasing your financial wealth isn’t solely about how much you make. It’s also about how much you save. Being smart in the way you manage those savings is what will make you better with it.
Also, being successful with your money isn’t about being born with a specific mindset; it’s about being prepared for the challenges that await you. Everything that happens to us in this life results from our actions. Getting good with money can be hard work, but it pays off.
People become wealthy through strategic decisions and actions. They develop skills; they create new opportunities; they work in their weaknesses; and beyond all, they provide value to other people.
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