Many Millennials and Gen X are riddled with debt. There are many forms of debt, but the most common debt comes first and foremost from college loans, followed by car loans, then credit cards and if you are super fortunate, a mortgage. People are getting so far into debt with an inability to pay off those loans that many are becoming depressed and overwhelmed with the sense of lack. This sense of lack now make people feel as thought they have no future of escape from it.
From my perspective, there are three keys to wealth creation. 1)You have to earn money. 2)You have to manage money and 3) you have to make money grow. But the most important skill you need out of those three is the ability to manage money. Getting your spending in check is vital! Even newly minted Football and basketball players have to learned this quickly. Some have learned this the hard way after losing it all. You have to learn how to keep more of your money first before you can make it work for you (grow). Stay tuned on a new post on this subject.In order to get your spending in check you have to do four things:
1.) Master Your Psychology
Most of the spending comes from poor habits in self-control. Have you ever gone into a store with intentions to buy one thing, but end out walking out of the store with a half full cart? The funny thing is that stores are using your weak control over self to their advantage. Stores are designed to entice you to make purchases other than for what you can to purchase. Companies spend millions of dollars a year consulting with behavioral economist, and psychologist to learn how they can get more of your money. When on a spending plan, you must identify your priorities and separate your needs from your wants. For example, you need to pay your utility bill, but you want to take that money and purchase a $200 pair of jeans. Obviously, paying your utility bill will be more important and you will forgo a late fee.
What to do Next: Food makes up one of our largest areas of spending. You can start here by mapping out your meals for the next day or couple of days. Determine the ingredients you need. Figure out which meals can be eaten over several days? Check your fridge and pantry to see what you already have, and make a list of the things you absolutely need to make the chosen dishes. Head over to the store, pick up ONLY those items. Remember to never shop while you are hungry!
2.) Create a budget and Stick To It!
Who has time for this? If you want to be successful with your money, then YOU should find the time. By seeing where your money is going, you will be able to reallocate funds to the most important things, cut the fat, and keep more of your money to reinvest into high interest activities. Why would you pay $1,000 a month for a swanky apartment downtown when you can pay $350 in a decent neighborhood? You can use the difference to place into a money market account or invest in a side gig. There are a variety of templates in Microsoft Word and Excel that you can use to track your spending. Nowadays we are so glued to our smartphones and there are plenty of apps that you as download as well. A budget is rather simple. You first estimate of the money that will come in during the month. You will also need to estimate the money that you will spend during the month. Depending on the amount you want to save or invest into more growth activities, you can figure out what expenses you can eliminate. Second you have to track ALL income and expenses. Third you want to look at the variation between your planned spending vs your actual spending. Lastly, you can use this data to make stronger decisions going forward.
What to do Next: One way for you to begin monitoring your spending habit is by downloading a mobile app called Spend Money. This app allows you to track your everyday expenses, scan receipts and if you shop at select stores, you can even get money back!
3.) Spend Wiser; Invest the Rest!
Pay With Debit Card CASH!!!
First make a commitment to start paying with Cash. I used to have a bad habit of never carrying cash. I would swipe my debit card multiple times day. Spending $10 for breakfast, $20 for lunch and other $30 for dinner. However, when I tried the strategy of living off of $20 cash per day, I saw just how quickly money dwindles. It provided tangible evidence. I connected with the pain of not having as much as before I started spending. It forced me to become more cognizant on where my money was going. It also made me realize that just because I had the money, did not mean that I needed to spend it so frivolously. Lastly, it will help you step into the shoes of people who lack the resources and if should you ever find yourself in that position, you will now to work with such a fragile budget.
What to do Next: Head over to the ATM Machine, take out $100 , and try to live only $20 a day for the 5 days.
Buy Generic
Many of the everyday products that have a cute marketing gimmicks contain the same ingredients as products with the “make them feel good” marketing campaigns. Take $6 bottle of Tylenol for example. It contains the main ingredient of Acetaminophen. If you were to look at the ingredients of a $1 bottle called” Headache Annihilators (fictitious), you’d see the only ingredient is Acetaminophen. Guess what, you have saved yourself $5 and have only spent $1 + tax.
What to do Next: Think of your favorite brands that you purchase regularly. Research their ingredients and find other cheaper items that could serve as a substitute.
4.) Become Accountable to Someone….Anybody!
Well maybe not just anybody, but sometimes you need a coach who will help you monitor your spending habits, spark ideas on ways to become efficient, and grow your money. Having someone to whom you can be accountable and surrounding yourself with like-minded people to heighten the possibility of success in your wallet.
What to do Next: Find someone who has good spending habits, ask questions and seek advice. Let that person know that you are trying to correct your spending habits, and you need a someone to hold you accountable. You can also find a career and financial coach who can help you reach your goals.
