5 Ways to Improve Your Relationship with Money
Awareness of Money Starts Early
Our relationship with money generally begins at a very young age. That connection is very simplistic. We want stuff. We use money to get stuff. We get the money that gets us the stuff from our parents, grandparents, or any family member that happens to be handy at the moment with a few bucks in hand. We are not particular.
Fast forward, and we grow up. Hopefully, along the way, our parents teach us some fundamental money management skills because if as adults, we don’t have some control over our finances, they will control us. The result is mounting debt and sleepless nights worrying how we are going to pay it down.
Money Management is an Acquired Skill
If I’ve just described your situation, don’t take it as a personal judgment. You are not alone. Americans have a problem with handling their finances. Need proof? Look at the 2008-2009 real estate market crash where 3.9 million Americans faced foreclosure. We collectively owe $1.5 trillion in student loans and another $1.4 trillion in credit card debt. To make matters worse, 60 percent of Americans cannot cover a $1000 emergency expense, and nearly 45 percent of baby boomers (aged 55-73) have no retirement savings.
Maybe you are a rock star at handling your money, and you feel a bit smug. Kudos to you and I say that with respect and sincerity. Adulting is hard work. But if you feel like inserting your head in a gallon of chocolate ice-cream right now, please read on. The development of a fiscally responsible lifestyle is an acquired skill. Let’s get started right now with five tips that will put you on the path to a healthy relationship with your money.
Establish a Consistent Income Flow
If you do not have a steady job and cobble together an income with short term gigs and part-time assignments and occasional handouts from your mum, look for a full-time position with a steady income and preferably benefits. It’s impossible to learn how to manage money if you don’t have it coming into your account on a regular, dependable basis. I told you. Adulting is hard, but worth it.
Prepare a Budget
Yes, I went there. Budgeting is not a dirty word, and it is not a revolutionary concept. If you don’t know where your money goes each month, it is unrealistic to expect to achieve any control. List your expenses. Deduct them from your present income. Simple right? Whatever remains, you can allocate to savings and discretionary spending. If you end up with more expenses than income, Houston, we have a problem. Need some help with setting up a budget. Here and you’re welcome.
Create an Emergency Fund
I was 19 and just landed my first real job working for National Airlines in New York City. My first day on the job, my union voted to strike. No kidding. There we were, my two roomies and I with rent to pay and no cash flow.
Thankfully I quickly landed an interim job to meet expenses but more valuable was the lesson learned from the experience. Financially responsible people prepare for the unexpected. Make it your priority to establish a savings account with enough to cover six months expenses should you lose your job. You can also tap this fund for other emergencies that may arise like car repairs or doctors bills and a vacation to Paris. No Paris is not an emergency. I just wanted to see if you were paying attention!
Save Money Every Month
Once you have emergencies covered, continue to save regularly. Set up a financial goal like saving to buy a home, or a new kitchen, or a vacation. The point is, make saving a regular part of your economic life and learn to plan for large purchases and life events. Dare to be creative in finding new ways to save money and make a game of it.
Start a Retirement Account
It is never too early to start saving for retirement. If your employer offers a 401K savings plan with a match, be sure you save up to that amount to take advantage of that extra cash your company puts into your retirement account. Your contribution comes right off the top before taxes, which is an added benefit. If you have no company plan or are self-employed, you can set up an IRA.
Some relationships are complicated. The one between you and your money doesn't have to be. People who have a healthy relationship with money are generally more successful and happier with themselves. Worrying about money requires a great deal of emotional energy and creates stress. Who needs that in their life!
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