Figuring out how to manage your money can be one of the most difficult skills to master as an adult. And if you're consistently finding that you're out of money before you're out of the month, perhaps these six simple tricks can help improve your spending habits.
1) You look for value in what you buy
Let's say you need a new pair of shoes. There's a cheap pair that will run you $20, but you'll have to replace it in three months, where a more expensive pair will cost you $60, but will last you through next year. Which ones do you buy?
If you're good with money, you'll save a bit and get to the $60 pair. Your choice is based on the best quality for purchases and investments.
2) You know when something is too good to be true.
That is, when you get an email in your inbox that looks like this:
Dear Sir:
You have been sent this message from the Ministry of Foreign Affairs in Nigeria. The Ministry of Foreign Affairs of the Federal Republic of Nigeria is committed to using this medium to inform/alert you of the outstanding payment due in your favor as a result of the repeatedly unpleasant out come of your dealing s with the impostors over the years, whose targets and concerns remains on how to rob you of your hard earned money. The sum of $4MUSD was granted in your favor on the 22th of August 2014 to compensate you based on your sweat money that was deprived from you by the many impostors.
You immediately delete it and laugh at the person trying steal money from you. Scams aren't limited to a phishing email from someone across the world. Or, perhaps, you're at a gas station one day, and someone pulls up in a white van and offers to sell you some "brand new speakers!" for an incredibly cheap price.
Scams can take all sorts of shapes and sizes, and occasionally it can be difficult to spot them. If your instinct is saying something is too good to be true - it probably is. Trust your gut!
3) You have some emergency savings
A recent study indicated that 62% of Americans have less than $1,000 in savings and can't cover a major emergency. And saving for a rainy day doesn't mean spending it on the latest and greatest movie memorabilia you saw at a comic book convention. Having a cushion of at least six months salary is a great way to know you're good with money.
4) You use cash for purchases instead of credit cards
Most households in America have an average debt of $16,000 and a lot of that is thanks to credit cards.
Sure it can be easier to put tonight's dinner on the Visa, or whip out the American Express for those groceries instead of carrying a wad of cash around. But you're essentially putting a tax on yourself for those normal everyday things you put on the card instead of paying for cash.
Of course, if you pay off your credit cards at the end of the month, you can avoid those interest charges, but why take the chance you'll run out of room on your card for those times when you actually need your credit?
5) You invest in things that appreciate such as stocks or bonds.
And definitely not action figures.
There's plenty of things that can appreciate in value. Your aunt's ceramic pig collection is not one of those, so don't start collecting ceramic pigs yourself as an investment.
Find things that will create a passive income for you and your family so that your money is always working FOR you. Unless you need a lot of ready cash, invest your savings in stocks, bonds, and safe investments so you know that even if you're not working, your money is.
6) You take advantage of your employer's 401k
If your employer offers to match a portion of your contribution to your 401k, you should absolutely take advantage. It's basically free money (think of it as a free raise) and it's even a pre-tax contribution! 401ks are a great way to put a little bit of money away every month (or every two weeks, depending on how often you get paid) and you'll be surprised at how quickly it can accumulate.
By the time you're ready to retire, your company could matched enough money in your 401k for you to finally build that addition onto your house that you've always wanted.
The key with money is to treat it with respect and not waste it on things that make you feel bad. We all have to live, and there's no shame in enjoying a luxury or two (avocado toast anyone?)