I think a lot of people start off on their own in their twenties without much knowledge of what to do with their money or how to use it for good in their life. We don’t teach it in school, you don’t have to learn anything to get a bank account, so we usually end up copying the money practices of our parents whether they are good or bad because it is the only thing we know.
So all that to say if you wanted a quick, simple, and straight to the point list of what you should and shouldn’t do with your money I’ve done it here in this post. Let me help you get a little jump start on your knowledge about money and how to use it for bettering your life, because I am ALL about that!
And because I am SO passionate about this topic the original post was almost 2,000 words. So I went ahead and divided it into a part one and part two as to not overwhelm you friends! Today is part one and part two will be up tomorrow!
Let’s do it shall we?
10 Do’s And Don’t’s of Money Management
1. Don’t use a credit card when you have no money in the bank.
The only way I’d understand someone using a credit card is if they are specifically trying to build credit or trying to earn a reward that new cards give. I myself have done both those things and earned $800 of free travel! But even then the tip here still applies.
Don’t use your credit card unless you have the same exact amount of money in the bank to pay for whatever you are buying! Debt is not your friend nor is a credit card and it will take away all your money if you let it.
2. Do have an emergency fund.
An emergency fund is an amount of money you are prepared to spend at any moment if something urgent comes up. It is not a credit card but actual cash in the bank that you can access. An emergency fund can be any amount really depending on your expenses and situation but I’d advise at least $500-$1000 to cover any car repairs, sicknesses, emergency days off, etc.
3. Don’t spend more than you make (or even all of what you make)
The easiest way to become broke, get in debt, and become stuck at your job is spending all of your paycheck or more. I’m going to tell you the #1 thing to do if you want to have good money management for the rest of your life. Are you ready? Live below your means, aka, spend less money than you make. A significant amount less if you can do it.
If you spend all your money every paycheck you are now dependent on that next paycheck to come, which in turn means you are dependent on that job. If you ever want to be able to take a job because you love it and not because of the money then you need to learn to live on less money. This tip will also help you accomplish tip #4 every month.
4. Do have a growing savings account.
Yes this is different than an emergency account. Your emergency account is for just that, emergencies. That’s not to say that you can’t use your savings if something urgent comes up that is more than what you have in your emergency fund. But a savings account is for multiple things, not just emergencies.
You can be saving for something specific (a downpayment on a house or a new-to-you car), or you can be saving for the future (kids college, your college, wedding), or if you are really smart you are saving just so you have a chunk of money in the bank at all times. You never know when you will get an opportunity you’ll need money for. Good and bad things come up all the time in life that they need money for, if you don’t have a savings and you are not prepared for them you are likely to put them on the credit card and become indebted to someone else or miss out on an opportunity altogether.
Have a savings account so that you are never stuck!
5. Don’t waste your money on unnecessary purchases!
If I could have neon flashing lights around this tip I would. If you’ve been around the blog for any amount of time you probably know I believe in minimal spending on unnecessary items so that you can use your money for better things. So this tip, though number five on this post is number one in my heart! It’s very simple but hard to actually put into practice! Don’t waste your money on unnecessary purchases!
Let me boil it down to some guidelines to show you what I mean:
Don’t buy things that you won’t want/need/use in a year or two.
Don’t buy something just because it says it’s on sale or clearance.
Don’t go out to eat all the time because you don’t want to cook.
Don’t get Starbucks everyday instead of drinking coffee at home.
Here is the thing, with every purchase you are taking your hard earned money and giving it to someone in return for something else. Make sure that “something else” is worth your hard earned money! (And that you’ll still think it was worth it in a year or two from now.) Okay, end rant! ;)
Well since we are already at almost 1,000 words I’ll give you a break until my next post where I’ll finish up this list with the next 5 dos and don’ts of money management. I hope this starts getting your brain thinking of new ways to use your money for good!