Do you earn a good salary but still find it doesn’t go far enough? Would you like to have money left at the end of each pay period?
There’s a scientific field called neuroeconomics, which studies the decisions we make by analysing how we interact with money. Its main theory says that one of the biggest mistakes in managing money is making decisions based on trends or fashions, acting irrationally, or following other people’s example. If you want to manage your money better, keep reading this article.
Don’t spend more than you earn
Sometimes, people irrationally spend more than they earn. This often comes down to impulse: it can lead people to overlook their priorities and spend money they shouldn’t, or can’t afford to spend.
To avoid this, make a list of your income (what comes in, what you have) and expenses (what goes out, what you spend). The main goal is to see where your money is going so you can cut unnecessary costs and make a noticeable difference to your finances.
To be clear, you don’t have to make this list on your computer using a program. Don’t overcomplicate it—you can even write it in a notebook, and it won’t take more than 10 minutes.
Talk to your partner or roommate
If you’re going to take steps to improve how you manage your household and personal finances, first consider whether you live with someone or whether anyone else depends on your monthly income.
It’s very important that everyone is on the same page, so one person isn’t left with more work, conflicts don’t arise, and managing the money doesn’t make things worse instead of better. If you think you can work as a team with the other person, don’t hesitate—it will be much easier to do together.
If you know another couple who live together, ask them for their strategies for managing money better. You could also ask your parents or grandparents how they make their money last through the whole month.
Saving
We should all set aside some of our income and save it. This can help us pay for what matters to us and deal with situations that may come up.
You can make saving a personal habit. If you find it really challenging to save and keep money at home (I know it is for me), you might spend it if you have it on hand. If you’re like me, I recommend opening a savings account with the bank of your choice. You can deposit whatever amount you decide each month. This will make the money readily available when you need it, without interfering with your monthly expenses and leaving you stressed, borrowing money, and going into debt.
You can try some popular saving strategies, such as saving all your 5- or 10-peso coins. Put them in a 4-liter plastic container, and believe me, you’ll be surprised by how much money you can save.
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The difference between needs and wants
It’s very important to recognize the difference between these two concepts. A need is something essential for a person’s survival, such as water, food, clothing, and shelter. A want, on the other hand, is something you’d like to have or experience but don’t need to live—for example, a car, a trip, a phone, or a computer. Now that we know the difference between needs and wants, it’s important to include them in your list of income and expenses.
If you can afford a few luxuries, such as a handbag or sneakers, go ahead—but don’t forget your priorities and personal responsibilities.
Stop complaining
I often see people complain about having to work an 8-hour day, not having enough money, or wishing they earned a little more. Many others compare themselves with other people, saying things like, “I wish I had their job,” “They look so happy—they probably have no debt,” or “How do they make their money last?”
Instead of complaining, accept your financial situation and take action as soon as possible. Also, think about the kind of person you are, what actions are leading to poor money management, and the consequences this has had in your life.
This isn’t just for people with major expenses. If you’re a parent reading this, it’s very important to teach your children how to manage their money.
I think we’ve all felt that our money just doesn’t stretch far enough—that we spend in one weekend what could last us a month, and then end up eating beans and rice at the end of the month (which, to be clear, are delicious), unable to leave the house, all because we haven’t managed our money well.
If you feel you’re not managing your money well, I recommend following these tips. They really do help and, above all, can improve your quality of life. Never stop trying to improve, and keep moving forward with new goals. If you manage your money well, you’ll be able to achieve many other goals.
