Financial advice is everywhere. But despite that, many people struggle to manage their finances. Many people assume that obtaining more money will solve their problems, and while that may hold true for some, most of us can agree that we do have adequate money to support our daily needs such as food, water, and a roof over our head. We are financially okay, but our society is based on consumption, and increasing that expenditure, and as a result, we all buy into the idea that we need more money.
If that’s the case, the approach to becoming financially free requires a much bolder approach. One that gives us different answers to the questions we keep asking.
Purchase only what is needed, not what you want. You need to identify what is a need and what is just a want. For example, if you get a bank loan for a home for a certain amount of money, search only for homes that sell for that amount or less. Realize the concept of minimalism. Decide what you need only on the merit of necessity rather than prospect, or on what you can possibly attain.
Don’t have car payments. This is a big one. Try to always pay in cash when you buy a new car. Try to avoid having car payments. Choose one that you can afford with whatever cash you have in the bank. Sometimes it is okay to not own a new car and get a pre-owned one instead, because it’s worth it if you can avoid any later stress related to car purchases.
In households where more than one person is earning an income, try to save the lesser income and live solely on the larger income. This way, you avoid lifestyle creep. Lifestyle creep happens when one’s income increases, and purchases that were once luxuries become necessities.
Avoid drinking alcohol. This may seem very countercultural, but it is very financially helpful. Those who don’t consume alcohol for whatever reason, whether it be cultural or religious, or personal, benefit greatly. People spend a huge amount of money on alcohol each year. This is a big expense for many families and if it is removed, discretionary income will increase greatly.
Try not to retire. There are some people well into their 80s and 90s who still work full time because they genuinely enjoy contributing to society. Their view of work is different from others which is why they never want to retire. Yes, some kinds of work are difficult to undertake in old age, but being open minded about work even after retirement age will certainly impact all financial decision making.
Studies show that we end up spending more when we use a credit card as opposed to when we pay with cash. If you are trying to follow a budget, pay with cash as much as you can. Also, we tend to keep a check of where we are spending money when we pay with cash, whereas it is rather easy to forget what we have paid when we use our credit cards. If you want to keep a tight hold on your expenses, pay with cash.
Aim to donate 8% of your income. Giving away not only benefits the receiver but also the giver. It is important to be generous in order to feel satisfied and fulfilled in life. When we give, we realize better how much as have and how much we can offer others.
Make the big spender manage the finances. If you live in a family where there is someone who is spending more than others, put that person in charge of managing all finances. That way, they will become much more aware of their spending, and will keep others in order as well.
These are tips that anyone is free to follow. They have worked for me and my friends, and surely can work for you too! Always remember that becoming financially free doesn’t mean just earning more money, but also changing your entire spending behavior and psychological approach to money matters.