In a perfect world, you’d be Scrooge McDuck-ing into a pool of money every morning.
But it’s not that world, and even if it was, you’d learn pretty quickly that belly flopping into a heap of coins is a painful way to start a day.
The realities of managing finances look drastically different. Figuring out how it all works is a source of stress for many, and since most of us didn’t have a school class to explain it, we’re left with trial and error.
Today we’re hitting the cosmic fast-forward button. A decade in the future (or two, or three, or four…), what will you know about money that you don’t know now? What lessons could you teach your younger self?
The sooner you face these brutally honest truths, the sooner you’ll be on the path to financial success.
Saving Without A Plan Isn’t Good Enough
Imagine you’re planning a trip. The first thing you do is pick a destination. You don’t worry about things like how you’ll get there, or whether you’ll stay in a hotel or an Airbnb, until you know where you’re going.
It seems obvious when it comes to travel, but we rarely apply the same logic to our financial lives. Before you can effectively decide what to do with your money, you have to determine where you want to go. Set specific financial goals for yourself, then rank them in terms of importance.
Only after you have a clear picture of where you want to end up can you figure out what steps will get you there.
You Don’t Get What You Don’t Ask For
Let go of the idea that you should be paid well because you “deserve” it. Successful men don’t get what they deserve – they get what they ask for.
Always be negotiating the best possible deal you can, whether that means inquiring about a discount, applying for a job that feels like a stretch, or requesting a higher starting salary instead of a raise down the line.
Mindless Spending Matters
A protein shake here, a fancy coffee there, a string of drunk purchases on Amazon… it’s all too easy to spend money mindlessly, and even the small purchases can have a big cumulative effect.
Think carefully about the unnecessary ‘little’ expenditures in your life. If you eliminated them, how much would you save per week? Per month? Per year?
Remind yourself regularly that every bit of cash that leaves your pocket could be put towards your savings goals, or a retirement fund, or paying off your credit cards, or a smart investment. Align your spending with the bigger picture.
Debt Doesn’t Disappear On Its Own
Short of finding an enchanted lamp and asking the genie, there’s no way to make debt magically disappear. It’s essential to create a plan for getting out of the red.
Start by assessing exactly how much you owe. Once you know the figure, decide which method you’ll use for tackling it. Your first option is to pay the debt with the highest interest rate first, so it has less opportunity to rack up additional costs. The second option is to start with the smallest debt first, pay it off, then use the momentum to tackle the next biggest, and the next biggest, and so on.
Either method can be effective, as long as you’re making some kind of progress towards your goals. Remember that the longer you wait to pay down your debt, the more you’ll owe thanks to interest accrual.
The Unexpected Isn’t Unexpected
No matter how hard you try to be smart about your spending, you will encounter unexpected expenses. And here’s the kicker: somewhere in your brain, you already know this.
You know you might go over budget on a holiday, or wind up in a doctor’s office, or get a parking ticket, or spend a little more on Christmas presents than you planned. Though you may not be able to anticipate the exact form they’ll take, unexpected expenses are actually pretty expected.
Budget accordingly.
Spending Now Can Save You Later
It’s tempting to buy the generic brand, or the 12-pack of socks made in a sweatshop in Asia, if you’re trying to save.
Lowering upfront costs can be the right call sometimes (though let’s skip the sweatshop labour, gentlemen), but you’ll often save more over time if you invest in the beginning. Don’t be afraid to spend on quality if it means it will last longer and you like it more. This is especially important with bigger ticket items like cars, appliances, and furniture, and even applies your splashier sartorial purchases.
Don’t be afraid to invest in things that have value. Along with saving you money in the future, it will help make you a more conscious, considerate spender.
You Must Pay Yourself First
This is a golden rule of personal finance. ‘Pay yourself first’ means putting money towards the essentials before throwing it at discretionary purchases. Those essentials include savings, debt, retirement, investments, and your emergency fund. After that, pay your bills. And after that, you’re free to spend the remainder on whatever whims arise.
Paying yourself first helps remove the temptation to fall into bad spending habits. You may be able to remove it even further by setting up automatic transfers into savings or retirement accounts every time you’re paid.
You Need Less Than You Think
This may be the hardest truth of all for the modern man. We’re constantly bombarded with advertisements urging us to spend more, with excessive displays of riches on television and Instagram, with ‘get rich quick’ schemes online. Our culture is obsessed with amassing wealth.
Reality check: many things you think you can’t live without are luxuries to much of the world (or even to your grandparents). Companies want – no, need – to make you feel discontent with what you have. It’s the only way they stay in business.
Research has found that money can increase your happiness up to a point (famously marked at US$75,000 a year in 2010), but no further. More money beyond that point has no effect on your emotional well-being.
Instead of obsessing over earning as much money as possible, focus on allocating it as well as possible. Your best bet: spend it on experiences.