Three Underrated Money Management Skills You Need Today
If you aren’t good at managing your money on a $50k salary, you won’t be good at managing it on a $500k salary. Womp, womp.
I can hear you saying, “Damn, Amanda, let me get some salve for that burn.”
Don’t get me wrong: more money is always awesome. I will never not high five you for making more money. But it’s not always the answer to all of your problems.
If you aren’t able to effectively manage your money with where you are today, it’s going to be just as difficult as you continue to increase your income over the years.
I’ve worked with hundreds of clients with all different types of budgets and lifestyles, and no matter how much they earned, what mattered most was the way they managed their money.
I want to share with you three money management skills that you need to incorporate into your life to become the rich girl (or boy!) you want to be.
Learn How to Live Below Your Means
Living below your means just means to spend less money than you make each month.
This concept seems simple enough until you start to factor in the new outfits you bought just because Nordstrom was having a sale and those Instagram Influencers were doing their best influencing or when happy hour became happy hours (no shame, we’ve all been there). Those things are all cool in moderation, but it’s when we start creeping into spending-every-dollar-we-make territory that things go off kilter.
Living below your means allows you to build up savings faster, pay down high-interest debt more quickly, invest for retirement, and achieve all of those long-term goals you’ve set for yourself.
Now this doesn’t mean to neurotically save every penny. You work hard for your money and deserve to enjoy it. But you also work too hard to live paycheck to paycheck with the constant stress of running out of money looming over you.
Here are some easy ways to help you develop the money habit of living below your means:
Get in touch with your inner spender: The best way to assess how to live below your means is to know yourself. Take some time to analyze your spending habits. Take inventory of your risk tolerance and really evaluate your mentality around money.
Make a budget and stick to it: The word budget doesn’t mean never spend another dime. It simply means you’ve made a plan for how you want to spend your money.
Intentional spending > mindless buying every day.
Find ways to reduce spending: Now that you know yourself and have a record of where your money goes each month, look for areas where you can reduce spending. Negotiate your credit card rate, your phone bill, your insurance rate…everything is negotiable.
Cut subscriptions and memberships you’re not using anymore.
If you’re going out to eat 15 times a month with friends, suggest they come over for apps and drinks at home to save a ton.
Look out for future you: Instant gratification is nice, but achieving those long-term goals you’ve set for yourself is nicer.
You don’t want to have to work forever. Do future you a favor by establishing an emergency fund and then make consistent investments to save for retirement and other future big purchases (like a house or a boat or your kid’s college).
Living below your means is doable. Make a plan, adjust as needed, and you’ll be glad you did.
Avoid Lifestyle Creep
Lifestyle creep is more seductive than Marilyn Monroe.
If you’ve ever gotten a bonus or a raise only to have literally no clue where that extra $$ went, you may be a victim of lifestyle creep (or lifestyle inflation).
When our salary increases, it is so tempting to buy a fancier car, upgrade our home, take a trip to the nearest Louis Vuitton, and even throw some fancier wine in our carts at the grocery store. After all, we’re #ballers now.
Without much thought, these extra expenses chip away at the additional income we’ve been bringing in and pretty soon we’re back to essentially taking home our old wage, or worse, even less.
So how can you avoid lifestyle creep?
Save more: It’s pretty obvious, but if you’re making more, then you should be saving or investing more.
Put that new found money to good use by increasing contributions to your savings accounts, retirement funds, or paying off debt. Don’t get me wrong, it’s okay to enjoy some of your new found wealth and upgrade your life a bit. But at least split the difference. For example, if you get a raise that’s $500 more per paycheck, try saving at least $250 of it and then spending $250 of it vs spending all $500 more each time.
Make a buy list: Make a list of everything you want to buy, including the big stuff like a new house, a new car, that Mediterranean cruise you’ve been dying to take, and the little things like that new book, the dress you saw at Target, the little Amazon kitchen gadget you were #influenced to buy on TikTok.
After a week, if you find you still want to buy that thing, buy it.
Chances are, you’ll decide you’d rather spend your money on something else once the anticipation of buying the thing wears off. If not? Then it was meant to be.
Don’t restrict: Budgets fail for the same reason diets fail. Just like how you can literally just not swear off a donut for the rest of your life, you can’t swear off not spending any money.
Know that it’s okay to treat yourself!
Like with making a buy-list, try and delay the gratification of the purchase if possible to break the never-ending cycle of I see it, I like it, I want it, I got it (unless you’re actually Ariana Grande, then you can knock yourself out).
Take inventory of your health: Ah the thrill of “add to cart.”
It’s called “retail therapy” for a reason. Sometimes we just make stupid impulsive purchases because it feels good.
If you’re finding yourself wanting to add everything to your cart and checkout with reckless abandon, take a minute to check in on your mental and physical health.
Ask yourself:
How am I really feeling right now?
Did I get enough sleep?
Are my basic needs being met?
Am I getting enough exercise?
Am I hungry? Thirsty? Too hot? Too cold?
Check in with yourself to make sure your purchases aren’t just a Band-Aid for something bigger. PS: You can always add to cart and then not actually buy 🙊 Retailers hate this as they’re called “abandoned carts”, but if it makes you feel better in the meantime, try starting there.
Revisit long-term goals: Remember the long-term goals you set for yourself. Think about how it’ll feel to finally pay off those student loans, take that family vacation, fully fund your kid’s college fund, or retire even sooner than you’d dreamed.
Keep your eye on the prize. You can do it, but allowing your lifestyle to creep up on you will only hold you back.
Continue Financial Education
If you’re reading this you’re obviously committed to being financially literate AF.
Keep up the good work.
We can never understand too much about our finances or know too much about how money works. Rules change all the time! Continuing financial education will keep you making the right decisions for your finances.
Wrapping Up:
What’s one money management skill you can commit to working on this week?
I’ll start: *getting my tax forms and receipts together for my accountant —because tax planning, though it is as fun as watching paint dry, is a year round thang*🥴
