We all make mistakes when it comes to managing our money.
But the problem is that many people are not even aware of the sometimes catastrophic state of their personal finances . Nor their lack of financial education (which unfortunately many of us suffer from).
And that’s where the problems start…
Without knowing what mistakes you make every day with your money, changing things can be very difficult.
If you think you are the exception to the rule, take a look at the 6 signs we present to you below. You might not be as good a student as you think.
1.You don’t know exactly how much you spend each month
Can you answer this question:
“How much money do you spend each month, all types of expenses combined?”
We often think that as long as we do not spend more than we earn, and that as long as we are not overdrawn, everything is fine. But that’s not the only problem.
If you spend everything you earn , without being overdrawn but without saving either, bad news: your finances are in bad shape.
If you don’t set aside even a minimum of money each month, how will you deal with an urgent and unexpected expense? How will you secure your future and your financial health for years to come? How to carry out your projects?
And the problem is that if you don’t really know how much you are spending and on what , it will be very difficult to change things.
That’s why you should have a monthly budgeting solution that allows you to be minimally accurate in calculating your expenses and income.
To track your budget, you can use an app like Linxo, Bankin’ or even a simple Excel spreadsheet. The bottom line is how much money you spend in each “category”
2.You plan to wait until you get more money before saving
We often talk on the site about the magic of compound interest for your savings and investments.
The problem is that the longer you wait before you start saving , the less money you will have in the long run. Because the goal is that the money you put aside will earn you money in the future.
You necessarily have goals or dreams: to travel abroad, buy a house, invest in a personal project, or quite simply become financially independent … And these desires necessarily have a financial bias that must be taken into account.
If you haven’t started setting aside money for each of your goals , the best time to start is now. Even if it’s only €20 per month, starting as soon as possible will allow you to grow your capital little by little while letting your money work for you thanks to the interest you will accumulate.
Of course, it will be more comfortable to save once your income is higher, especially if you have just finished your studies and embarked on a working life. But you can then gradually increase the amounts you set aside (going from €20 to €40, then to €50…) without impacting your lifestyle.
3.You are terrified of investing
Investing can seem very impressive.
And for good reason: money management in general and the concept of investment in particular are never discussed or explained at school.
And yet, investing is an essential step for anyone who would like to grow their capital and start accumulating wealth.
Well chosen, the investment has a growth potential far greater than what you could obtain through a traditional savings account.
Of course, it’s not about putting your money on the stock market without any knowledge of financial markets or how investing works. In any case, you should be accompanied by professionals who will determine with you the best investments according to various factors, including your sensitivity to risk.
4.You don’t have an emergency fund
No matter your age, lifestyle, or financial situation, you need precautionary savings .
Generally, it is recommended to have set aside in a savings account between 3 and 6 months of expenses in order to deal with possible financial problems or the vagaries of life.
And if you think you’re safe from a layoff, a medical emergency, or replacing high-priced equipment, know that no one is.
Having an emergency fund allows you to approach your personal finances much more lightly and feel less stressed when it comes to dealing with unexpected expenses.
5.You tend to spend too quickly (and without really thinking)
It’s completely understandable to want to buy yourself a new gadget, brand new clothes , or replace your old furniture with trendy furniture.
But it’s even more important to be able to broaden your vision to focus on what really matters to you . What if you put the €70 cost of this coat (which you don’t really need) aside for a personal project that is really close to your heart, even if it is for the longer term?
Human beings naturally have difficulty prioritizing sustainability in the future over short-term enjoyment.
It’s very easy to say to yourself that ” it’s not eating out one evening instead of cooking that will impact my finances “. But the problem is that (1) let’s be honest, it probably won’t be just “one night” and (2) it’s the small savings, accumulated over time, that will allow you to really save (it’s especially what explains the concept of the Latte Factor).
Certainly, having beautiful things is comfortable. But that’s too often a waste of money – especially when you know yourself that you could put it to better use elsewhere.
After two weeks, once our dopamine rush has subsided, it is easy to realize the futility of many of our expenses. So be careful with your spending, and take the time to really think things through before buying something, even if it means not buying the same day .
6.You have dozens of excuses why you are a special case and cannot manage your finances like the others
And yes, we see you coming:
- “I really wish I could do this, but I don’t have the time”
- “With my salary, for once, it’s really not possible to put aside”
- “The next few months, I will have too many expenses to be able to save”
- “Right now, I need to enjoy life a bit rather than deprive myself”
This is the reaction of many people when the sensitive subject of managing personal finances is broached.
Your reasons may seem perfectly legitimate and convincing to you. But they are just an emotional reaction to a much bigger problem.
Of course, there are extenuating circumstances in every situation. But except in extreme cases, there is always a different way of seeing and doing things.
Your salary this month is not high enough to put some money aside in a savings fund? You have two options:
- You tell yourself that that’s excuse enough and that you won’t be able to save this month
- Looking for solutions. What if, just for a month, you didn’t buy your meals outside for lunch but brought a meal from home to save a little on food? What if you resell some clothes or items you don’t need?