Not so easy money

6 tips for anyone who finds it hard to save.

Story: George deGeyter

Money can be difficult to understand. It can add up in ways that are hard for many to fathom, and it can run out without warning. If you’re like millions of others who find it hard to make sense of money in their lives, here are some tips:

1. Start saving right away. People often assume they need lots of money in order to be able to save. What they don’t realize is that it’s when you make a small paycheck that you truly need to save. You need a buffer against life’s unpredictable events. People who make large paychecks need to save, too. No one can take their paycheck for granted. It’s always important to save.

2. Savings can add up. Many people simply stay away from saving money because they imagine that saving anything substantial requires large monthly contributions. This isn’t true. A sum of $300 saved each month for 10 years amounts to $36,000. It is money that could easily equal the down payment on a house. Money adds up slowly, but it does amount to impressive sums. You want to save slowly and steadily to see money add up in this way.

3. Create a cash flow plan. Cash flow plans aren’t just for businesses. A cash flow statement is the best way to make the most of personal cash as well. Consult a financial advisor to map out how much money you have coming in and how much you can expect to save after you take out all your expenses.

4. Resolve to be strict. It’s one thing to draw up a financial plan; it’s another matter to resolve to live by its requirements. It’s important to make up your mind to do whatever it takes to live within your means. It might mean telling your friends that you can’t afford to spend on costly nights out. It might mean telling friends and family when they ask to borrow money that you can’t afford it. Letting go of your pride is often an important part of making your financial goals.

5. Make frugality a part of decisions. Frugality works when you take it to every part of your life. For instance, it doesn’t matter how careful you are with money if you marry someone who is wasteful. It can take resolve to tell yourself that money does matter in a relationship, and to look for love that comes with financial responsibility. Doing this can greatly help your financial goals.

6. Avoid borrowing money. Credit cards and other sources of borrowed money can ruin your financial goals. This is because it takes a tremendously evolved financial sense to mentally track how much you borrow, how much interest the money accrues, and how quickly you need to pay the money back. If you don’t really understand how quickly credit card interest adds up, you’ll do very well to not use credit cards at all.

Understanding money is a skill some people may have. Others need to work hard to make sense of their financial life. It doesn’t matter who you are. You can make your goals if you’re careful.