Who likes playing with money? I know I do and I’m not talking about monopoly here.
In second grade we had a project where you got to plan out your future adult life. You were able to choose your dream job and salary and then create the lifestyle of your dreams. You were required to buy the basics like food, clothing, and shelter, but you could also spend your money on perks like exotic trips. The point of the exercise was to get us to picture our dream life and then to see how to plan and create it in reality. We researched what things would cost and were graded on if we spent our money practically and stayed within our budget.
Looking back, this was an incredible way to teach children about personal finance. I remember using my imagination and being excited about what kind of life I could live. Those were the days, but those days don’t have to be over.
Welcome to the exciting world of personal finance, where all your dreams can come true. If you think personal finance is boring, I don’t blame you, but if we can approach it like I did my second grade project, then it can become fun.
Now, my project did have all the upsides and none of the downsides of actually being an adult. However in making personal finance less scary and more fun you are more likely to take action and see results. Life is meant to be enjoyed and having great money habits helps us to enjoy it. Don’t think of it in the same old stuffy way: rather, view it as a tool to create a fulfilling life.
Now get excited because here are three basic, common sense tenets of money management to help you get an edge in the game.
1) Get a layout of your finances during a given month by monitoring the money that comes in versus the money that goes out. Are you in the negative or positive each month?
2)Create a budget. This doesn’t have to be scary; you just want to know where your money is going and how to best allocate it. The rule of thumb is that you always pay yourself first. Sounds great, right? You save 10% of your income each month. You then pay off your creditors, e.g. school debt, or credit card debt, next with the next 10%. After that, you pay your future self by investing the next 10%. The rest goes to all of your living expenses. In short, your lifestyle should reflect 70% of your income.
3)Now do a t-chart (pros and cons chart) of the things you can’t live without and things you can live without. Then, cut back on the things you can live without and direct that money towards things you can’t live without or your savings. This is creating the ideal lifestyle with your current level of income.
Bonus: Once you optimize your current income level and then decide you want to raise your income level, you must then develop a plan to invest in yourself so you can add new revenue streams. You repeat this process until you have reached the lifestyle of your dreams.
Photo by Josh Sorenson from Pexels