How I taught myself to better manage my money.
I used to be really, really terrible with my finances. Luckily, I’ve managed to teach myself how to completely turn that around.
Not to place blame, but managing my money was never something I was taught as a child. I simply observed my parents having the funds and spending as they pleased.
I didn’t learn to be financially responsible until I’d become quite irresponsible with my money. This led me to feel so much discomfort that I knew I needed to make a change. And while it took time, as most big changes do, the payoff has been large (no pun intended).
So here are some simple financial habits I’ve implemented that have made the world of a difference. By no means is this list applicable to everyone’s situation, but I can certainly attest to the fact that it helped me.
Paying off my credit card each month.
This might come as a surprise, and I’m actually ashamed to admit it, but until my mid-twenties, I wasn’t aware that there was a difference between paying your minimum monthly credit card payment and paying off your entire balance.
It wasn’t until someone told me rather bluntly that I was, for lack of a better term, shooting myself in the foot. I promptly began focusing on paying off the entire balance before adding any new purchases, and within a few months, I succeeded.
Lo and behold, my credit score began to climb, and while I didn’t care too much about that at the time, it certainly paid off when I needed to apply for a mortgage.
Now, outside of emergencies, I don’t purchase anything on my credit card if I can’t foresee the ability to pay it off within that same month.
Living within my means.
Having a credit card quickly became a tool allowing me to make reckless purchases, but it also enabled me to believe I could live outside of my means.
A few years ago, I was working in Toronto, paying for my car, gas, transit, rent, and food. While I had a well-paying job, I was living in a city that’s almost impossible to get ahead financially, especially when living alone.
I commuted 3 hours a day to work at a job for 9 hours that left me emotionally and physically exhausted. And I was lonely.
So any money I did have leftover after paying my living expenses was usually spent on purchases I didn’t need to be making. I quickly got into a cycle of buying things out of boredom and out of a desire to fill a void.
And I think it’s important to note that good mental health is certainly a positive factor in responsibly managing your money. As my relationship with myself strengthened, I became less inclined to self-medicate with material possessions.
Because financial security isn’t about the amount of money you make, it’s also about how much you spend. For instance, you can make a million a year, and still spend more than you’re earning. By all accounts, you may look rich, but on paper, you’re still poor.
So I knew I had to change my life.
I left the city, left the job, and took a chance on something completely different — moving back to my hometown and working part-time for the government while also working online, freelancing with companies to supplement my income.
And you know what, it’s worked out better than I ever could’ve anticipated.
Doing my own bookkeeping.
Since I’ve begun working online, I’ve had to start my own bookkeeping. Because I am primarily earning work in the United States (while residing in Canada), I also have to tax myself, because I do not pay US taxes.
Which means I have to put money aside each time I am paid in order to have the funds available when tax time rolls around. I settled on putting 30% aside into a high-interest savings account, and have been diligent in doing so for the past few years.
You may think I have high self-discipline, but it’s primarily because I was (and still am) terrified of owing more in income taxes than I can afford during the time in which I’m filing them.
So I keep a running Excel spreadsheet of all my incoming payments, I do my own invoicing, and I use the Mint app religiously to track my expenses. I also have monthly spreadsheets for all my bills, both personal and for my house, so that I can track how much money I’m making, spending, and saving each month.
By being in control of my finances and through regularly monitoring my accounts in the app, I’m constantly aware of my incoming and outgoing payments and can make more intuitive, up-to-date financial decisions as a result.
Not putting all my eggs in one basket.
When I was working full-time and spending hours of my day commuting, I had no time left for hobbies or side hustles. While I’m aware that this option isn’t for everyone, transitioning into part-time office work and part-time self-employment has been a game-changer for me.
I’m much more satisfied with my work because I have different streams to pull from — if I get disappointed in one job, at least I have another that’s going well.
And I have more time to do extra freelance work on the side, a privilege in which the payoff can be quite lucrative. But sometimes it’s just about having the time for activities that aren’t work-related, ones that don’t make me money but help me stay sane.
For instance, instead of shopping my woes away, I now have time for many hobbies that keep my hands busy, such as tending to my various house plants, gardening in my yard, teaching myself how to do macramé and practicing my hand-lettering.
Writing is another side hobby that I stumbled upon a few years ago, one from which I’m now gratefully earning a steady stream of income, but one I’d engage in regardless because I love it so much.
Buying a house.
Now, buying a house may sound counter-intuitive to financial responsibility, especially if you’re someone who’s living paycheck to paycheck like I used to. Investing in building my own equity instead of funding someone else’s mortgage payments is certainly a privilege.
But once I was able to pay off my credit card, live within my means, and build a career (and a lifestyle) in which I’m able to start saving money, buying a house was finally a smart financial decision for me.
Because of the large financial responsibility that a house brings, being a homeowner has also strengthened my desire to be financially responsible because I had something tangible to work towards, and a lot to lose if I didn’t maintain it.
By tracking all my house expenses every month, I have a good idea of how much money I have leftover to work with.
So I put money aside for my house expenses as a first priority, I pay off my other personal bills (life insurance, car insurance, car payment, etc) and any leftover I can spend on whatever I please.
And I’m so much more inclined to spend it wisely because my money goes a lot further today than it ever has in the past.