A lot of women shut off when it comes to the topic of finance or wealth planning. Because it’s boring. Because it’s just too complicated. Because there are too many things to buy and life’s too short to wait. But it doesn’t have to be! I think that we can look good without getting in debt; we just need to learn how to be financially savvy. And it can be interesting and fun!
With my frequent hauls, I might not look like the best person to be discussing about personal finance. But believe it or not, I have never been in debt and I like to keep my finances clean and well planned. I buy a lot of things because… well, I plan and budget for them so that I can comfortably afford them. Now and then I slip up and overspend, but over the long term, the averages work out for me.
How do I sustain my crazy spending? I am not rich, not sponsored, and not subsidized. I don’t get money from others to buy things. I do get a couple of beauty gifts a year from the boyfriend, but he makes a point not to buy me beauty products; he prefers to help out with holidays and experiences. I appreciate that, but that also means that I have to rely on myself to get what I want. So how do I do it?
Here are some very simple beginner tips that I always stick to. They’re not rocket science, and may seem like common sense – but somehow, common sense is not that common. I think these are the foundation for anyone who is interested in getting their personal finance in order – to be able to enjoy life on a consistent basis without having to worry about being in debt.
If you already are in debt, pay it off FIRST. But selectively.
There’s just no avoiding this issue. If you are in debt, everything else is secondary. You need to pay it off. But you should be selective about which debt to pay off immediately.
For mortgage and school loans, assuming that you have made a reasonable investment in them – these can and should be paid in manageable instalments over time. I have friends who scrimp on everything in order to pay off their mortgage and school loans in the shortest time possible, but in the process alienated everybody and everything else in their life. I don’t think that’s the way to live; mortgages and education are long term investments and should be paid off over the long term.
However, if you have credit card debt outstanding from overspending, pay them off pronto! Interest rates on credit cards are over 20%… stop buying an extra lipstick that you don’t need and put that money to clear off the debt. This is just a “foundation” piece, so if you’re deeply in debt and it’s ‘impossible’ to pay them off, there are many places to seek help and you should.
Never spend beyond what you can afford.
This might not sound like rocket science, but you may be surprised how few people actually sticks to this. I am not in debt and the reason is simple – if I cannot afford to pay it off, I will not buy it.
It’s perfectly fine to buy things that you don’t need, only if you have the funds. When I say “if you have the funds”, I mean that you have enough cash sitting in your bank account and can pay them off right now. I have too many friends who claim that they can afford something… because “I can put it on my credit card”; that’s the first step to financial ruin. If it is not a necessity, don’t buy it if you have to wait for your next paycheck in order to pay it off.
Use a credit card for purchases but always pay off on time.
I have never owed credit card debt. Never. I always pay on time, in full.
Credit cards get a bad reputation because of their high interest, but it is not wrong to use credit cards. It’s how you use it. I love using credit cards because they give me discounts or cash back, which can accumulate so I get more for every buck that I spend. I think they’re great!
But I always make sure to pay on time – every cent that I spend on my card, I have a matching amount of CASH sitting in my bank waiting to be used to clear off that expenditure when the bill comes. Have you checked how much the interest rate is on your credit card debt? It’s insane. This goes to the earlier point; never spend beyond what you can afford – a credit card is not free money; make sure you have a matching amount in your bank before you swipe it.
Have a spending plan. And budget in that lipstick.
A lot of people find being on a budget to be very restrictive and after awhile, they stop doing it. That’s because you’re not allowing yourself to have fun! It’s like dieting – if you try to cut out everything you love eating, then the plan is bound to fail.
You need to have a spending plan and know what you’re spending on, then cut down on things that doesn’t give you as much happiness, while shifting that expenditure into a treat or two that will give you a lot more happiness. A budget is not about spending as little as you can. It’s about maximising utility/happiness given your financial constraints. We’ll touch on how to set about a spending plan soon.
I think you don’t have to stop spending altogether; what matters is that there is a plan and money is spent wisely. If you learn how to work with your money, then you can slowly learn to make your money work for you – giving you more to buy what you want. Let’s talk more about this in 2 weeks time.