Everyone and their mother wants to tell you how to manage your money.
Now, I’ll admit, I’m doing that too with this post. But the difference between everyone else and me is that I’m giving your real advice. Good advice. Tips and tricks that actually work.
Whenever I see budgeting posts, four out of five times, I cringe really hard. People mean well with their advice, but some of the most popular tips out there are just plain wrong.
That’s why I’m here! I don’t want you to get frustrated or upset if the money managements systems that work for everyone don’t work for you. You’re not alone. I’m going to share the top three most pointless money management tips I see, and what you can do in your budgeting system instead. Let me set the record straight and make sure you have some actionable, sustainable money habits you can develop.
Money Management Myth #1: Keep track of your monthly income and subtract your expenses.
Hold on, Shreya. This is the most basic system for budgeting ever. How can this be wrong?
I hate seeing this tip given out to everyone like it works universally. Because guess what? I don’t have a consistent monthly income! I get paid a different amount every two weeks. And I don’t have fixed expenses either. My utility bills change every month. So when I tried to budget when I started this job, all of my numbers for monthly income and expenses were estimates (pretty bad estimates, too).
That just doesn’t work. You can’t build a budget on a guess. You need to know the money you have before you can make plans about how much money you’re spending, and where.
Instead of tracking my income every month, I redo my budget every time I get paid. Rather than doing my budget on a monthly basis, I do it on a biweekly basis. Every time I get paid, I know exactly what my income is because I’ve already received it. At that point, I can make way more accurate decisions when it comes to budgeting.
If you aren’t able to make a good monthly budget because your income isn’t consistent, try to budget every time you get paid instead! This could seriously help you wrap your head about how much money you have to spend at any given time.
Money Management Myth #2: Cut down on unnecessary spending.
Here’s another seemingly simple, foundational tip that is actually super hard to implement.
The problem with this totally basic advice is that the word “unnecessary” could mean loads of things. What types of spending count as unnecessary? It’s such a subjective word, and it can lead to really unsustainable money practices.
For example, most money management gurus would say that dining out is unnecessary spending, and you should try to cut down on eating out as much as possible in order to save money. At first blush, this is solid advice – but what about people like me? I’m a total foodie, and eating out brings me a lot of joy. I love investing in really great food experiences. So cutting down on spending when it comes to dining out is never going to be sustainable for me, since dining out is genuinely one of my most favorite things to do.
Basically, what some people may consider unnecessary might actually be very necessary to your happiness in life. And it’s not wrong to spend on things that make you happy!
Instead of cutting down, I simply set a fixed percentage of my income that I’m going to spend for every category of spending I have. For example, I have categories for money spent on rent, eating out, blogging, video games, and clothes! Then, I fiddle with these percentages until they add up to 100%. Of course, in order to eat out as much as I’d like, I need to cut down on other expenses.
But by following a percentage-based method of budgeting, you can prioritize your spending in a way that works for you, instead of trying to follow other people’s definition of “unnecessary spending”.
Money management and finances are always intensely personal subjects. Percentage-based budgets let you define what is important to your life.
Money Management Myth #3: Try a spending freeze/no-spend challenge to kickstart your financial journey.
No. No, no, no. Every time I see any posts recommending a no-spend challenge, I have to shake my head.
The idea behind many spending freezes is that by eliminating all your spending for a certain amount of time, you can see how much of your spending is unnecessary and then build healthier money habits when you come out of the freeze.
The problem is that there’s never a good time to start a no-spend challenge. Life will always get in the way – and while you may be able to push past the obstacles that show up, it’s still a really, really difficult path to follow. Trying to kickstart your budgeting process by undertaking a super hard challenge is sure to cause a lot of stress and heartache.
I’m never going to be an advocate of taking huge steps like this or quitting anything cold turkey. It’s just not my style.
Instead of trying a no-spend challenge, I started my financial journey by just keeping track of every transaction I made in a spreadsheet I made myself. In my opinion, tracking is one of the most surefire ways to make goals easier to achieve. Being able to assess yourself as you go is so invaluable. In the case of finances specifically, just knowing how much you’re spending and where you’re spending it is a great way to start making changes to your budget.
I take ten minutes to update my spreadsheet every morning or so, adding all the transactions I made since then last time I edited it. That’s all the time I need to create a living, breathing report of my finances that I can refer to whenever I’m creating a new budget. Whenever I decide to make actual changes to my spending habits, it’s so wonderful to have a history of transactions to refer to for information on my tendencies.
If you’re looking for ways to kickstart your financial journey, I can’t recommend tracking enough. Start with small steps instead of bigger ones; I promise it’ll pay off down the road.
I hope that this post helps you find different ways to work on your financial goals! I’m not trying to say that every money management tip out there is wrong, or misguided. But some of the most popular tricks out there might not work for you, and I don’t want that to dishearten you. Everyone has a unique relationship to money – by understanding that, you can start to build a budgeting system that works for you, instead of following a pre-built system that someone claims will work for everyone.
I hope this post helps you find new ways to reach your financial goals! If you have any questions, feel free to leave a comment below. What money management tips have failed for you in the past? What makes your relationship with money unique?