- Money -
basic money management
by fergus mellon
How you manage your money is a truly personal decision and you will find what works for you, below are some starters in how to manage your finances in a simple but effective way.
Credit Card Calamity. Early on in your career it may be difficult never to have credit card debt (you are likely managing the twin evils of student debt and a comparatively low salary), but really try to steer well clear of it. Why? You are throwing money away on the interest (and interest really is tomorrow's salary: you are taking what you will earn tomorrow to pay for the purchases you make today). If it is an emergency (health, car repair etc.) of course credit cards are good for that interim help but you are paying for that help through the huge interest fees that the banks are making off of you.
So what am I saying?
Always aim to have at least a dollar balance in your bank account at the end of every month (do not go overdrawn!) and when you get a windfall (annual bonus) put it away (either save it or make an early loan repayment). Do not blow it on a watch, pair of shoes, handbag etc.
It ain't worth blowing your cash to keep up with the Joneses.
Early Loan Repayment. In the above section I recommended making an early repayment on your student loans. Why? For the same reason that saving early can really add up to a nice lump sum due to the magic of compounding (see next section on Saving for Retirement), so it works in reverse for loans. If you can make an extra loan payment, even a small one, over the life of your loan you will save money on the interest. Over time, managing your finances and having no debt will give you more to spend every month. While it seems normal for everyone to carry debt, this is a pretty new value and I can assure you, you will be better off by avoiding debt as best you can.
Ignore Mr. & Mrs. Jones. I still have a $60 watch and have no shame in wearing it despite many peers having the fancy Rolexes or Cartier watches and looking like a "success". I don't need to show that I am doing ok and would say that you don't either. Buy nice things and enjoy your life, of course, but don't feel you need to bankrupt yourself to keep up with the crowd. It ain't worth it as the crowd will later find out when they have to pay off their credit card bills. They will have a debt mountain that even if they can service it, will have to cutback on their lifestyle to get their finances in order. If you on the other hand have not accumulated credit card debt you will have a far more stable life (and will be richer to boot as you will not be paying interest on your purchases). In addition to reading "I Will Teach You To Be Rich", there is another good book on this from the 1990's called "The Millionaire Next Door" which focuses on how to be a power saver. When I read it, I found that I had definitely not followed the best practice that both authors recommend. I wished (and wish) that I had!
Next section: Saving for Retirement
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