When it comes to money tips, we all have certain financial philosophies we live by. However, one thing is certain: effectively managing finances isn’t possible until you accept several harsh truths no one likes to think too much about. Check out this article for a cold dose of reality.
I was recently watching an episode of Girls, when a short conversation between the characters stuck with me.
“Shoshanna: I just don't understand why nobody tells you how bad it’s gonna be in the real world.
Marnie: Yeah they do. It's pretty much all they tell you”.
Marnie’s right. Once you hit a certain age, people stop sugarcoating things and try to prep you for what’s ahead. They tell you that you’re going to have responsibilities, that making rent will be a struggle sometimes, that finding a job you truly love will be difficult at best. That even if you do find that perfect job, it won’t be quite as you expected, and you will still have days when you’re productivity plummets and you hate everyone. That relationships, as wonderful as they are, need hard work. And that managing your finances doesn’t come easy, especially when you’re not making much.
My parents and my older friends all warned me about these issues, but I wasn’t paying too much attention. I was busy picking a major, and looking for low-maintenance internships, and partying way too much. After I graduated college though, it dawn on me: “I’m an adult. Now what?” Despite all the advice I’ve gotten along the years, there I was, on my own, with zero previous experience, trying to make it work.
As amazing as life can be, there are also harsh truths that you tend not to acknowledge until they stare you in the face. And when it comes to financial matters, these truths need to be swallowed sooner, rather than later. Here’s what I got so far.
1. You Need Some Sort of Financial Education
Everyone is on the receiving end of various money tips as they grew older. However, few actually have the necessary knowledge to manage money efficiently once they’re on their own for the first time. It can be overwhelming. Paying bills, saving for the future, investing – to figure out how things work, you need to have at least some sort of financial education. Unfortunately, parents don’t always teach their children about money, and colleges don’t offer a crash course in personal finances. If that’s your case, start researching the subject on your own. There are plenty of free resources to take advantage of.
2. You Spend More Than You Would Like to Admit
We all spend more money than we’d like to admit on something, whether that something is shoes, drinks, or chocolate. It’s not at all uncommon, as these expenses bring us a rush of instant gratification. However, as small as they might be, they add up. If you’re not tracking your spending, you will be surprised to realize just how much your morning coffee costs you in a given month. It might make reconsider your spending habits altogether.
3. You Won’t Make It Without a Budget
Speaking of tracking expenses, you won’t be able to save money and reach your financial goals if you don’t budget. I know it sounds boring, but it’s necessary. Spending chaotically increases your chances of accumulating debt – when you run out of money, you have to resort to credit to cover your basic living expenses. Also, budgeting is not as difficult as it may seem. There’s no downside, so why aren’t you doing it yet?
4. Advice Should Be Considered, Not Followed Blindly
People tend to have an opinion about everything these days, especially money. No matter how helpful they’re trying to be though, their advice shouldn’t always be followed. For instance, your grandma might tell you that credit cards are the devil and you should stay away from them at all costs. But in today’s economy, a lack of credit history can easily prevent you from landing a loan later on. Consider the advice you receive, but make sure it applies to you before following it blindly.
5. Friends Can Be a Bad Influence, Money-Wise
Money is often an awkward subject among friends; and it shouldn’t be. If you can talk to each other about your most shameful dating experiences, sharing money tips should be a breeze. However, as you go through life, you will notice that not only is the subject of money difficult to bring up with friends, but also that some of your friends can influence you to spend way over your limit. If they always want to go to fancy places, insist you go shopping at least once a week, or invite you to go on expensive trips, have an honest chat about your financial situation.
Explain that you can’t afford to spend so much money recklessly and that you want to focus on building an emergency fund and securing your financial future. Then propose some low-cost activities you can enjoy together – like movie marathons, hikes, or coffee dates. If they value the friendship, they will oblige.
6. Saving for Retirement Isn’t Optional
This one hit me hard a few months ago. My parents retired early and moved to Quechee Lakes, Vermont, after they sold the house I grew up in. It was shocking, but I also felt an immense sense of pride – retiring early is something that many Americans aspire to, and yet few actually pull it off. I’ve been a bit reckless regardless to my retirement savings, but I’m currently trying to fix that. Even so, I won’t get back the compound interest I would have earn have I started sooner. Bummer.
7. Paying Down Debt is a Daunting and Lengthy Process
Abusing even one credit card can lead you on a dangerous path. There is such a thing as good debt, but even that can take you years to repay. Be selective about the debt you decide to take on and don’t do it unless it’s completely necessary.
Establishing healthy financial habits from early on is key when you want to make your money goals come true. Make sure you live well within your means and avoid accumulating too much debt, as it may damage your credit history in the long run. Most importantly: educate yourself. Knowledge is power. The more you financially-savvy you are the more informed money-related decisions you will make.