I used to think that learning how to manage money wisely is about as exciting as watching golf on TV. I also believed that money management and keeping track of money are for miserable spoilsports. What can I say, I have a strong hedonistic streak – I believe it is the sacred duty of each of us to enjoy life.
As a result, I earned, spent, and got into a lot of debt. That is not all: I wasted decades of my life and tons of energy worrying about money when I should have been learning how to manage it wisely.
Then one day, it all changed.
I finally realised a simple truth that many of us ignore to our peril.
I realised that money is always about life and that it has no meaning, no importance, apart from nourishing it.
Managing money wisely is not about the clinking sound of pounds and pennies; it is about spending on what rocks the boat of your life. It is also about having control over the story of your life.
Hence, taking control of my finances became about understanding my desires rather than straight jacketing them.
That is where you may wish to be as well. Learning how to manage money wisely and taking control of your finances will offer a little island of calm in the stormy economy coming in the aftermath of the COVID pandemic.
Here are three important steps to implement and take control of your finances.
#1. How to manage money wisely: record your spending
Personal finance experts would have you believe that the most important thing to do to manage money wisely is to have a budget.
They would be wrong. As any money maverick would tell you, the most important thing to do to manage your money wisely is to keep a spending record.
It took me several years to figure this one out and if you go back to some of my earlier posts, you’d notice that I moaned that I have a spending record, not a budget.
This record, and a very detailed one at that, helped me manage money wisely in four ways:
- I knew exactly where my money goes.
- I had a record of what we spent on what.
- Comparing what we spend to what we would like to spend helped make decisions about cutting spending.
- Comparing what we spend on and what we value in our lives, helped make decisions about optimising our spending.
Importantly, we had the information about our spending and prices that enabled us to make informed decisions and set realistic budgets.
Friends, it is how we kept up with managing our money.
Since I developed, and have been using, The Money Principle Monthly Budget Planner tool, money management feels empowering not boring and suffocating.
Please create a record of your spending, and maintain it if you wish to take control of your finances. You can download The Money Principle Monthly Budget Planner – it is easy to use and worth the investment of approximately 30 minutes per month.
#2. Take control of your finances: the ERR money management approach
There are many money management approaches making the rounds. Most tell you how to divide your money across spending categories (or budget lines).
The Money Principle ERR money management strategy is different. It focuses on ways to eliminate the waste in your spending, replace the way you spend on some items and reduce the consumption of other items (hence, ERR – eliminate, replace, and reduce).
Once you have a detailed record of your spending, preferably over several months, you can start optimising your spending not simply slashing it. For instance, you may notice that you waste money on apps you don’t use, on the food you throw away, and on the insurance that is overpriced – and take steps to eliminate that waste.
You may also consider how to manage money wisely, and save, by changing the way you do things. You may still go on your favourite beach holiday but what can you do differently so you get it cheaper?
Lastly, you may wish to reduce consumption in some spending categories. For instance, you may decide not to drink a bottle of wine every day.
Using the ERR money management strategy will save you thousands of pounds (dollars) guaranteed. When I did that for the first time, I reduced our monthly spending by over £1,000 by only cutting the waste.
#3. How to manage money wisely: keep it going
Most people get money management wrong and get in financial trouble not because they don’t know what to do but because they don’t do it regularly.
For example, readers have been contacting me asking for help to pay off their debt.
I ask them to fill in a set of spreadsheets and offer them FREE help to interpret the information and plan debt payment.
Guess what? Nine times out of ten I do not hear from them again, and I certainly don’t receive the necessary information.
It is human to shy away from the tasks we see as boring and scary (spreadsheets are perceived as both). It is also human to overcome our limitations and ensure we live the best lives we can imagine. (Remember, the only purpose of money is to nourish your life and that is what money management guarantees.)
Don’t wait around – make a brew and start on the Monthly Budget Planner. Read and learn about the ERR strategy of money management (or select any of the other money management tools). Apply it to your monthly spending record and save yourself hundreds, even thousands, of pounds per month.
Get inspired to take control of your finances by reading about people who have done it!
Make money management into a habit by doing it on a particular day every week without fail.
I know you can do it! You just have to muster the interest, motivation, and knowledge and the rest will follow.
Final thoughts: learning how to manage money wisely is empowering
Do you still believe learning how to manage money wisely is boring?
Do you still refuse to take control of your finances and ensure that your life gets the nourishment it demands?
I hope this helped you change the way you view money management and you feel inspired and motivated to get it going and keep it going.