Other than a random accounting elective in high school or college, there is no formal system that teaches us money management and financial planning. We grow up with little to no clue unless our parents involve us in their process—and even then, it may be too complicated or not plausible for us to handle our own money that way.
But you can learn personal finance skills and implement them to begin a new economic journey that can lead you to more freedom to use your money how you want. And the best part is, it doesn’t take much to create small habits that will set you on the right path. Here are five tips on how to hack your way into financial independence.
1. Keep a notebook of your expenditures.
You’ve probably heard of a food diary and now it’s time to apply that to your finances. Instead of recording every food you eat, start a diary of your expenditures. Write every single thing you spend money on, even if it’s just giving your kid a quarter at the toy machines. Look at your bank account and record automatic withdrawals regularly.
Keeping a money diary will hold you accountable for your spending. When you go back to the previous week and see how much you spent on eating out late night snacks, or household items you won’t use, you’ll begin thinking about your money in a new way.
2. Use an app like Mint.
Mint is a money management app that has a user-friendly platform to connect your bank accounts, credit cards, and investments. The free program will analyze your financial information and make a personal recommendation for 10 distinct situations. It can help you with your first budget, growing your investments, or consolidating your debt.
The smart program can even learn your spending patterns and help you save money by revealing places you struggle with making wise decisions. There are many money management apps available, so it’s best to do a bit of research before you settle on one.
3. Take a look at your emotional connection to spending.
Do you have bad habits like shopping when you’re upset or spending more than you should when couponing? As you examine your money diary, consider how you were feeling when you spent money you shouldn’t have. Controlling your expenditures won’t work if you throw it all away because you had a bad day at work.
Make notes next to line items like “bad day” or “fight with a friend” so that you acknowledge what made you spend. Then, brainstorm productive ways to make yourself feel better other than pulling out the debit card.
4. Figure out your money script.
Dr. Bradley T. Klontz, a financial psychologist, and Dr. Sonya Britt are Certified Financial Planners. They suggested that there are four money scripts that create patterns of spending.
Money Vigilance: Super careful with money.
Money Avoidance: Money isn’t important, so you don’t care about it.
Money Status: Your self-worth is tied to how much money you have.
Money Worship: Not having enough money is the root of all your problems, so getting more will solve them.
Pinpointing which script you live by will help you identify bad habits and will help you further isolate emotional patterns of spending.
5. Create a budget and stick to it.
After a month of working with a money diary, sit down and do a budget. Start by highlighting the most important expenditures: mortgage or rent, utilities, grocery budget, gas, etc. Compare that to your income. If you have money left over, put a mark by expenses that are of secondary importance: savings, a gym membership, Netflix subscription, etc. Still, have money left over? It’s time to look at investments.
Programs like Mint can help you define a budget, and there are many websites online to get you started. If you use a program online, it’s a good idea to also handwrite your budget on paper. It will reinforce your plan and give you a hard copy of what you want to achieve. Post your budget somewhere that it will be prominent enough for you to see daily.
You can hack your way into financial independence through these small changes, but they will require dedication and penny-pinching. Start telling yourself, “You can’t always get what you want, and you SHOULDN’T either!” every time you pick up something you don’t need to spend your money on.
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