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| How to get a better economy |
| Ok, so out of lack of anything better to do, I'd like to share my story how I went from being a poor student drowning in debt, to being able to have 3 savings accounts today. HOWEVER, this is just my personal story, and I'm not exactly an economist. In fact, I have dyscalculia (its been worse, but probably getting better..). You probably also have to take into account that I live in Denmark, where you get paid just for studying. That being said, its probably still relevant to share my story in regards to what mentality you need in order to get a good economy. This is mostly for people who live by themselves/isn't supported by their parents, but can probably be useful for anyone who has their own money to spend, regardless if you live at your parents or not. How it used to be: Like most other danish students, I couldn't afford shit. Besides being really bad at math, my parents didn't teach me much about handling money. In fact, my mom has always been way too generous, and everytime we went grocery shopping I could pretty much throw anything in the cart, and she'd pay for it. I literally got no common sense for spending money. My dad on the other hand, tried to teach me to always be sceptical towards bills, just in case someone wanted to scam me. This resulted in me ignoring a lot of bills, because I just simply didn't understood why I got it or why it was that amount. Not exactly a good idea, to say the least. That, and the fact that I was too lazy to actually know exactly what I signed up for when I signed any kind of legal papers and such, resulted in me getting a lot of debt. Something I couldn't pay, because like anyone else in my situation, I didn't have a lot of money. But unlike anyone smart in my situation, I choose to ignore the bills rather than find a solution for it. But you don't have to be an idiot like me, in order to have a shitty economy still. But it surely didn't help. I got some help getting settlement agreements going for all my creditors, so I could pay off the debt along the way. How I got started: Besides getting some settlements going with the creditors, making a budget is really the key element for a healthy economy. I got my fiances help on this one, and I really recommend getting help on this one in general. We use Google sheets to make a budget list, because its accessible anywhere and easy to update (and you don't need to install Excell on your computer). Figure out ALL of your expenses, everything from food, rent, electric/internet bills, clothes, telephone provider, pet food, whatever you spend money on. You should generally always keep your old bills, and this will also help you get an idea what kind of expenses you usually have. In Denmark there is a law saying you should keep your old bills up to 5 years for legal reasons, mostly for your own sake (you can't complain about mistakes if you don't have a bill to prove anything, and here they expire after 5 years). Don't know how it is in other countries. If you want to get an estimate of how much you spend on food and other stuff, keep all the recipes of everything you buy over the past couple of months (3 months at least, just to get an average idea). Once you know all your expenses, you also have the opportunity to figure out if any of them can be cut out. Like, if you spend $10 on average on facebook/smartphone games every month, buy Starbucks coffee every week, or you have a subscription to a mail order fashion magazine, you might consider how important those things really are to you. Prioritize! Write up all your expenses for one month on your budget, and cut out as many unnecessary things as you possibly can. My bank provided me with 3 accounts by default, a main account, a budget account, and a 'whatever' account, that I use for savings. I'm not sure if all banks provides more than one account pr. default, but you can at least buy another account if you ask them. I really recommend you get an extra account for your budget, to separate all necessary expenses, like bills and so on, from the rest of your account (the money you use on clothes, trinkets, Starbucks coffee and that sort of thing). Just because you have money, doesn't mean you have to spend it - Why a savings account is necessary: Making a budget is good for many reasons. It gives you an overview of your expenses, it makes you aware what unnecessary expenses you have, so you can cut them out, and it gives you a good idea how much money you are supposed to spend on what. But it doesn't mean that you should squeeze the lemon to its final drop, and make sure every penny is spent on every single expense you think you need. A budget provides you the opportunity to make room for savings. Savings are good for many obvious reasons, other than just being able to buy more expensive things for yourselves, when you want to treat yourself. I used to have this mentality that money doesn't have a value if I don't spend it. Like, what is the point of having a ton of money, if I can't use it, right? Well, its not about that. Its nice to be able to buy nice things for yourself, but even in that regard, it nicer to be able to buy something of good quality that will last long rather than buying a lot of cheap stuff, that I would probably throw out in a few months anyway. Also, the more time you have to consider your purchase, the more certain you'd be once you actually buy it. But even so, a savings account doesn't help you a lot in the long run if you empty it frequently. The most important thing about why a savings account does have value, is that it acts like a security net. Especially when you live out, and doesn't have your parents money to support you, you sometimes get unexpected expenses. If you have a pet, it might get sick and needs to go to the vet. Or you might get into an accident, and don't have insurance. You have glasses, and they suddenly break, or your tooth broke and you need to go to the dentist. Things that aren't particular interesting to be spending your money on, but it does happen sometimes. Its better to have room in your economy to be able to pay off any unexpected expenses without it effecting the rest of your monthly budget, rather than having to cut down on basic things like food and bills, because you get an unexpected bill you need to pay off from your main budget. How to make a savings account: Well, it seems pretty basic. Just put money aside each month, right? Well, yes. It is really that simple, but it can be hard not to just use it, when you know its there. I currently have 3 savings accounts, but you really don't need to. I also have a bigger income now, than back when I was just a poor student, so I can afford it now. I have 3 because they are all for different things. One that I share with my fiancé, for any shared expenses (especially in regards to the baby we're having any day now), and two personal ones - a big one, for really big unexected expenses (or really expensive 'treats'), and a minor one, just in case I end up spending too much money one month, which I rarely do though. I do however recommend you start off by making just one savings account, unless you can afford to have more, but I do have two ways of saving for my accounts. When making the budget plan, one of the monthly expenses was putting away money for the two of my savings accounts (the shared and the big one). How much money you choose to put away, is up to you. It really doesn't matter, because even small amounts is still better than nothing at all. But obviously, it takes longer to make it big. Transfer the amount of money you know you can spare, and maybe even a bit more, just to practise some restraint. The thing about money is, the more you have, the more you usually spend. So if you put a bit more money away than you would usually spend, you have to force yourself to limit yourself, but at the same time still have more money, because of the savings account. Its a win-win! I transfer 200kr to each of these two accounts (app. 27€) each month. Another vital thing about these two savings accounts in particular, is that I don't have access to any of them. The shared one is on my fiancés bank account, and the other one is at one of my moms accounts. This plays a really important role to me, because that way I can't get tempted if I don't know how big they are, and because I need to ask someone else to release the money, I can't use them spontaneously. It makes spending this money a bit of a hassle, which is exactly what makes it work really well! So what about the third savings account? My "little" savings account? The little savings account is all the money I have left the last day of each month, that I haven't spent. But in order for that to work, I need to get to my next tip: Restrain yourself: This is a method I use for grocery shopping as well as personal shopping. Once you made your budget, its a good idea to separate the expenses in categories. I don't know how it works in other countries, but in Denmark you can register almost all monthly bills in a payment service, making an automated process where all monthly bills get paid first day of the month, so you don't have to worry about doing it manually. Have the right amount to cover all these bills transferred automatically to your budget account each month, and let the payment service withdraw from this account. Then separate your necessary shopping (like food, toilet paper, that sort of thing) from your personal shopping (clothes, fastfood, ebay stuff, that kind of thing). If you save your recipes from at least the past 3 months of any kind of shopping, you can get an estimate of how much you usually spend. Then what I do, is I go to the nearest ATM machine every first day of the month and withdraw 2000kr for food (for two people... This is a lot less than most people spend on food and stuff for two people, but apparently I'm a pro at keeping it low..), in 4 500 notes. Then I keep the notes at a safe place in my apartment, and I only have 500kr in my purse each week. This way, I can't spend more than 500kr a month on food. If I use up all of it before the week has passed, its just though luck. But its far better only having to wait a few days to be able to spend more money on food, rather than having spent all the food money before the month has passed, having to wait at least a week or two before being able to buy again. I do the same thing with my personal shopping, except I keep my personal money on the bank account, just so I don't mix up personal stuff with necessary stuff (but also because I'm in charge of grocery shopping for the both of us, and there is no reason why my fiance should pay for all the crap I buy on ebay or all the candy I buy for myself all the time..). So I only pay cash for food, but I use my credit card when its personal. I put a limit at 200kr a week for personal things. Also a bit low for most I think, but besides tons of crap on ebay, I'm not a big spender in that sense. Then I keep track of all my spendings on an app on my phone (I use 'Keep' for that), and calculate every time I use my credit card, and try my best not to exceed the 200kr limit a week. I did however set the limit pretty low on purpose (again, keep in mind: just because you have money, doesn't mean you have to use it). Sometimes I will go a bit above that amount, sometimes I might go a bit below. And often, I completely forget to write down a purchase. All these things are reasons why I set the limit lower than I can actually afford. It gives more room if I accidentally spend more one week. Even though I sometimes forget to write it down, I still do my best to remember it, even if I miss a few purchases. It gives a good feel of how much money I have spent, and it makes me aware not to use more than I have to. And because I put the limit a bit lower than I can actually afford, I often have a little extra each end of the month that I didn't spent. As mentioned, this money get transferred to my 'little savings account'. If I should one month go over my personal limit of 200kr a week, I can take whatever I need from that savings account (but only if I really have to! And only the amount I actually need). How I save money when grocery shopping: Although my mom was terrible at teaching me how to manage money, at least I've always learnt how to make great deals when you buy stuff. But every time I talk with other people about how I save money when shopping, people always seems very amazed how I can keep the spendings so low. I don't know how, it just kinda comes naturally, and I probably sometimes cut down or prioritize some things lower than most people would. So take this tip with a grain of salt, or alter it to how it fits you. I just do it this way, because I've always done so. Firstly, when grocery shopping its always a good idea to make a list - and keep to that list! The more open you are to suggestions when you go shopping, the more likely you are to be seduced by advertisement. Its okay to buy a few things that isn't on the list, especially if its a good deal, but don't go overboard with too many spontaneous buys. Although I always make a list, I often write somewhat vague things on it, like "meat" or "things to put on bread", without being specific about what exactly it is I'm looking for. That way I can always look for discounts and prioritize. Unless its really important for some reason, I'd rather just write "meat" and buy whatever is on sale that day, than write "chicken" and give full prize just because it had to be chicken, even though pork was on sale. Sometimes I'd also put things on the list I might not even buy that day anyway. If everything else ends up getting a bit more expensive than I had anticipated, I need to prioritize and determine if roasted onions really is that important to buy today, or if I in fact can wait a few more days before getting it. If its at the end of the week and money is short, it also helps counting everything I put in the basked. I use the calculator on my phone and calculate all the prizes just to make sure I don't exceed the money I have left. I almost always go for discount products, and this is really a matter of personal choice. Unless it really does taste worse than a brand name of the same product, there is usually no reason to pay more for the same thing. If you often buy a certain product, and you just swear that Nutella is much better than Hasselnüss creme, despite being twice as expensive, you should consider making a blind test one day, and see if you can actually taste the difference, or if it isn't just all in your head (many studies and tests have shown that it usually just is in your head...). Then comes principles like organic and free range products, that are usually more expensive but where its about more than just brand and taste. In those cases, its completely up to you where you how you prioritize. Personally, I will always buy organic/free range if I get the same amount (or close to) for the same amount of money. I'm also likely to buy it if it taste much better, but is only a few kroner more expensive. But being able to do so, also means I cut down other places. You need to determine where you think your money is best spent, because sometimes you have to choose. Like if organic vegetables are more important than a free range chicken (putting chemicals into your body vs. animal rights). Remember, the small savings also matters in the long run! A few cents here and there adds up. Also remember to bring your own shopping bag instead of buying/getting a plastic bag each time you shop. Better for your economy, but more importantly, better for the environment! |
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