Financial peace isn’t the acquisition of stuff. It’s learning to live on less than you make, so you can give money back and have money to invest. You can’t win until you do this.
– Dave Ramsey –
Being young you have many desires and dreams to achieve. But is it not possible unless you manage your finances.
Most of our money goes balancing our debts, paying our credit card bills, or spending on unnecessary things.
To achieve more, you need to plan for it.
Finance managing might seem a huge word for you but don’t get scared. When I started looking after my finances, I also had similar feelings.
I used to believe that managing finances has nothing to do at this age and anyway my earnings are not so high.
We often create false thoughts that managing finance only comes when your earning is more. Managing finances has nothing to do with the money that is earned but it is more related to spending your money.
10 Things To Manage Your Finances As A Young Earner
So today, I will talk about why to manage your finances and how easily you can do it. Here are 10 things you can do to manage your finances well.
1. Become Financially Literate
Becoming financially literate means enhancing the ability to manage your finances by making better money choices and make own financial decisions.
It also covers many things like budgeting, paying your bills, understanding the loan system, credit card usage, and stock market too. You are your teacher.
My mentor Shabbir Bhimani is a developer and full-time freelancer. His background is IT but he started learning about stock markets and personal finances by studying on his own.
He managed to earn profits out of stock markets and has a well-managed portfolio only through his studies on new stock trends.
So, my point is, nobody can teach you better about your finances than you. You need to take responsibility for your money. Because you are more attached to your money than any other person.
To educate yourself better, you can start reading books, read finance magazines, practice your math skills, read government resources, etc.
Moreover, you need to develop a consumer mentality. Instead of getting targeted yourself with all the ads that show you how to own a lavish lifestyle, break the ice, and develop an investor mentality.
There is a nice quote on becoming financially literate:
“More people should learn to tell their dollars where to go instead of asking them where they went.”
– Roger Babson –
Therefore, start learning about finances at an early age. Because the early you start, the better you save.
2. Frame Your Financial Goals
We have many desires in life like buying a house, paying a big debt of life, or buying an expensive car.
But without goals, it’s like shooting in the dark. So one has to set the goals which are S.M.A.R.T: Specific, Measurable, Attainable, Relevant, and Timely.
Remind yourself that goals will always be dreams if not defined clearly. It’s very important to know the ‘when’ of your financial goals.
Also, framing your goals will help you plan your money and how much return it will give you in the short or long term.
There are three types of goals which you need to focus on:
a. Short-Term Goals (Less Than 3 years)
Short-term goals are for things you want to achieve shortly. Framing short term goals can help you save your time and easily achieve it.
Recently I achieved one of my short-term goals. I planned for the Dubai trip. For 5 months, I saved my salary, did some extra projects that pay me well, and cut down on the expenses that I spent on leisure.
If I wouldn’t plan my expenses during these 5 months, it would be impossible to plan a trip. So yes, setting goals is important but also, managing your money is more important.
b. Mid-Term Goals (More Than 5 Years And Less Than 10 Years)
Mid-term goals are the one which you want to achieve in near time. Suppose you want to buy a car for yourself, you would plan your finances in such a way that it doesn’t hinder your current living expenses and emergency fund.
One of my friends wanted to buy an expensive car between 8-10 lacs. So she started investing in stocks, mainly in evergreen stocks from her salary.
She invested it for around 5 years and received a good return on it. Now she is the owner of an expensive car.
Investing is the key to all your plans and expenses. Because it saves your principal amount and you only spend your interest.
c. Long-Term Goals (More Than 15 Years)
Long-term goals are very crucial for a successful career and a good lavish life.
Has anyone asked you about your long-term goals or have you made any list of them? If your goals are still blurry, let’s talk about them today and make your life goals on track.
Long-term goals are related to your career and life. It can include buying a new house, doing a huge investment, or obtain a certain position in your career shortly.
The amusing thing is you can achieve all these goals easily. But you need to plan it.
I will give you my example. I want to secure my future by becoming the best selling author. I have made out a list where I noted books topics.
In the next 15 years, I want to write at least 5 books. But my future depends on today’s work.
Your small goals will make you reach the long ones. Your every long term thing is attached to the small things you do today.
Suppose, how much time every day I will write, the time spent on my readings, researching, and everything. Concluding all the aspects I put in, it gets me close to my long term goals.
Long-term goals are your dreams and to make it happen, set them today, and start working on it. You will surely win.
3. Make Your Budget And Start Saving
Everyone gets it wrong. We make goals not to plan ‘how to spend the money’ rather ‘how to save the money’.
But yes, saving and budgeting money cannot easily come to you naturally. You have to learn it just like learning a new language.
I started saving my money at the age of 26. Before that, I only cared about where should I spend my money.
You are never late though. Once you realize, you can start at the exact moment.
Budgeting for me was stress. I didn’t know how to start. So I took my mother’s advice. She is great at budgeting.
She always keeps a diary in which she writes down her monthly expenses. She highlights the amount which is available for a month spending also the funds in which she has invested.
Once you start keeping the records of your expenses, you will see many expenses are just casual which can be avoided. So, next time you will be more careful about spending your money.
Your savings will be automatically accumulated once you will start budgeting. I started writing on my phone about daily expenses. At the end of the month, I would sum it and will be happy that I have saved enough bucks this month.
There is a famous quote by Warren Buffet:
“Do not save what is left after spending; instead, spend what is left after saving.”
4. Increase Your Earnings
We all hope to double our earnings. But is it possible? Yes and No. You can make it triple also, but it’s not going to happen suddenly.
To increase your earnings, you need to increase your skills, knowledge, wisdom, and use your time wisely.
According to me, these four elements are the most important one. So write down the plans that will help you achieve the earnings you want.
Every week think of what you want to achieve and write down the things you will need to get you there. The day comes when you will see, your success is here.
The other important thing is to use your time wisely. The person who values time has everything in the world. It’s the only resource by which you can achieve anything in life.
You have only 24 hours just like others have. Therefore, your focus should always be on investing your time doing your precious work.
For example, J.K Rowolling who is the famous writer of Harry Porter has been failed for more than 10-15 times. And today her success is making noise in every corner of the world since 1997.
This is the power of time and success. They always replicate each other. So create something that lasts long and makes you tons of dollars.
5. Save For An Emergency
Having an emergency fund will save you from two things: borrowing money from others and save yourself from any financial crisis.
Thus, as a young earner, you should always keep your emergency fund ready. You don’t need to rely on anyone or even use credit cards to create extra debts.
Suppose, you lose your job, you are not going to get a new job the next day. Till the time you find new, your emergency fund will be helpful.
We earn money so we can help ourselves and our family in money matters. As a responsible child, you always want to help your parents or maybe your friends. But if you will not have any money, how you will help?
If you want to be helpful at the right time with the right resources, keep aside your emergency fund.
6. Avoid Debt Traps
Being in debt is dangerous. Be it taking a loan from bank, heavy EMIs, or lending money from friends.
All these debt traps make you weak financially. It will give you pleasure for some moments but then eat your monthly budget. I also used to be in such debt traps.
Last, to last year, I bought a phone worth Rs. 60,000 and took EMI. I used to pay around Rs. 7000 from my monthly income.
Sometimes it used to be so difficult that I didn’t have money to buy medicines for me. Everything was messed up. I asked for money to my friends, framed a new debt cycle, and then it’s on and on.
Then I realized that having less money is fine than being in debt. Having fewer things in life is fine than having things which will be devalued in the next 3 years.
We all want to become rich and create wealth but debt traps will always stop our financial growth.
6. Don’t Use A Credit Card
Credit cards are salaries that are paid to you before you earn it. It is another form of debt traps. Using a credit card can buy you an expensive watch, but then you will have no idea, your cents will go away like a free bird.
I used to have two credit cards. Sometimes when my salary comes late, I used a credit card blindly. And the next month I see my bill, and aghast!
Having a credit card will give you royal feeling but it’s of no use. Also, relying on credit cards will make your habits bad. You will become a slave of your unearned money. It’s like a drug addiction.
And if you can use it properly, is always good. But first, make your calculations accurate and then use it.
7. Buy What You Need & Not What You Desire
Buying stuff for yourself is always good but you need to know when to draw the limit line. I will explain you with an example.
There was my friend named Radhika. Last year she received an appraisal for her best performance. We went for dinner and it was on her.
The next morning I woke up to her Instagram status showing her brand new speaker. She was chilling and throwing beer parties now and then.
One day in the evening, we went for a walk and I tried to explain to her about her expenses. She was too cool about it. She believed that if money has come, they come with a purpose and we as the owner of them, need to fulfill it.
She did expenses without thinking what will remain in hand and the day came when the money was over and she didn’t have single money in hand to spend so she borrowed from her parents.
This is the real example of buying the things one wants instead of one need. Earning money is easy but using it wisely is the real task.
8. Have Fun Without Money
Money can buy you happiness but some happiness is priceless and need no money. You can enjoy your time without or very little money.
I used to be a shopaholic. But I changed now in many ways. I realized that when spending less money on something can also give you exact fun than spending more.
Whatever you like to do like going for a coffee, eating outside, or movies. There are cheap alternatives available in the market. You can always go for it. Trust me, it’s not going to make any difference.
I used to go for an expensive coffee outside which cost me around Rs. 250. I found an amazing alternative to coffee which is hot chocolate worth Rs. 40 and that too in the best taste. That’s how I cut down cost on dining out.
Instead of taking my car, I started taking my two-wheeler for drives at night. There was no difference in enjoying the drives with small vehicles because I had the best company of my friends.
I learned that enjoying life with less money gives me satisfaction too. I don’t need expensive dinners or places to roam. I could go to the riverside and have fun.
Also, I am not saying that your whole life should be compromised or you should never take a sip of an expensive coffee.
Of course, we all earn to make our lifestyle rich. But when?
When you earn that much money that you can divide into three funds properly: savings, emergency fund, and spending money.
9. Invest In Yourself
You are you’re the biggest strength. Therefore, make yourself a priority, at the end of the day you are you’re the longest commitment.
Educate yourself with the skills that you want to acquire. Excel in it and work for your passion. Because that will give you the best returns in life.
Whether you are investing in learning new courses, developing yourself professionally and personally, or tapping the scope of opportunities by hiring a coach.
You are going to learn yourself and then give to others and earn your money out of it.
I studied MBA in marketing and got into a finance job. But my passion was writing. I wanted to become a writer. And after 4 years, I started my first writing job and making money.
With that, I also learned photography and videography skills and got into that business too. Some offers came in my way of shooting some restaurants video.
So yes, it’s necessary to show some self-love and develop your talents so you can serve others in a better way and earn handsome money.
10. Try To Make Wealth, Not An Income
There is a difference between earning an income and creating wealth. Wealth is a bigger picture.
Income means earning your salaries, short-term earnings, profits, interest, etc. Whereas wealth is owning monetary as well as materialistic things. It can be properties that you own, businesses, stocks, and expensive cars.
Wealth is created out of saving your income and investing it in the right place at the right time. So if you want to become a millionaire, start saving as much as you can.
Apply 50/30/20 rule in saving technique to manage your finances. You should spend your 20% of your income on paying debts, EMI, interest, or emergency fund. Furthermore, spend 30% of your money on your wants like shopping, dining out or on your hobbies.
The next 50% should be your savings. You need to save half of your money so that you can compile the notes and invest in proper funds or stocks. Enjoy the retired life by enjoying the returns you get over your savings.
Increase your wealth instead of income. Make savings, strategies, focused goals and you will see a big change in your finance management.
Till today if you were not so serious about managing your finances, well it’s never too late to start something good. Follow the simple steps to manage your finances given below and make your life debt-free:
- Make a diary and write day-to-day expenses.
- Write down short-term and long-term goals.
- Start investing early. Follow the 50/30/20 rule.
- Invest in yourself – learn new skills.
- Buy the things that are necessary for life.
Voila! You can manage your finances with small efforts and make a BIG difference in life. You can also, earn side by side of your job.
Start your self venture and work for your passion which I did. Use your passion as your money-making machine. Your two targets are done: earn the money while following your passion.
I wish you all fortunes days in life and if with anything you need help, write a mail to us and We will be happy to discuss with you.
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