From my experience most people understand the very basics of money they just can’t grasp what good money management can actually do for their life.
If you can’t recognize money for what it truly is, then it’s hard to imagine life any differently.
You first need to focus on changing your relationship with money. Here’s how to do it.
Ignore What Other People Do
If your friends all jumped off a bridge would you do it too?
In the financial world the peer pressure to keep up with the people around you is often referred to as “keeping up with the Joneses.”
All of your friends buy new cars so you want one too. All of your friends are taking exotic vacations so you want one too. All of your friends are buying houses so you want to buy a house too.
This is a real thing.
Studies have proven that if you are married and one of your immediate friends gets divorced your chances of divorce are upped to 75%. Here’s reports of another study showing that if one of your friends gains weight you have a 57% chance of gaining too.
Whether you realize it or not the same things happen with money.
When people around you are seemingly buying bigger and better it can force you to feel the need to keep up, regardless if that spending is actually meaningful to you.
If you want to change your relationship with money one of the first things you need to do is be hyper aware of why you spend. If that urge to spend comes with the need of keeping up appearances, and isn’t truly valuable to you, then don’t spend.
Don’t compare yourself to other people and don’t try to keep up. Trying to keep up will cause you to be broke, in debt, and stressed out. That’s the opposite of how you need to be.
Create Strong Goals
To successfully prevent keeping up with joneses from infiltrating your life you need to have super strong, meaningful goals.
What do you want your life to look like?
This, obviously, is different for all of us. Just as an example my main financial goal at the moment is to pay off my mortgage in eight years.
This is meaningful to me because a) I personally hate owing money b) it puts my family in a strong financial position and c) it will bring a sense of security to me.
Having absolutely zero debt is important to me. This goal isn’t important to everyone and that is perfectly okay.
You need to figure out what matters most to you and then spend your money in a way that aligns with your goals and the life you want to be living. If you’re married or in a serious relationship then the goals you create need to be important to both you and your significant other.
Know That You Can Design Your Life
The most powerful realization I’ve had in regards to money is lifestyle design. You don’t have to be like everyone else. Having strong goals and mindfully spending in pursuit of those goals is how you can design your own lifestyle.
As kids we were told that we could be anything we wanted when we grew up. It’s so simple, but it’s true.
The average person can get in the mindset that adult life means go to college, get a good job, work for 40 years, and then retire at age 65. If that’s how you want your life to look there is absolutely nothing wrong with that, it’s just not your only option.
Do you want to travel the world? Build your own business? Retire to a farm at age 40? Work half a year every year? Retire at age 50?
You have the ability to design your lifestyle. Intentional financial management is how you do it.
Embrace the Basics
Basic personal finance advice can get you pretty much anywhere you want to be if you know where you’re going.
Spend Less Than You Earn – Or you’ll never be able to reach your goals.
Make Money Work for You – Learn how to save and invest in a way that you’re comfortable with. There are so many different ways you can put your money to work. Explore them.
Challenge the Norms – Realize that a lot of financial advice needs to be taken with a grain of salt. You have to do what works for you. For instance, one piece of advice that is often given by financial gurus is to save 10% of your income for retirement. If you only save 10% of your income toward retirement it will take you 51 years of saving before you can retire. If you plan on retiring early this obviously isn’t going to cut it.
Map out your financial plan to fit your goals. Don’t blindly follow other people’s advice. Pick out the parts that work for you and ignore the rest.
Nobody else has the exact same goals that you do. Therefore a one-size-fits-all financial plan just isn’t going to cut it.
Plan – If you’re currently in debt or are struggling to earn enough money to get by, realize that there are no instant fixes. Unfortunately, hard work is needed.
Plan for the future but take things one step at a time. It might take a while to get where you want to be but that end result starts the day you decide to turn your financial life around.
Change Your Relationship with Money
The single best thing you can do for your finances is change the way you look at money.
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Poor money habits and the lack of money can make you miserable. However, once you figure out that you can use money to build the life you want and deserve, you’ll see money in a whole new way.