Money is hard to come by
Believe it or not, people are fortunate enough to get a job because they have access to money. Keeping it is another matter. For people all over the world, one of the most daunting tasks is to know how to save money effectively. Some of us can do so quite well, but only on a WANT basis; like I am saving up for a 50-inch PLASMA TV or Mary is saving up for that next trip to Cancun, or even a business owner trying to save up for the latest business telephone systems. Whatever our needs or wants may be, it’s important for us to develop the right habits when it comes to saving money.
In order to make sense of the habits that I am about to share, I am going to create two scenarios which reflect how people save money. Enter John, a student who works part time as a pizza delivery boy. He earns minimum wage, working at 6 hours a day for 6 days including overtime. He is blessed to have found a good employer. On average, he earns close to $600 a month. Enter Mary, a full-time secretary for an accounting firm. She earns twice the minimum wage than John and garners at least $1000 a month on salaries. They both have the same tendencies to splurge and they are both saving up for something. John wants the new Entertainment system + a 40-INCH plasma by the end of summer and Mary wants to secure a downpayment for a new car. Supposing that what Mary and John want costs the same at $3000.
The right habits
Strategies, techniques, or tip on saving money are not effective if not backed by the right habits. Think of it this way: the habits are the thoughts and the strategies are the actions. Thoughts are followed by actions, so in order to be an effective money manager, one must have the right set of habits.
1.)Focus on the end – The end being your goal in saving money. Focusing on your goal will allow you to dedicate more effort into saving. This follows one of Stephen Covey’s habits from 7 Habits of Highly Effective People, although in a financial sense. Focusing on the end or goal will also help you give a clear vision of what you’re working for or what you’re working your way to.
2.)Be ready to compromise – Compromise is not just for making relationships work. If you really want to be an effective money manager, you need to be ready to compromise. Instead of spending $50 a week on beers or drinks, you could save that money and be $50 close to your goal.
3.)Be ready to prioritize – Some of the money management techniques that I’ve read will only tell you on saving up for a particular item alone, but they don’t tell you to be flexible. Sometimes, it’s a good idea to shift away from your goal in the hopes of prioritizing a more important goal; like saving up for a rainy day or saving up to help your family. I find that people can save for X number of reasons if they know how to prioritize, which makes them even more effective money managers. Supposing that John is also saving up for his college tuition for a good 2 years. From his $600, he can take up $150 for his college tuition and $100 for his entertainment system. If he accomplishes both, he’s a better money saver than Mary.
4.)Be creative – Part of being an effective money manager is to know how to create opportunities to create more money. What if John makes an extra $200 a month by baby-sitting? Or what if Mary makes an extra $100 by transcribing audio files from her office? The possibilities are endless; all one has to do is look for it. From a business’ point of view, you can try to look for ways to increase your income from other directions in order to buy those new business telephone systems.