Learning to manage finances

Earning your own livelihood can be quite liberating but at the same time you might be saddled by the need to manage your finances wisely. You might want to save for a trip, pay off your student loan or invest and make your money fructify. Whatever your reasons may be, a good way to start is by reading personal finance blogs (see below).

Here is a summary of what I have learnt over the past few weeks:

Define your goals

I shall graduate this year with considerable student debt. I also know that considering the situation of the job market, I might not land one immediately. I thus need to create a savings pool to support me through the no-income periods.
And if I get lucky, I just might use it to travel around Europe!

Setting a precise goal is extremely motivating and rewarding.

Spend less than you earn.

Sounds simple enough but difficult to put into practice especially since the lure of easy credit is high… Thankfully, I have mastered this principle.

“Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”

– Charles Dickens, David Copperfield

Know the value of stuff. Pay for value.

You don’t have to be miserly. Spend on things that matter to you. Cut costs on things that don’t.

This is pretty tricky: knowing what matters to you is easy. But try making a list of stuff that doesn’t matter and you’ll see.
I still need to work on this one.

Plan your expenses

Think twice before buying stuff. Ask yourself if you really need it. Plan the bigger expenses well in advance and try sticking to your budget.

Last weekend I went to the supermarket to buy a face mask and shampoo. But I ended up falling for a beautiful white cotton shirt (29 euros!) and bought it spontaneously. Result: Guilt.

Track your expenses

Write down your expenses every single day. I have started to do it and it did help me rein in my expenses or at least identify the problem zones. (Read eating out)

Automate!

If your bank provides the facility, automatically siphon off part of your pay check to a savings account so that it’s out of sight (and out of mind).

I manually transfer a part of my salary to the Livret A or Livret Jeune the day it arrives on my current account. It forces me to save though I need to be disciplined enough not to touch it.

I still have a long way to go. I still splurge a lot on eating out. But I’m glad that I have taken the first steps. The idea is not to cut down on having fun but to realise the value of money and being responsible.

Two of my favourite blogs:

Ramit Sethi’s I will teach you to be rich

J D Roth’s Get rich slowly