If you google “mastering your personal finances”, you’ll find a vast selection of articles. Unfortunately, many of them have to do with thinking about your long term goals and setting up a budget or financial plan – with which we know a lot of people struggle to stick. So what’s a more practical way to begin?
I’d like to re-frame the debate by stating: the key to mastering your personal finances is NOT about budgeting. It’s about having a plan to answer three basic questions:
- How can I maximize my short term and long term ability to earn?
- How can I control my spending habits and maximize the value I get out of my spending?
- How can I save mindlessly and build savings into my everyday behaviors?
That’s it. If you’ve got a solid answer for the three questions above, then you are well on your way to mastering your personal finances and heading towards financial freedom.
Pathways to Financial Freedom
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If you don’t (don’t feel bad… most of us don’t), then read on and take advantage of these three tips.
1. Re-organize the apps on your phone
Organize the apps on your phone into three categories – “Apps that help me earn," “Apps that help me spend," “Apps that help me save." The simple act of creating these categories and seeing if you can fill them will make you think a lot about your personal finances and what you’re actively doing to take control of them.
2. Spend mindfully
The heart of mastering personal finances and financial freedom is NOT saving. It’s actually much more about becoming a master of your spending.
It’s simple: if you spend all (or more than) you earn, you can’t save. So SPENDING should be the overwhelming focus of personal finances. But this doesn’t mean budgeting. In fact, I encourage anyone who’s struggling with spending NOT to leap to setting up a budget as a first step.
Instead, map out your spending habits by answering two simple questions – Where do you spend? Are you happy with that? Get in touch with your habits, your daily life and lifestyle rhythms that pretty much drive your spending patterns.
By simply becoming conscious of how and on what you spend your money, you'll begin to prioritize your needs and wants and waste less. I guarantee you, through this simple process you’ll find 20% you can shave off and still be happy… maybe even happier.
Apps like Moven are perfect for helping you start this process.
3. Save mindlessly
We’ve been raised to think that people tend to spend mindlessly, so saving is HARD and needs to be very planned and methodical. I DISAGREE.
There are lots of methods out there that will help you save mindlessly. One easy one is setting up a simple retirement account and enabling it with monthly “auto-deposit”.
Another easy one is micro-savings apps like Digit or Acorns that enable you to automatically contribute to savings with every purchase you make.
Set up at least two automatic savings vehicles – one with tax advantages, like retirement or education savings, and another tied to everyday spending.
The key to savings is to make it effortless and invisible NOT to be intimidated or psyched out by some over-wrought savings plan.
The path to mastering personal finances and heading to financial freedom is not about developing a budget or a financial plan. It’s about finding tools and creating a simple set of habits around earning, spending and saving. The time to start is now.
Alex is a recognized thought leader, speaker and one of the leading voices in the financial services industry. In his experience working with banks, he noted they were developing products for profit and not for customers. This inspired him to co-found Moven with the premise of empowering customers with financial wellness via digital and mobile channels.