Today, we’ll take a different approach and discuss what to stop doing with your money.
We often think the more money we have the better our lives would be. In many cases, that is true because more money can mean a stable roof over our heads, daily meals, and access to healthcare. However, in some cases, more money doesn’t mean more happiness.
I do continue to hear stories from people who share that money is just a tool like a hammer. It doesn’t make a person happy but what he can build with the hammer often does.
I’m often asked about my top tips for what to do with money. This would be a good time to share 5 things to stop doing with your money. Follow these simple guidelines to a better path to financial freedom.
1. Saving for the sake of saving
Save with intention and for a purpose. There’s a lot of bold advice out there that says to just save. Saving money is important, but you need to be clear about why and what you’re saving for. The reason many people are unable to save is not having a clear objective for the money they are stashing away. Saving money requires a shift in your relationship with money. And if you’ve had difficulties saving in the past, it’s not that you “couldn’t” but rather you didn’t fully grasp the reason to do so.
Tip: Identify all your savings goals such as emergency fund, new car, first home, college expense, vacation, trip around the world, or a new Macbook. Have a savings account for each goal and title them accordingly. Many financial institutions like credit unions and online banks, similar to Ally and Capital One, offer the ability to open multiple savings accounts.
2. Borrow to pay other loans
Credit is also a tool that can be utilized to help you achieve life milestones. But, unfortunately, many of us use credit as a means to spend on stuff that doesn’t add value or create wealth. This can often lead to long-term debt. Now, if you’re looking to become debt-free, then using a consolidation loan or credit card balance transfer can be a gamechanger. It’s important, however, that you are aware of your relationship with credit. We often have the best intentions of using consolidation loans to manage our credit cards, but if you don’t tame your credit card usage, you may find yourself with a debt consolidation loan AND additional credit card debt.
Pro tip: There are alternatives to credit card consolidation loans.
3. Paying debt first before saving
Saving money is a habit and needs to start sooner rather than later. You’ve probably heard Dave Ramsey share his belief that paying off debt is much more important. I disagree with this advice. It’s important that you start saving even while you have debt. The reason has to do with money isn’t just a numbers game. It’s an emotional and feelings intense relationship. You’ll come to realize saving money for your goals, while paying off debt, is a necessary component for your wellbeing.
Pro tip: Pay yourself first with every paycheck. Make sure you’re building your emergency fund and contributing to your other savings goals even if it’s just $5.
4. Keeping finances task-oriented
Automate your finances, but don’t forget about them. Simplicity is key to wellness. Take advantage of direct deposit, alerts, bill-pay features, auto-savings transfers, retirement contributions and more. These auto features make managing finances simpler and convenient. Remember, you’re not giving up control, you’re removing non-essential tasks so you can focus your attention on bigger moves.
Pro tip: Choose a primary bank to transact your finances that offer the option of multiple checking and savings accounts. And connect external services such as brokerage accounts or additional savings apps.
5. Replacing cash with stuff and gadgets
The purpose of money is to purchase goods and services. We earn money to spend it. But, it doesn’t mean your paychecks should be spent immediately. I understand how marketing efforts convince us to buy the next and latest gadget. For example, when did it become acceptable to buy a new iPhone every year? How does a gadget that costs on average $800 become obsolete in 12 months? Break the cycle from earning to spending.
Pro tip: To shift your relationship with money, start thinking about making money with money i.e. grow money. This can lead to a future where you stop exchanging more time for a paycheck. Learn how to invest your first $100.
Is there anything you can add? What else should you stop doing with your money?