Is it weird to take money management advice from someone who once had $80k in debt? Maybe. I prefer to think of this post as a “learn from me and don’t make the mistakes I did” type of a thing.
To this day, I truly believe that not being given money management lessons in high school and college is one of the biggest flaws in our education system (among other things). The reason is for my poor money management skills (the reason why I had $80k in credit card debt) can be directly traced back to being given a boatload of money in student loans and not having any clue what to do with them. As an adult, I had to go through a lot of trial and error before I learned how to get my budget under control and how to properly manage my money.
This post is a collection of tips on proper money management based on my personal experience. (P.S. I am not a financial advisor, and this is not professional financial advice. Please consult your financial advisor first.)
Tip 1: Learn how to make a budget
This seems obvious, but in truth, it is actually trickier than you might imagine. The trick with creating a budget is learning balance. What good is a budget if it is not balanced and not realistic to your lifestyle?
I am all about transparency, so here is an actual example of my budget for January 2020.
| Description of Items – 1st Paycheck | Budgeted |
| Monthly Transportation | $200 |
| Rent Part 1 | $1,000 |
| Debt Payment #1 | $585 |
| Phone | $125 |
| Credit Card Payment #1 | $60 |
| Food | $200 |
| Fitness Classes | $50 |
| Description of Items – 2nd Paycheck | Budgeted |
| Rent Part 2 | $1,000 |
| Debt Payment #2 | $619 |
| Student Loans Payments | $185 |
| Discretionary Fund (Netflix, Shopping) | $80 |
| Credit Card #2 | $79 |
| Food | $200 |
| Fitness Classes | $0 |
As you can see, I divided up my expenses based on the two paychecks I received per month. The tough part about this budget was that I had to be extremely realistic about what I was able to afford and what I couldn’t.
When I take out all the necessary payments for rent, debt payments, credit card payments, student loans, phone bills, and food, I was left with a total of $130 in discretionary money per month. That means I can’t blow it all on a shopping trip early on in the month if I want to pay for Netflix for the month.
It all comes down to knowing your limits and balancing what you need to spend and when you spend it.
Tip 2: Track your spending
It seems like if you’re already on a budget, you shouldn’t need to track your spending, but this is actually the biggest misconception out there.
Even with a tightly controlled budget, you can’t control the days when you suddenly run out of toilet paper, toothpaste, and moisturizer all on the same day. The fact of life is that life is unexpected, and there will always be unexpected expenses.
There are a lot of ways to track your spending. You can do it manually every single day by checking your bank account or you can connect your accounts to a reputable source such as Mint by Intuit.
My favorite way to track my spending is through Marcus by Goldman Sachs. You can create a free account; link your bank accounts and credit cards, and track all of your payments securely through their app. The reason that I love using an app like Marcus is that I can classify my payments as “bills” or “dining” or “entertainment” and see whether I am actually sticking to my budget.
Another hot tip I have is to turn on automatic text updates whenever you make a purchase.
This is a service that most major credit card companies and banks will offer, and this has saved my life on more than one occasion. More than once, I have caught fraud on my cards because someone made small payments like a random $20 to some sketchy dating app or another $10 to some unknown subscription.
Such small payments won’t be caught by the banks’ fraud-detecting systems, and as annoying as it is to receive texts, you will thank your lucky stars when you catch those fraudsters!
Tip 3: Start building a good credit score
As much as we hate it, a lot of the “adult” things in life like buying a car or a house depends on your credit score. Rather than advise you to focus on paying off your debt, I would advise you to focus on fixing the areas in your credit score that need fixing.
For me, the thing bringing down my credit score is the amount of debt I have. Thus, the way I would go about building my credit score is to pay down my debt. For more details on how I paid off $60k so far in credit card debt, check out my YouTube video!
For others, what brings down your credit score may be having too many credit checks in a short time or missing a payment. Everyone’s credit score is unique to them, and I always recommend using a free credit checking service such as the free CreditJourney Chase offers account holders.
This also might be a good time to clarify that checking your credit score is not the same thing as a hard credit inquiry. A hard inquiry means when you apply for a new retail card at your favorite shopping retailer or when you send in a rent application requiring a credit check.
Tip 4: Invest safely and build a savings
With all the talk of GameStop, AMC, and other Reddit meme stocks in the news, it is easy to feel like you’re falling behind in investing. The truth is that good money management will include investing. Here’s the reason why: it is a much easier way to build savings through investing.
Typical savings accounts will give a 0.01% annual percentage yield each year, which means that you don’t see any benefit from storing your money in traditional savings accounts. Other savings accounts such as Marcus will yield 0.50%, but investing will mean that over time, you can start to see a real return on your investment. Before deciding to invest, I highly recommend first reading up on what investing is before making any decisions on whether you will invest yourself or ask a financial advisor.
In my household, my partner Mikhail makes the investing decisions for us. The simple reason for this is that although we both work in finance (I work at a global investment bank and financial services firm), he is much more knowledgeable than I am when it comes to the stock market. Because his skills are above average given his background in finance, we don’t need a financial advisor.
If you’re brand new to this, I highly recommend educating yourself first on investing, deciding which type of financial advisors you would need, and then selecting an advisor or a firm that is reputable.
If you’d like to learn more about personal finances and how to start investing, I’d also recommend checking out the articles on Marcus by Goldman Sachs’ resources section.
Tip 5: Negotiate a higher pay
This last tip is less a tip than a reminder to always know your worth. Women still get only get paid 80% of what a man might be paid, and this statistic becomes increasingly lower when we factor in age, race, and other distinguishing factors in a person’s background.
2020 was a tough year for all of us, but some of the biggest companies are still thriving and increasing their profit. Depending on where you work, Covid-19 is not an excuse for your employers to say that they cannot give you that pay raise. You owe it to yourself and others who get paid 80% or less than a white man to negotiate for that higher pay. You deserve it! It is also infinitely easier to have good money management when you’re paid what you deserve.
