If there was to be a club called, People Who Act Like They Can’t Afford Expensive Things And Then Spend Exactly That Amount (or even more) On A Bunch Of Small Purchases They Don’t Need, I would be club President.
Generally, I pretend to know what I’m talking about when it comes to almost* anything. Call it lying or just simple social etiquette but I almost pride myself on being able to fake my way through just about any small talk scenario that presents itself.
*But the one thing I will never, ever, ever pretend to know what I’m talking about, as President of aforementioned club, is money.
So, ATT: All club members that want to leave (and don’t worry, I won’t be offended, I even recommend it!) enjoy our Fast Five with our new resident financial goddess who shall remains nameless and ever debtless:
FN: What’s the most important lesson you can teach me about money?
Financial goddess (FG):
Realise that nobody cares about your money more than you. Not your boyfriend, not your friends, not even your Mum.
And it’s not because the world is against you. The ups and downs of your bank account are simply yours and yours only. Your friend is always going to tell you, “It’s just money – go on, buy the shoes” – it’s you who needs to take the responsibility to protect and grow your hard earned cash.
FN: Am I likely to spend more if I take my card or if I have cash?
FG: EASY. Everyone spends more money on plastic. Study after study shows that people spend more money when they use plastic, including debit cards. When you carry around a pile of cash, you tend to spend less money.
FN: Is that because it’s easy to forget how much you are ‘actually’ spending when you just ‘tap’?
FG: The weird thing about continual spending on a card is that if you ignore it, it can almost feel like it doesn’t affect your life that much. And that’s how a lot of people spiral into debt.
The thing with credit card debt is it’s really easy to start and hard to get rid of it.
People underestimate how hard it is to get out from under it. You can ignore it for a while but when you tackle it head on, you start to realise it for what it is: a burden that swallows your money month after month.
FN: How much money should I be spending on fun things like food, coffee and shopping?
FG: Generally speaking, the 50/20/30 rule is a great benchmarking tool. This says that 50 per cent of your budget should go toward essentials (rent, groceries, transportation to/from work with rent taking no more than 30 per cent of what you take home each month), 20 per cent should go toward your future (goals, retirement, emergency savings) and 30 per cent is for you to spend on your lifestyle expenses i.e. shopping, coffee, life.
FN: What’s the dumbest thing that people in university spend money on?
FG: The one thing that always seems to blow up a budget: rent. I repeat: your rent should never be more than 30 per cent of what you take home each month.
Something else that I hear time and time again is the tale of young girls buying cheap ‘going out clothes’ every weekend. You’ll blow much more money in the long term buying cheap clothes because you’ll only wear them a few times. Don’t buy anything as a quick last minute fix for a night out that you don’t see future potential in.