How many times have we said or heard the phrase, “If I only had more money…”? Whether wanting to purchase a new car, house or trying to pay down bills such as credit card debt and student loans we can fall into the trap of thinking that more money will be the answer to our problems. Most often, this is not the case.
The question we face is how we manage our money – not how much we make. Granted folks need a certain amount of money to survive (although there are some extremists that would argue otherwise) but think of it this way: if someone is poor at managing their money they currently make, how is an increase in income going to make them a better money manager?
Let’s give this some perspective (shout out to last week’s post). Let’s say you were a bank and you were lending out money to a business owner. Every year, the business owner comes to you and asks for more money. After looking at the business’s financials and records you see that the money you’ve lent in the past was blow through in a matter of weeks – yet your client still asks for more telling you that if only they had more money, they’d be in a better financial position.
After a while, you’d cut the client off. It’s clear they cannot manage their money. Sadly, some folks think that this is the way to get out of debt – by adding more. Individuals will apply for more credit cards in order to get out of the current credit card trap they’re in – which often compounds their money troubles.
Unfortunately there are some higher powers that are in the same boat. Illinois for example, has one of the highest tax revenues among the US states (Census 2012), yet ranks among the worst states with unfunded pension liabilities ($97 billion in 2013). Here’s a glaring example that more money is not the answer.
Government irresponsibility aside, here are some things you can do to better manage they money you do have:
- Pay yourself first. Set aside a certain amount of your income each paycheck for retirement and savings.
- Live within your means. Stop over spending and before making a purchase ask yourself, “Do I really need this?”
- Admit you are horrible at managing money.
- Commit to educating yourself about money, personal finance, and investing. There are several books (three on this blog) that can help you build a solid financial education foundation.
- Practice frugality. Clip coupons, shop for deals, ask for discounts.
- Be thankful for what you have. Being content with what you have and grateful for what you’ve been blessed with can help combat materialism.
- Forget about the Joneses. Don’t keep up with them – they may be on the wrong road!