When I got my first job, my Nana sat me down and gave me one of the best money management tips I’ve ever received.
She told me to save a third of my paycheck, allocate a third to living expenses, and to spend the rest on myself.
I turned 52 in March. If I’d listened to her I could have opted for an early retirement.
Instead —because 18-year-olds know better than their money savvy grandmothers— I chose to ignore her ridiculously simple, yet remarkably sound advice.
“The greatest ideas are the simplest.” ―
I opted to blow all my money on payday and then get into debt for the things I still wanted but couldn’t afford. Pretty much the antithesis of living within my means.
I spent the next two decades in debt, barely making ends meet. Things only started looking up when Sporty and I sold all our stuff in 2008. (It turns out one of the benefits of minimalism is having more money.)
Had personal finance been a part of my school curriculum, things might have turned out differently for me. But that was the eighties; we were all about religious instruction and writing in cursive back then.
With only 35-45 percent of high schools delivering financial education, kids nowadays are not that much better off. This is especially concerning when you consider the intense pressure young people are under to rack up debt so they can buy stuff and appear rich.
It’s not just teenagers who need money management tips, however. According to data from the Federal Reserve, Americans hold over $1 trillion in credit card debt. (And that’s just one of many worrying personal finance statistics compiled by Debt.com.)
Money Management Tips from Around the Globe
But while folks in the United States might be up to their eyeballs in debt, other countries are doing things differently and living more comfortable lives as a result.
Different cultures deal with cash in different ways. Let’s see what money management tips we can glean from folks in other parts of the world.
1. Save up for Christmas
Photo Credit: Budget Direct
Christmas is a notoriously expensive holiday to celebrate. If you’re anything like I was, you invariably head into the new year with a heap of debt. Thanks to gifts, elaborate family meals and basically having a good time, you often end up spending more than you have.
Sometimes a lot more. Gulp.
People in Panama have found a way around this by paying monthly installments into a caja de ahorros (savings bank) throughout the year. When the Christmas season arrives, they receive the full amount to spend on whatever makes their holiday special.
The lesson here is simple. If you want something, whether it’s a new lounge suite or the desire to see out the year on a high note, save up for it. Whatever you do, don’t get into debt. It’s definitely not worth it.
2. Use Cash, Not Plastic
Photo Credit: Budget Direct
A credit card is fine if you use it like a debit card, spending money that belongs to you. The problem is, most people use the bank’s money to fund their credit card purchases. That’s what I used to do, and it got me into some uncomfortably hot water.
In sharp contrast, Germans pay cash for almost everything, shunning both credit cards and personal debt. Their geld stinkt nicht (cash doesn’t stink) mentality helps them stay aware of how they’re spending their money.
Give it a try next time you’re out shopping. You’ll quickly realize how much more tangible it is to pay with cash rather than handing over your credit card. If you have shopaholic tendencies, this approach will definitely help curb the habit.
3. Donate a Portion of Your Earnings
Photo Credit: Budget Direct
In Pakistan, people are mandated by law to donate at least 2.5 percent of their income to charities and those less fortunate.
The generous giving practice of Zakat (tithing) is said to teach self-discipline and free you from becoming obsessed with accumulating material possessions. Similarly, Christians are encouraged to tithe ten percent of their income.
Whether or not you are religious, donating a portion of your earnings each month makes sense. Paradoxically, the more you give, the more you get. It shouldn’t be your only motivation for helping others (obviously), but it is a nice side-effect of generosity.
More importantly, adopting a giving mindset gets you out of the lack mentality you generally find yourself in when you’re in debt. It may sound far-fetched, but it helps you to believe you have enough.
Figuring Out Your Finances
If your finances are in a mess take the time to sort them out. Sticking your head in the sand is tempting, but won’t help. If anything, it’ll only make things worse.
Along with the emotional effects of being in debt, there are also health risks associated with owing money. Conditions that can be caused or aggravated by financial stress include high blood pressure, insomnia and heart disease, to mention a few.
It’s not all doom and gloom though. With a little personal finance insight you’ll soon change the way you think about money. Start with these tips, then see what else you can do to improve your money management habits.
Sporty and I enlisted the help of a financial advisor to get out of the mess we were in. This is an excellent route to take, as they have skills and know-how you don’t. Ask your friends and colleagues for recommendations.
It’s important to feel comfortable with the person you choose. Interview them, quiz them, get a feel for them. If they don’t feel right, move along. Don’t go with someone because you feel obliged.
In terms of online advice, Dave Ramsey has a comprehensive website with a bunch of free and paid tools and resources to help you get a handle on your finances. It’s a one-stop-shop for personal finance, so give it a try before turning to Google.