First of all, to clear things up, I have say that I do not consider myself as a professional in any way, nor a perfect person when it comes to finances. I’m just like any other human being; there are months where I sometimes have a difficult time managing my finances. But I definitely can’t stress it enough how important it is to organise and budget your finances. By slowly making progress in managing your finances, you can take so much weight off your shoulders in terms of unnecessary stress. Common problems such as being short at the end of the month or suddenly not having enough to pay for an emergency and unexpected expense can be suppressed from your life and make you be more at ease. So that’s why I just wanted to share some things that I’ve learned along the way, that I apply to the way I manage my finances and tips and tricks that I try to use in my everyday life.
- Setting priorities – putting aside for things that have to be paid – bills, subscriptions, etc.
One of the first and most important ways to make managing your finances an easier task would probably be setting priorities. What I mean by that, is to instantly separate your income as soon as you receive it. Set priorities and put aside money for important things that NEED to be paid such as rent, monthly subscriptions, phone bills, etc. What I personally do is that, at the beginning of the month, I separate my money into different categories and put them into different bank accounts. One that is for important and unquestionable expenses (bills, rent, etc.), one for general expenses (food, transportation…) and one for my savings. But doing that, I found that it is easier for me to picture how much I have left for general spendings. Not only that, but it reduces chances of being short when it comes to paying bills. For me, having one bank account dedicated to those important expenses, creates a sense of security; I know I will have enough money when comes the time that I will need to pay my bills.
One quick tip that I would recommend you to do as well, at least once, is to go through your subscriptions. See if there are any that you are still spending your money on but barely using. Sometimes we don’t even realise that we are still paying for something that we don’t use anymore. Some subscriptions might not cost lots of money, and so you decide to keep the subscription active but in the long run, those small expenses really can add up.
- Emergency saving fund & sinking fund
These two things are also really important. For those who don’t know, a sinking fund is a fund set up that is usually reserved for an event expense that is either planned or not. What I personally do at the beginning of each month, is that I list down all possible expenses such as dentist appointment, friend’s/family’s birthdays, things like that. In a way you can think of this fund as a “pre-saved” fund that is going to be used during the upcoming month. Again this is a similar process to the “important expenses” fund. It helps me keep aside money for various events.
My emergency saving fund and saving fund are pretty much the same. I only rarely, if not at all, touch at this fund. When I receive my monthly income, I usually save directly 10% of it. Meaning that I directly deduct 10% of my money and put it aside. I know that many young people, might not see the point of starting to save at a age young, but trust me having money saved aside can become very handy in the future.
- Small things that can add up (electricity, bills…)
This is problably something that I have only realised once I started living on my own. When I was younger, my father would always insist me to turn off the lights when I got out of a room or to turn of any unnecessary lighting, not to leave the tap water on when I brushed my teeth nor to take long showers (yes because whenever I took a shower back then, I used to think it was my time to shine with my singing 😉 hahaha, so I would think of it as my concert time. I mean… who else can relate? I’m sure some of you have also done the same thing at least once.) I always used to think that my father was just giving me hard time back then. But it’s only when I paid my own electricity and water bills, that I finally realised the reason why my father kept repeating those words. Every single minute of electricity or water usage just adds up on the bill. Since then, I have been more reasonable with my usage. I only turn on the lights of the room I am in, not the entire flat’s lights. The same goes for my water usage. I know you might be thinking that this change will only make a difference of only a few bahts but trust me that in the long run, it can add up. Plus, it’s an expense that you can be in control of, meaning that your own usage determines how much you are going to pay since it isn’t a fixed cost.
So maybe next time when you leave a room, don’t forget to turn off the lights and maybe shower a little less longer. I mean, it’s a win-win situation here; you’re not only saving up on money but you are also being more eco-friendly.
- SALE but not actually saving money
When we go shopping or shop online and our attention is suddenly attracted to sign with “50% sale” or “buy one get one free”, we think we have found the deal of the day. For example, when we see that something is originally priced at 750 baht and cost now only 150 baht, we think that by buying that item now, we are going to make some savings. That can be true but most of time, we don’t usually even need that item in the first place. Now what do I mean by that? Sometimes sales can become a trap by making us spend money on things we don’t even need. Take the example of an item costing 1,000 baht and it’s on sale for 750 baht, and you decided to buy it, you did not save 250 baht. You just spent 750 baht. We only think that we should get the item now it is currently at a cheaper price than the original one. But that isn’t the case unless it’s an item that you been planning on buying anyways and it happens to be on sale at the perfect time . Only then, you are saving some money.
So one important lesson you can take from this point is to be more mindful when you see a discounted item. Do you really need it? Or you just want because of the good deal that is offered?
- Being reasonable (with going outs, eating outs, etc.)
I know, I know, being in your 20s is probably the time where you socialise, spend most time meeting up with friends, make new encounters and discover the world. Of course you can have fun in your 20s and I wouldn’t tell you to do otherwise but one important thing to keep in mind is to not overdo it in terms of spending. Be conscious and most importantly, be reasonable with yourself and try to live below your means. You can allow yourself to eat out but not to do so every single day of the month. You can go watch movies, attend concerts, go to attraction parks but still try to keep in a reasonable number of occasions.
What I mean by being reasonable with yourself, I mean asking yourself if it’s really necessary to go out this time or not but also if your wallet can actually really afford it. Sometimes we get caught up in the moment and say that it’s fine to go out again; ignoring that our wallet might suffer at the end of the month (and trust me, no one ever wants to be experiencing that feeling).
Another thing that young people get easily caught up in is trying to be on trend. No matter how money/spending-conscious I am, I even sometimes get caught up in the idea of needing to buy something just because every has it or because it’s what is “hot right now”. Social media definitely also doesn’t help this.
- Tracking expenses and confronting them at the end of the month
Last but not least, my number one recommendation is for you to track your expenses. I personally create a new excel sheet every month and I type down every. single. expense I make, even if it’s a small one. Since the day I started doing this, I have strikingly dinimished my expenses. For the simple reason that when I write down what I have paid for, it’s like a reminder of much money has already gotten out of my pocket. Before, I used to spend and spend, without exactly having an idea of how much I spent during that day. Writing down your expenses is not enough, you need to look back at them at the end of each month. This is probably one of things that people dislike to do the most and the scariest for some. CONFRONT YOUR PREVIOUS EXPENSES. Believe me, at first it won’t be that easy because you feel bad or ashamed of yourself for realising that you have spend so much money on things that might not even actually be necessary. But once you are able to get over your fear of doing so, the way you will spend your money will fully change. It will enable you to see what were your main expenses during the past month and cut off on future unecessary expenses. I would probably say this is one of the most effective ways to reduce your spendings. Recording your expenses is key!!