This Sunday, April 30, our neighbors to the south will be celebrating National Honesty Day. We thought this would be a great opportunity to hop on the bandwagon and discuss being honest with yourself when it comes to your personal finances. Honesty is always (in our opinion) the best policy, especially when you’re dealing with money or credit or debt. Below we’ve compiled a list of the top 10 financial truths that we think everyone should accept because sometimes all you need is the truth to truly back a change in your life.
Time is Money
The term time value of money explains how money in present time is worth more than the same amount in the future. Meaning, one dollar today is not worth one dollar a year from now, it’s worthless. This is because as time goes on, money loses its value due to inflation. That being said, if you keep all of your savings in a bank account that earns no interest, over time inflation will lower the value of that money. But, if you earn interest on your money or invest it elsewhere then you can increase the value and even make a profit. The money you have right now can increase in worth in the future; you just have to think smart and make the right choices, use your money to make even more.
Save the Change
Even though two dollars may seem like pocket change, and technically it is, it can add up faster than you think. Get into the habit of keeping any extra change in a “piggy” bank of some sort and watch your funds grow. Within a few months, you may be able to save upwards of a few hundred dollars. Considering this pocket change would have been spent on an overpriced coffee or a cookie from Starbucks, you can save this money and actually use it for something valuable. Would you rather have coffees throughout the year, or take a fun weekend trip with your friends? The choice is ultimately yours, but recognize that every dollar counts.
Money Can’t Buy Happiness
As cliché as this may sound, it’s reality of money. Money doesn’t necessarily buy you happiness, but it can definitely help you purchase certain opportunities or experiences that could lead to a temporary state of happiness. Therefore, don’t waste your money on unless items that you think will make you happy because no object will actually change your level of happiness. Spend your money thoughtfully, on experiences that will directly improve the quality of your life or allow you to explore different hobbies or passions. Spending money in this way can improve your state of mind and create a positive attitude. Next time you go to purchase something, think about whether or not it’s actually worth the money your spending. Impulsive spending on materialistic objects is a waste of money and could lead to financial stress and unhappiness.
You Spend When You’re Bored
Being bored might just be your budget’s worst enemy. It’s easy to stay on track, cut back on spending, and maintain your budget when you’re busy working and living a productive life. But, once you have some unplanned free time or the winter hits (especially for us in Canada), spending becomes a form of entertainment. Nothing to do on Sunday afternoon? Why not do a little online shopping. Too snowy and cold outside to go grocery shopping, we’ll just order takeout instead. To combat the want to spend to ease your boredom, think up of a few fun and free activities, you’re actually interested in, that you can do at home where the temptation to spend is hopefully a little less intense.
Everyone is in Denial About Their Spending
Don’t try to blame your lack of savings on anyone but yourself. For the most part, there’s no reason why you shouldn’t take full responsibility for your spending and saving habits. You’re definitely not alone if you’re in denial about your purchasing patterns because so is the rest of the world. Ultimately, you spend it on what you want, so don’t complain about not having money for vacation or for clothes because you decided to go out for breakfast 3 times a week. Stop making excuses for yourself and accept the fact that you can change your financial future. By making the right choices and realizing that the power is in your hands, you can be one step closer to a more prosperous life.
Looking for a new way to budget? Click here.
Saving is Hard
There is no doubt that saving is hard and just plain frustrating. Nobody likes limiting themselves, and that’s exactly what saving is. It involves denying yourself and saying no to a lot of things you want to say yes too. In some ways, saving is very similar to dieting. Nobody actually enjoys dieting because it’s one of the hardest things in the world. Denying yourself all the yummy food you want is hard, but that beach-body is worth it. Similarly, saving sucks, but that fat wallet will certainly be worth it. If you’re reading this, you’re not alone, because everybody has to save, no matter how rich or poor you are. Even millionaires still save because their organized and motivated to reach their next financial goal. So, even though it’s difficult, figure out how to make it part of your life.
Debt is Easy to Create, But Hard to Get Rid of
No one ever sees it coming, but it’s usually right around the corner. Debt can creep up on you quicker than you imagined. Many people are not only in denial about their bad spending habits, but they’re also in denial about their debts. The reason this is such a big problem is because when they’re faced with debt, they have no idea how to confront or overcome it. This is why it’s so important to not let yourself get into debt because it’s so easy to get into, but so hard to get out of. Taking the time each week to make sure you’re sticking to your budget and not overspending will save you a lot of stress and headaches in the future.
Sometimes You Have to Spend to Save
When you think about saving money you probably think about denying yourself something you want or choosing a cheaper alternative. But the problem is, sometimes cheaper isn’t always better or even less expensive in the long run. This is particularly true when you start sacrificing quality for price, especially with regards to large or expensive items (think dishwashers, refrigerators and sometimes even vehicles). For instance, buying a cheaper car may cost you less right now, but will cost you more long-term due to repairs and maintenance. If you buy a very old, used car for $5,000 but have to pay a few hundred dollars in repairs every few months to replace parts, you would have been better off buying a $15,000 car with no repairs needed. These maintenance fees will quickly add up and may end up costing more than a brand new car, especially if you’re keeping this car for a long period of time. Similarly, buying a cheaper fridge to save $400 may backfire when the fridge breaks after a short period of time and you need to buy a new one. Thus, it’s important to weigh your options when it comes to large, necessary purchases.
We’re Addicted to Our Credit Cards
With a heavy reliance on credit cards, it seems like people are taking advantage of the readily available “money” in their pocket. Even though this isn’t reality, it may appear this way. A credit card allows you to buy pretty much anything you want with the simple swipe of a plastic card. However, if you’re actually unable to afford these items, you can quickly rack up a lot debt. Since credit cards are so easy to use, it’s even easier to spend money you don’t have. Even if you think you’re using your credit card responsibly, make sure to go over your monthly charges to ensure you are not overspending. If you find you are heavily dependent on your credit card, try to use it less. Take out cash on a weekly basis so you can see how much you’re actually spending and keep credit cards for emergencies, and no, shopping emergencies do not count.
It’s Okay to Ask For Help
Admitting you have a problem is always the first step to a successful recovery. Okay, so maybe your spending habits aren’t that dangerous, but in order to improve, you must admit that there is something to improve. If you come to the realization that you have a spending problem, don’t be scared to ask for help. Talk to the people around you, friends and family, and ask them to help you with your finances. Have someone take your credit card, or ask your friend to make sure you don’t spend any more money on valueless objects.
You may even want to consider seeking the help of a professional if you feel as though you’re in over your head. If this is something you might be interested in, we can help.
