What Having a Relationship With My Money Has Taught Me

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If I'm like every other Millennial out there, it's a constant struggle trying to understand your cash flow. Life is just so expensive yet income sometimes don't match our expenses. With student loans, rent, savings, and somehow living a fulfilling life, it’s easy to lose touch with your money.

I read an article on Fortune that had a quote that really hit home:

 “A GoBankingRates survey, which asked people how much money they had in their savings accounts in August 2017, showed that 57% of Americans have less than $1,000 in savings.”

Less than $1,000. Wow. Imagine if you had an emergency, like denting your car and you had to pay for it out of pocket, with $1,000 that wouldn’t even cover it. This was my life prior to understanding my cash flow.

RUDE AWAKENING

For the longest while, I would just spend blindly. I never really took the time to understand my money and where it was coming from and where it was going. I have a habit of never checking my bank balance - this isn't because I'm so rich or anything, but more due to laziness and fear of what I would find. My principle was, I knew what my salary was, I knew how much my bills were, I knew I wanted to save x amount of dollars a month and everything else outside of that could be spent. Boy, was that the wrong way to look at things.

The random day I would check my account, I was always confused as to why my bank account looked the way it did. Based on my mental calculations, I was supposed to have a certain amount but it was usually less. As adulthood crept up and I suddenly had more responsibilities, I knew I had to make a change. It was imperative I knew where my hard-earned dollars were going. The following steps not only helped me understand where my money was going but also helped me 10x my savings.

STEP 1

I took a pen and paper and wrote down every single penny that left my account within a month. Yes, this included the bank fees and the odd itunes charges that I don’t recall signing up for.

STEP 2

Based on the information I found, I started calling the guilty parties.

  • First, seeing the bank fees I was paying, I called by bank at the time, to understand why I was being charged the fees and what they actually meant. By calling the bank and understanding the fees, I was able to realize I could live without the services they were offering and saved over $250 a year instantly.

  • Second, I noticed I was paying for subscriptions that I never actually used and can live without. At that moment, I canceled them and was able to save an additional $180 per year.

STEP 3

Based on the conversation I had with my bank, I started shopping around for a different bank. You don’t realize all the services a bank charges you for until you ask. This was the first time I realized my fees included visiting the branch and the up-keep. I rarely go into a branch and I certainly don’t go as frequent as I was being charged for it. I found a bank that I really loved and made the switch. For years, I thought the bank fees were a non-issue until I realized that’s money that can be going towards my savings goals. I switched to Tangerine Bank and I’ve been loving it ever since. I can see a clear picture of the money I have and never have to worry about bank fees that I never understood.

STEP 4

Get a finance app. I recently downloaded an app called Mint and I'm absolutely obsessed! One of the biggest problems I had was spending using my credit card and debit card. I would spend on my credit card and totally forget about the money I spent there and assume I had money in my account (based on my checking account balance). This app really gives me the run-down of how much cash I actually have and I never have to overspend ever again.

STEP 5

Savings. Open different savings accounts, based on the goal. I currently have 4 savings accounts. 1 is for Travel and Rainy day spending. I travel quite often so this is so needed, or else I would be in debt. It's a great relief knowing I don't have to "wait to get paid" before I take a trip. 2 is what I call "future savings". This savings is for anything future related, as in 12 months+ down the line type of future. I have this in a different bank with high interest so I never touch it. 3. Investments. I recently got into investments and I have money set aside for this on a monthly basis. This is what I use for my TFSA and I never touch this money either. All this is on auto-deposit so the money leaves my account as soon as I get paid so by the time I check my account, the money is gone and it's like I never earned it. 4 is for bills. So money spent on my credit card, phone bill, internet, etc. I ensure I set the money aside so I can understand my true cash flow. Overspending is sometimes what leads to living paycheque to paycheque and this is not how you build wealth.

STEP 6

Discipline. This is probably the most important step. As soon as I spend money on my credit card, I transfer it to my bills savings account and keep it for when my statement is due. This ensures I don’t overspend and continue to keep track of the money I actually have.

These are the steps I took to turn my relationship with money around and it has served to ensure I am always confident in my cash flow. I never have to question if I can afford something because I know what I have.

Written by Victory Omotayo