I love money. Excuse me for a sudden confession, but I love money! I admit it. I believe that to express love for money is to have a good and healthy relationship with it, just like expressing your care for your loved ones helps you to have good relationships with them. So, I love money! How about you?
It’s nice to have money, isn’t it? It gives us more opportunities in life. Of course, money isn’t everything, and there are so many valuable things that don’t involve money; however, money is an inseparable part of our lives, and more money provides more choices.
When I was younger, I used to think my co-workers and/or friends seemed to have more money than I did. Well, I’ll be honest. I still sometimes do…
I always wondered why.
Even though I had a full-time corporate job, I was always short of cash. It’s not that I was not getting paid enough. But somehow, I didn’t have money.
And this “somehow” is the key here. It’s not “somehow.” It’s always “how” people have money, and “how” people don’t.
Now, it would be easy to understand it if there was an extreme reason, such as people who were born into families with huge assets have money, or people who hardly ever work don’t have money. But those are rare cases. In reality, even with the same amount of salary, some people have money and some don’t.
Why is that?
2 differences between people with and without money
1. People with more money budget their finance well, while people with less money don’t.
One of the reasons my co-workers and friends seemed to have more money than I did is that they budgeted their finance very well, and not only that, they stuck to their budget.
Budgeting is probably common sense, but to my shame, I didn’t do it well at all.
I knew how much I was making and how much my approximate fixed expenses (such as housing, utilities, cellphones, etc.) were, but I didn’t track my variable expenses.
Now, if I had been able to spend less than the available cash, there would have been no problem, but the reality wasn’t so. When I didn’t have enough cash left on hand, I used my credit card to make up for it. Although I never had credit card debt, most of the money left after subtracting the fixed expenses was used to pay my credit card bills every month. So, it was like I was borrowing money from myself from the future. I just couldn’t get out of this negative cycle. Because of my poor planning, I had no money left to spend freely several days before the payday. Basically, I was living paycheck to paycheck.
That’s a dangerous walk on a tightrope, isn’t it? What if I had gotten into an accident or gotten sick and hospitalized? That is a scary thought.
So, how to fix paycheck to paycheck life?
Budgeting!
But before budgeting, first visualizing your financial situation is important.
Visualizing actual numbers helps a lot more than knowing rough numbers in your head.
Sometimes, it’s surprising to see a big gap between the actual numbers and rough numbers.
With the actual numbers in front of you, you can start assessing your spending habits and even can find items that can be improved even in the necessities. For example, I was spending so much on food as a whole. Grocery waste was severe. My problem was that even though I had ingredients to cook, I would often get lazy and buy already-made food. Then vegetables, fruits, and others that had relatively short expiration dates would go bad and became total waste. What I was doing is that I was paying redundantly for food. Upon finding that issue, I had to convince myself not to buy perishables if I wasn’t sure whether I was going to eat everything. So, I stopped buying food for cooking. Yes, my food cost was a lot higher than what would have been if I cooked, but at least, I was not paying money for the food that I didn’t eat. Then later on, by looking at the actual cost of food, I started to think like, “What should I do if I want to reduce food cost by 5%?”, “OK, if I cook for 1 week, I will be able to reduce this much.”
That’s how I started budgeting. Knowing what’s going on with your current finance is the start of good budgeting.
Once you conquer one area, you can move to another. You don’t need to make big changes all at once. A small start makes a big difference later. Moreover, a small start is a lot easier to manage and continue in a long run.
2. People with more money have firm mindsets regarding spending and know when to say no, while people with less money don’t.
It pertains to budgeting, but people who have money have firm mindsets regarding spending. They know what to spend their money on and are not willing to spend money on something if it is not worth it to them, even if it is temporarily attractive.
Fashion for instance. People with more money seem to buy clothes based on what they look good in, not based on trends or low-price offers.
Japan, where I’m from, is such a small country, so fashion trends spread out very quickly. When a certain style becomes popular, you encounter 50 similar styles throughout the day. One winter, a poncho was a big hit, and every lady was wearing a stylish poncho. What’s sad is that no one was wearing it next winter. It’s a unique style, so I doubt that it made any money at second-hand stores. I wonder if it was worth spending $100-200 on one cloth for only one winter. Did I buy it? No. I confess I was tempted to, but I didn’t buy it; however, not because I was strong enough to resist it but because I was too broke to buy it. Whatever the reason, I’m glad I didn’t buy it.
People with more money don’t get influenced by trends but have their own style and spend only on something they can enjoy for a long time. They also don’t spend much on fast fashion. Of course, fast fashion is wonderful. I used to own clothes from famous fast fashion brands because they were so cute. But if you are not careful, fast fashion can end up costing more because its low price stimulates people to buy more than they need. Moreover, the clothes don’t last long because of poor quality, so people keep coming back and spend some more. Because they are so cheap, it may feel like a bargain, but you may be losing money.
So, how to decide what you spend on?
Always keep in mind how much money you can spend this month. Think of the thing you are about to spend money on is whether worth your hard-earned money. Is it going to make you happy not only now but also in a long run? Is it worth using your credit card and paying it back with possible interest?
I used to justify my spending as investing. When a time came where I had to decide whether to spend money, such as shopping, attending social gatherings, or anything, I told myself that it was an investment. What is the percentage of good investment I made? I’m ashamed to say. I can’t count how many times I had to give up something more valuable later. So many times I regretted spending money just to satisfy myself at the moment.
Now, my spending has significantly dropped. The first thing I noticed is that I am OK not having many things nor eating out with people all the time. Once I am used to it, things or occasions I do decide to spend money on bring more joy.
Picking what’s worth your money out of many options every time helps you to find what you really like and shape you into the person you really want to be.
What separates people with more money from people with less money is just a small difference in mindset and behavior. It’s no magic. One small step now will make a huge impact later.
I want to keep trying to improve my spending habits.
What difference do you think there is between people with more money and people with less money?
Have you done anything to change your spending habit? How has it been? How are you feeling now?
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