8 I've Learnt About Managing Money So Far

Financial literacy is an interesting topic. For something that permeates every aspect of our lives, its astonishing that there is no clear path to being "good" with money. In my opinion, there is no such thing anyway. We're all learning and what makes sense for one person's lifestyle or budget might not work for someone else. In saying that here are the most important things I've learnt about managing money over the last decade.

If you need to budget, then you need a budget.

This year I switched from a steady 40-hour a week job, to becoming a "full time" freelancer. While I don't actually work "full time" it is my sole source of income and makes me enough to pay the bills and then some. Up until now, I've managed my money in more of an intuitive way. I've paid my bills first, then socked some money into savings and kind of mismanaged the rest. What I've found is this attitude does not cut it when your income fluctuates wildly from one month to the next. Instead, I've written out a one year budget (template courtesy of One Big Happy Life) and am managing each month as I go.

It's SO HELPFUL. Honestly, I was kind of terrified about how I was going to manage my money going forward. If you are at a stage in your life when just winging it won't cut it, I highly recommend spending an hour or so setting yourself up with a yearly overview. I do log every purchase I make but it takes me less than ten minutes a week to keep up with and I've already made countless money decision based on knowing what was left in each of my budgeted categories for the month.

You can still do smart things with your money even if you don't know what the future holds.

Currently, I'm living in New Zealand after spending one year in America. As me and my partner try to figure out visa's and jobs it's a little bit difficult to think about anything beyond the next year, let along saving for a home or god forbid children one day. I think one of the hardest things for Millennials, and Gen Z after us, is that our lives aren't as linear as generations before us. It's no longer meet someone, get married, buy a house, have kids.

I came to the conclusion that while I couldn't define whether I would be buying a home or even staying in the same country in the next year I could make decisions based on when I might want to access my savings. I have short term savings in a high-interest bank account. This I can access for big payments that I don't have on hand like flights or emergencies.

The rest of my savings are split between a long-term deposit and investing in my ETFs. The long-term deposit I can access in a years time, meaning if I do want to think about a deposit for a house then I can use some of this for a deposit. My investments are for much further along in the future - like my midlife crisis or retirement.

You need to save for retirement. And not just the mandatory minimum payments.

I was 27 when I first learnt that other people my age were actually adding to their retirement accounts - and I'm not talking about opting into the government minimum payments. It's bonkers that this isn't even taught to us at school but, chances are that there will be very little money left in the pension fund by the time we Millenials turn 65. Making monthly contributions to your Kiwisaver, over the mandatory amount is a good idea.

You don't need to be obsessed with FIRE to be "good" with finances.

Here's the thing about money. Utilizing every dollar to build yourself a life you love is more important than saving 70% of your income. Personally, I'm not a big fan of the F.I.R.E (financial independence retire early) clan because living super frugally would drive me crazy. And I should know because I used to date someone who lived this way. Spending money on clothing, entertainment, makeup, sports, craft beers or other non-necessities does not make you bad with money. It just means you have different priorities for your life than someone who wants to save every (and I mean every) penny. Be smart with money. Invest for your goals, pay your debts and save for retirement. But don't feel guilty for whatever "self-indulgent" things you spend money on each week.

Investing isn't just for the super-rich.

There are so many ways to invest money these days from Sharesies to Smarshares and InvestNow that didn't exist ten years ago in New Zealand. I am by no means an expert on what type of fund is best for you but if I can do it it can't be that complicated. My only advice is to invest in your future self. Your investments will go up and down so don't invest if you need to access this money within the next five years.

This morning I woke up to my investments plummeting by 7%. I had two options. Invest some more money while the market had dipped or close my app and ignore it. Since I invest with an auto payment plan at the end of each month (and a lot of studies show that timing your payments doesn't make much of a difference in the long term) I decided to close my app.

There are very few things worth going into debt for.

Cars are not one of them and neither are electronics. Apart from a mortgage or a college education, I can't think of anything that I've bought in the 13 years I've been working that would be worth paying interest on. Most things can wait until you can afford them.

In saying that credit cards aren't necessarily evil.

I was always told that credit cards were bad and that holding debt on them is a huge waste of money. While this is true, there are perks to having a credit card. I've been penalized for taking money out of my savings account because I didn't have enough money in my checking account to pay for flights. With a credit card, I could have paid them off during the month avoiding any fees while keeping my bonus interest. I got a credit card for the first time a year ago and wished I had gotten one sooner. It's also a great way to build credit.

On applying for an apartment this year I requested my credit score to use as a resource to show how great I am at paying my bills. Except...since I've never used credit I have a decidedly average credit score! While I'm sure this matters less in New Zealand than it would in say, America, it's still something to think about.

Check-in on lifestyle inflation every six months. 

Lifestyle inflation or lifestyle creep is when your spending increases as your pay increases. So, rather than being able to save more you just spend more money on unnecessary purchases or nicer more expensive versions of what you used to buy. I like to check in on my lifestyle inflation every six months or so. Too many coffees out or Kindle purchases can blow our budgets without us even realizing.

Now that I have my handy one year budget I find it easier to manage this but even so, I still decided to cancel my subscriptions to The Cut and Spotify (!) because my income is lower than usual. While this only comes to an extra $19 a month and $228 a year, that's the price of hosting my website on Squarespace. Since the gym and my house are the main places I listen to Spotify, and they both have wifi (my rent includes unlimited wifi) it wasn't a sacrifice to me at all.

I'm sure I've learnt more good money habits but these are the main ones that come to mind when I think of what has shaped my finances over the last ten years.