How I Went From Being “Good With Money” To Being “Great With Money”

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We’ve all had those moments. You’re walking around, feeling like a real adult because you did laundry before you even ran out of clean underwear, and then you take a glance at your (surprisingly paltry) bank account balance and go right back to feeling like all 7-year-olds must know more about the *real world* than you do. No? Just me? Well, either way, let me tell you what I changed to keep that from happening.

I’m a financially literate person. I was taught how to write a check when I turned 13, was given a well-worn copy of Financial Peace by my father after graduating from college (a highly recommended read!), and knew that I needed to stay out of debt. I began a job in Washington, DC in the July after I graduated from college and my approach to money was this: Every month I had part of my paycheck ($200) direct-deposited into a separate bank account which would become my “Emergency Fund.” I didn’t think of this as money I had to spend. I also had half of my rent check direct-deposited from each paycheck into an account I only used for that purpose — ensuring I would never have to worry about having enough money for rent at the end of the month. The rest was deposited into the checking account I used on a day-to-day basis, both for paying off my credit card at the end of the month and for paying with a debit card.

I stand by these choices — I think they were good financial moves for the start of my career. Making these decisions up-front saved me from making stupid mistakes later. They made me feel in control of my finances, and helped me to put my priorities into motion. I would strongly encourage you to adopt them if a) you worry about not having enough money in your checking account to cover rent or b) you don’t feel like you’re good at saving money and don’t have any money set aside for emergencies.

[Side Note: Having money set aside for emergencies should be your number one financial goal (after paying down any high-interest credit card debt you might have). Financial experts tend to recommend having three months’ worth of expenses at a minimum. To calculate this for myself, I took the cost of my rent, utilities, and groceries for a month and multiplied that by three. Then I added some more funds as padding. In the event that I became unemployed (one of the emergencies my emergency fund is meant to cover), I imagine I would severely cut down on spending money. But I’m human, and I know that even if I was unemployed, I would need to go out to eat once in a while and buy a new interview dress and see friends, all of which cost money. So I added money for those kinds of expenses in to my goal emergency fund amount. My emergency fund took me over a year to amass, which wasn’t fun, but it felt great when I’d reached my goal!]

The problem with my original approach to money was that I gave myself free reign with the rest of my paycheck. I told myself that because I was making smart choices with my money, I could freely spend “the leftovers.” By the time the next payday was coming around, I would always have less than $100 left in my account. The weekend immediately after payday was always way more fun than the weekend in-between. Sure, I still made some savvy financial choices — I brought lunch to work instead of buying it, I had friends over for drinks on the weekends instead of going out to bars both nights, and I didn’t put purchases on my credit card I wouldn’t have the money to pay off — but I still gave myself license to spend my money however I saw fit in each given moment. And sometimes I would put clothes or food or restaurant tabs on my credit card without sufficient funds in my checking account to cover them. This practice never came back to bite me (because I would pay it off as soon as that next paycheck would hit my account), but it was not smart. I was spending money I didn’t have. And all of this always left me wondering, where did my paycheck go?

Keeping track of (nearly*) everything you spend is not always easy and is sometimes tedious**. I admit that. But it’s also helped me save an additional $150+ each month just by making me more cognizant of my spending, and forcing me to address my priorities and make daily choices that are aligned with those priorities. When you sweep the day-to-day use of money (Buying groceries and 6-packs and coffee and eyeliner) under the rug and just focus on your big choices about money (Am I saving for emergencies? Am I saving to travel? Do I know I will have money for rent at the end of the month?), you take away the power of those daily choices and find you can’t accomplish your big goals quite as easily.

Money is something we use almost every day. It is a daily part of life. But it’s so easy to think that our daily choices don’t matter in the big scheme of things — that not checking what’s on sale at your grocery store before making your shopping list for the week doesn’t matter. But it does. Making small decisions like that can save you $10 here or $15 there (and it can be as simple as not ordering a cocktail at dinner). And that money is still yours to keep and use! I think a lot of people think of saving as stealing from themselves. ‘Current You’ can’t use the money you’re saving so it feels like it’s being taken away from you — but it’s not! ‘Future You’ can use that money, combined with all the other money you’ve saved, to accomplish goals that $10 here or $15 there couldn’t accomplish on their own. And those are the kind of goals that do not leave you scratching your head and wondering where your paycheck went.

Keeping track of what you’re spending goes hand-in-hand with having a budget***. A budget keeps each purchase from occurring in isolation. A budget balances out your wants and your needs, and hopefully leaves room for both. A budget fits your big priorities (saving to go back to graduate school) in with your small priorities (enjoying the restaurants my city has to offer) and gives you a reasonable picture of where you want your money to go. A budget also makes keeping track of your spending much easier and worthwhile. Because you’ve given yourself license to spend a certain amount of money on going out to eat for example (by putting that in your budget), you can spend that money nearly care-free (by simply recording that you did spend that money). When you keep track of what you’re spending, treating yourself to a nice dinner out with cocktails and appetizers and dessert can be a joyful experience because it is purposeful. You know you have the money specifically set aside to have this experience, and so spending that money is no longer stressful or riddled with anxiety or guilt.

Creating a budget, combined with keeping track of everything I spend on a daily basis, has given me even greater confidence that I am making smart financial choices and that I am saving for what I want while not feeling restricted in my day-to-day spending. I used to just buy gifts (weddings, Christmas, birthdays, etc.) when the time came, but now I’m saving for them specifically. I put $25 from each paycheck aside for gifts, a very small amount, but that money will grow and allow me to be generous and thoughtful when friends’ and families’ special days arrive. I value travel, so I set aside a certain amount each paycheck that works toward that goal. Knowing that these are the kinds of things I’m saving for makes it easier to make healthy financial choices on a day-to-day basis. The vision my budget gives me and the self-accountability keeping track of my spending gives me, gives me a good idea of where my paycheck goes each month.

I am lucky — I have no debt, I was taught about finances starting from a young age, and I have a good-paying job in a city I love. These are blessings that not everyone has and I am aware of that. But even if you’re not in as simple of a financial situation as I am, I still thinking tracking what you spend can be a valuable exercise. Whether you keep track of it for a week, a month, or a year, it will help you wrap your head around where your paycheck goes. It will help you balance out your priorities, and creating a budget alongside this exercise will be even more beneficial. Being financially healthy is a lot easier when you know where your paycheck is going.

*I account for cash as I take it out and not when I spend it, which is why I say I only keep track of nearly everything.

**I use the financial software/app/budgeting system YNAB, which stands for You Need A Budget. The system is based on four key principles of saving money and shifting my mindset along with daily use of the YNAB app has had a very real and positive impact on my finances. I highly recommend it to all of my friends and you can learn more here.

***Budgets are most helpful if you create them based on your spending, lifestyle, and priorities and if you pay attention to them and follow them. Even if you’re moving money around in your budget on a weekly basis to account for variance in your expenses, a budget helps you pay attention to where you want your money to go and where it’s actually going.

Emily lives in Washington, DC and loves it, but wishes everything cost as little as it does back home in Michigan. She is a social policy researcher and huge fan of craft beer. Follow her on Twitter.

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