There’s no point re-inventing the wheel. If you’re looking for ways to improve your finances, you might not have to look further than the next desk, the next house, or the next social event. Your neighbors / co-workers / friends might have the answers you’re looking for. Remember: no matter how good / bad you are with money, there’s always someone else who’s much better / worse. What and how can you learn from them?
Fact: we all have money
People have money. It’s pretty much the first rule of capitalism and big business knows it. From fashion designers to software developers, companies see life as a constant quest for ever-more effective ways of diverting that money from people’s pockets and into their own.
To us, as consumers, it all comes across as temptation. We’re surrounded by ads & movies, TV shows & magazines, all telling us how great life could be if we’d only give in to that temptation. Some people are simply better at resisting the temptation than most. If that group doesn’t include you, maybe it could, with a bit of luck, a bit of discipline ““ and a role model or two”¦
Positive role models – how on earth do they do it?
Do you know someone who seems to have it all figured out? Who NEVER seems to worry about money? If someone springs to mind as a positive role model, consider taking a leaf out of their book. OK, there’s no point studying someone with millionaire parents or a high-flying job. Try to pick someone who (you reckon) earns about the same as you. Someone you can talk to without embarrassment. You might find they’re just keeping their problems to themselves, hiding $40,000 of credit card debt behind a happy smile. If so, find yourself another role model a.s.a.p.
If not, you could probably learn from the way they prioritize their spending. After all, if they’re doing better than you on (more or less) the same salary, it stands to reason they’re either really lucky or just spending more wisely. Maybe they’ve mastered the art of:
Sensible short-term spending
- CDs, DVDs, fashionable clothes, nights out ““ there are thousands of ways to “˜blow’ money every day.
- At a guess, your positive role model is just good at resisting them.
Sensible medium-term spending
- Where do you go on holiday? Where do they go? How often does each of you do it? What do you each spend when you get there?
- What kind of car do you each drive? How sensibly do you drive it? Do they save on gas by accelerating gently and resisting the urge to speed on highways? Do their gearboxes and brake discs last longer because they tend to take it easy?
- Where do you turn for advice? Can you admit when you have a problem? Do you look for expert debt advice when you need it?
Sensible long-term spending
- Property, stocks, shares, savings accounts. In a word, investments: what do they do with their “˜spare’ money?
- What’s their philosophy when it comes to savings, debt, homeownership, etc?
In short, what do they do that you don’t but could?
Negative role models ““ why on earth do they do it?
There’s one good thing about negative role models: they’re so much easier to find than positive ones! Everyone makes bad decisions from time to time, but some people’s track records are truly terrible. Actually studying someone like that might be a bit more difficult than talking to the positive role you identified above. No-one takes kindly to a conversation that starts with “You’re really bad with money ““ can I take notes?” On the other hand, misery loves company, so there’s a good chance you’ll hear all about their financial troubles anyway. Again, it’s all about priorities. For whatever reason, your chosen negative role model probably has a habit of putting the important stuff last and the trivial stuff first. With the appropriate blend of diplomacy and self-discipline, you could help them, learn from them ““ or both. See if you can make some sense of the reasons behind their financial muddles by sorting them into two categories: obvious and subtle.
Some financial mistakes are obvious:
- Three holidays a year.
- A big house on a small salary.
- Six credit cards.
- A part-time job but a full-time shopping addiction.
If you’ve managed to avoid this kind of mistake, don’t feel too smug too soon. Do any of their blunders remind you of things you’ve done in the past ““ and might do again?
Other errors are harder to spot:
- Grabbing a coffee & burger, instead of taking a packed lunch to work.
- Taking taxis instead of walking / waiting for a bus.
- Spending on impulse buys during the weekly shopping.
- Credit cards and the minimum payment trap’ so many debt advisers warn of.
- Obsession with brands, all the way from foodstuffs to jeans.
These little mistakes can really add up, and the cumulative impact can be frightening. Again, the important thing (from your perspective) is to see if any of their bad habits remind you of things you do”¦
From theory to practice
There are always plenty of people who are better with money than you, and plenty who are worse. A few tips on choosing and using your role models:
- Choose your role models wisely. Focus on financial whiz-kids and you might end up too depressed to make the necessary changes. Spend too much time nit-picking other people’s mistakes and you’re running the risk of complacency.
- Once you’ve studied each role model, find another. You might learn as much as (or more than) you did from the first!
- Create a chart. Draw a table. Make yourself a ticklist. Do whatever it is that motivates you to avoid the bad ideas ““ and implement the good ones!
And don’t feel you have to do it all yourself. If you want some help with your debts, talk to a professional debt adviser.
Don’t take it too far!
There’s a fine line between sensible spending and pathological parsimony ““ the kind that could help grow your bank balance, but shrink everything else, from your social circle to your life expectancy. In other words, cut back on the extravagant spending, but don’t deny yourself everything that’s good in life, from a warm house in the winter to a well-earned night out with friends now and then.