Good money management - The 4 most important tips

Good money management is easy if you live by these four basics. Find out what you can do now to handle money well.

“Too many people spend money they haven’t earned
to buy things they don’t want to impress people they don’t like.”
Will Rogers

What is good money management?

Handling money well means using your money to squeeze as much quality of life out of it as you can.

That does not mean that you buy a lot of stuff or that you have to be very rich. It mainly means that you use your money as a tool to experience more freedom, joy and meaning.

These four tips will help you do that step by step. So you can handle money in a way that makes your life more fun.

1. Live below your means and make a profit

This is such an important thought that I emphasize it again: live below your means and make a profit.

What does this mean? Simple - you spend less money than comes in. If you earn $ 1,500 you make sure that you spend a maximum of $ 1,499.99. That is the baseline. And from there, you do your best to increase the difference between income and expenses (your profit margin).

Make it your goal to:

Make your quality of life as high as possible.
While making the expenses as low as possible.

You are looking for the sweet spot between price / quality. For example, owning a car can improve your quality of life. You choose a car that meets your practical requirements, requires little maintenance and has a low consumption. This gives you freedom and possibilities that make you happy.

But suppose you choose a car that has exactly the same practical value, but that (because of the brand, engine or design) costs four times as much in purchase and consumption. Does such a car make your life four times more fun? Probably not. It makes it four times more expensive.

Make your profit. And optimize your quality of life within that limitation. That requires creativity and that is perfect. Because designing your life creatively contributes greatly to your quality of life.

2. Think of money as a tool, not as chocolate

Money is like a hammer, not like a bar of chocolate. You can use money to get things done. It is much less effective if you consume it directly as a bar of Snickers.

If you spend your money directly on goods, it is gone. Then it gives you a temporary endorphin boost and you feel happy. You have a pair of extra shoes and that feels nice. But then this money does nothing for your quality of life.

A smarter way is to give the money you've saved a very clear destination. Look for strategic places where you can use your money as a tool to experience more freedom, happiness and meaning.

For example:

Pay off a loan so that you pay less interest and therefore have more money left over in the future.
Invest in yourself through a course, training or educational books.
Spend a little more on quality products that you can last longer and enjoy more.
Invest your money so that it works for you.
Use your money to save money in the future. Put solar panels on your roof, pay your health insurance every year for an extra discount or buy a museum card so that you can go on a cheap trip all year round.

If you let money disappear as soon as it comes into your possession, it won't do much for you. If you see money as a tool, you can do many nice things with it.

3. Build a freedom buffer

Make sure to put part of your "earnings" aside in a savings account. And build a freedom buffer. A freedom buffer is a saved amount that is about the size of six months of your expenses.

So suppose you spend $ 1,200 monthly to maintain your lifestyle, then you want to build up a savings buffer of at least $ 7,200.

Why? Because this gives you a wonderfully free feeling. You always have enough money to solve emergencies. You do not have to buy expensive insurance policies - such as a smartphone insurance - because you can cover the risk yourself (saving you a lot of money).

Moreover, you feel more confident when it comes to your income. Should your income decrease or disappear, you know that you can move forward for at least six months without income. But probably even longer. Because if you are really in need, you always have the option to scale your expenses further so that you can do longer with your buffer.

A freedom buffer is like the crumple zone on a car: it prevents you from getting injured when your financial blows continue. It increases your resilience and ensures that you never get into financial problems again.

How do you start building a freedom buffer? Simple: you deposit a few dollars in a savings account. And you continue to deposit money into this account until you reach your goal. It may take a few years, but it doesn't matter. With every dollar you save you make yourself freer.

And realize that all those little bits add up to an impressive amount.

4. Don't be fooled

Many people feel that they will finally be happy when they make that one purchase. That new smartphone, that dress, that bag, that house, that car, that beautiful interior.

But do you know the problem with this? If you always feel that happiness is just around the corner, then happiness will always remain there. For the simple reason that your purchases cannot and will not make you happy.

Of course you already knew that. Otherwise you would still be happy with your Nokia 3310. But as with everything in life - like getting used to a Nokia 3310 - once you get used to it, you want something new again.

This cycle of materialism costs a lot of money, it is a lot of waste and it does not bring you any closer feelings of happiness and satisfaction.

So - if a better life is your goal, break this cycle. Do not be fooled by materialism. Don't fall into the trap. Stuff is a means to an end, not an end in itself. You need much less than you think. Less stuff, less services.

Move towards a simpler life. One in which not stuff but people are central. Relationships, personal growth, mindfulness and - very important - satisfaction.

If you want to experience satisfaction, you can move there immediately. You don't have to do that through shops. You do that by working on yourself. Much cheaper, much more sustainable and much more fun.