7 Money Lessons to Save More Without Earning More
There are important money lessons I wish I had known in my 20s that helped me completely transform my financial situation in my 30s.
I’m going to share these important frugal habits with you now so you can build wealth regardless of your income.
1. Lots of money doesn’t equal financial security
Let’s be honest, whoever said money doesn’t buy happiness was probably pretty well off. Money is like oxygen, it doesn’t matter unless you don’t have any.
That being said, your financial security does not wholly depend on the number of zeros at the end of your salary, it depends on your attitude towards money – whether money, to you, means more stuff or more security makes a huge difference.
You could go from making $20k a year to earning $150k a year and still not have financial security, because if you spend what you earn you’ll never be financially free.
Financial security isn’t the same as making a lot of money – it’s about protecting your earnings by staying debt-free, building emergency savings and having a financial plan for the future.
If you are earning more to buy more stuff this can lead to poor financial decisions – such as allowing lifestyle creep to eat up any gains made as salary increases.
Lifestyle creep is particularly costly when it involves your biggest spending commitments, which will be your housing, what car you drive (and how often you replace it), where and how frequently you holiday and whether you choose to send your kids to private school.
No matter what you earn, aim to live below your means and make saving and investing a priority in your budget.
2. Celebrating what you have
It can be much easier to live below your means if you decide on and celebrate what is enough for you.
The feeling of not having enough can be one of the biggest reasons why people are driven to overspend. If you consistently move the goalposts on what you need to happy, how will you ever really be happy.
It’s emotions like dissatisfaction, anxiety, envy and boredom that can often drive us to make bad financial choices in the moment.
That’s not to say that you should never spend money for the joy. Frugality and smart financial decisions aren’t about giving up the joy, they’re about intentional spending.
For example, mindlessly spending on clothes that fill your closet provide short, sharp dopamine hits but won’t necessarily increase your happiness for a long period of time. Planning to spend money on things that enrich your life, such as travel or a family pet, will bring you longer term happiness and satisfaction. That’s where spending money wisely is priceless.
For example I have decided to go on a long weekend trip abroad with some friends. This isn’t a necessary expense, clearly this is a want not a need, however I am going because this is something that will enrich my life in ways money cannot buy. Valuable time with friends exploring somewhere new and a break from my usual work and family life routine.
3. Building wealth is boring
In my 20s I very much had a live for now attitude, and also my salary at the time was so low I thought it pointless to even try.
Today I realise that building wealth, by that I mean growing your investments and savings, is a long game. You’re not going to do it overnight, but consistency is key.
The number one thing I did to help change my financial situation was to commit to consistently saving somewhere with a decent rate of return. A lot of people are sceptical of investing, but when done right the rate of return will be better than you’ll get from an easy access saving account.
For example. Save $100 a month every month for 30 years, increasing that amount by just 1% every year, you could have $135,000, based on a 7% return.
Putting that $100 away every month won’t be very interesting. The amount will look unimpressive for a long time, but leave it 10 years and things start to get interesting. Stick with it.
4. Know what you owe
You should be really clear on what bills you need to cover every month, including annual expenses. I’m in my expensive month right now when all my car-related expenses come at once – insurance renewal, tax and service and MOT. I can cover those because I’ve been saving for them all year.
If you are feeling around in the dark on these things and on a tight budget it’s a recipe for disaster. It’s only when you know what you owe that you can make a plan to either cut it back where you’re going above your means or find a way to increase your earnings through career progression or a side hustle.
Once you know that, you also need to be realistic about the bills and expenses that will inevitably come out of nowhere. If there is any certainty in life it’s that the unexpected will happen.
One of the best things I have done is to make a plan for my budget, but also plan for the plan to go wrong – that last-minute school trip or special occasion or car repair. That means I need room for error – money set aside just in case.
Want more tips for budgeting? See this complete guide to setting a budget.
5. Be flexible
One thing I have learned from riding the freelance work rollercoaster these last 7 years is that flexibility is so key. It’s important from a work point of view, and from a budgeting point of view.
We are in a cost of living crisis. Inflation has been high for a long time and while the rate of inflation is lower than it was, prices are still rising.
Someone who is flexible will make lifestyle changes, recognising that in order to weather the storm of rising costs of essentials we all need, you need to give something up.
That’s not easy, especially when budgets may already be tight and you have a growing family. I have really noticed the difference in portion sizes my kids will eat now compared to five years ago. My teenage nephews are a whole other story. Couple that with inflation and you’ve got major pressure on your essential costs.
When our financial pressures increase we have to push back just as hard in the other direction to avoid it dragging us into the red.
6. Organise your stuff
If you understand what you already have then you will be less likely to buy more things – that applies to food, clothes, DIY supplies, everything in your home.
If your kids are able to access their toys for play then they’ll get more value out of them.
Having a tidy house – not Marie Kondo tidy but presentable to visiting relatives tidy – will make all of the difference when it comes to understanding what you already have and making use of it.
A cluttered house is difficult to navigate, you won’t be able to easily see what you already have which can lead to waste, if food goes off, and overspending when you buy duplicates or something similar to what you already have.
7. Immerse yourself in conversations about money
Just reading about and talking about money has improved my confidence when it comes to managing money no end and motivated me to take action.
You could get started by subscribing to my YouTube channel where I talk personal finance all the time – it’s free.
Of course with some friendships you won’t feel comfortable swapping bank statements. But you can snoop on how other people are managing their money in newspaper money columns. They’re gold dust for picking up tips.
As soon as you are normalising thinking about managing money and looking at what other people are doing well or not so well, you pick up tips that are invaluable.
Just one word of warning, be wary of people sharing their net worth or how much they’ve made or saved on social media. It’s sometimes a gateway to them selling you something or recruiting to you to a scam. So be in the conversation, but remember to critically analyse information you receive too. Just because people may seem to know more than you, doesn’t mean their advice is sound or good for you.
