I was 18 when I got my first real job that paid me real money. And I had no idea what to do with it other than spend it. So, it disappeared…pretty quickly.
If I could turn back time, here’s a few things I would change about how I managed money when I was at university:
1. Have a separate savings account
This was by far the stupidest mistake I made. When I first started earning, I had one bank account and all my money came in and out of the one account. I told myself I didn’t need a separate savings account because “I would just exercise self control, and not spend the money.”
Guess what happened? I SPENT THE MONEY. Guess how much of my salary I managed to save? NONE. Nothing. Zero.
Not setting up a separate savings account to put your savings into, is the equivalent of keeping ice-cream in the fridge when you’re trying to go on a diet. It is a recipe for failure because you are relying solely on your self-control and willpower.
If I could go back, I’d set up a separate savings account AND set up an automatic transfer of at least $50 per week into my savings account.
2. Stop spending for the sake of spending, start spending for what gives me value
I got a bit excited when I first started earning money, because I finally had my own money to spend. But I didn’t really know how to spend money. Uhhh, what? You just give your shopkeeper money. Duh.
What I mean is: I didn’t know how to get value for my spending. I just…spent money on useless stuff that wasn’t fulfilling. I spent for the sake of spending.
For example, I started buying a hot chocolate every day on the way to work…just because I enjoyed the feeling of having money to spend and the freedom of being able to spend it.
So I was easily spending $15 – 20 on hot chocolates a week! This would have been okay if I actually derived fulfilment and value from that. But I didn’t. As a result, when it came to bigger ticket items later on that would have given me a lot more fulfilment, I didn’t have the money for it.
Going back, I would have been better off identifying goals or things I wanted to buy that would give me the most ‘value’ (happiness, fulfilment, excitement etc), and putting my money towards those things. I daresay I would have travelled more!
3. Don’t create habits around spending
The first time I bought a hot chocolate on the way to work, I did it just because I happened to see the cafe and randomly felt the urge to buy one.
But I walked to work everyday. So everyday, I would see that cafe and guess what started to happen? Everyday I bought the same hot chocolate from the same cafe as part of my daily walk to work.
It quickly became a habit. When I say it was a habit, I mean that a psychological pattern was created. I was no longer making a conscious decision to buy a hot chocolate, it became an automatic ritual. It became something I started to look forward to as soon as I left the house. It wasn’t a habit I had consciously chosen to create, it was one that I just stumbled into. Once the habit was created, it was really hard to break.
It wasn’t until many, many years later that I would learn about how habits are formed in the brain, and how important that regular repetition is in cementing habits.
If I could go back, I would be a lot more conscious and selective about habits I was creating that involved regular spending.
4. Start a ‘side-gig’ sooner
In the last year, I’ve started taking on freelance work for small businesses. I cannot believe I did not start doing this sooner.
For so long, I held the mindset that money came from your profession, your career, your ‘day-job’. I didn’t even really know about freelancing, or the idea of making money on the side. So even as a university student, I always sought paid employment. I didn’t think about the ‘gig economy’.
In today’s economy, the opportunities for taking on little bits of work on the side for a bit of extra cash are pretty much endless. There are so many ways you can make an extra few hundred dollars a month without even leaving your home.
I definitely would have benefitted from exploring those opportunities earlier on.
5. Invest time into my financial education
Even if I had saved and started a side gig, the reality is I would have had no idea what to do with that money. I remember this nagging sensation that I should figure out what investing meant, and learn what I should do with my money.
I didn’t do it though, I guess partly because it felt like such an uphill battle and I didn’t know where to start. I remember I did try to read some books from personal finance gurus, but I ended up with all these big concepts (“make passive income!” “invest your money!” “become financially free!”) and zero knowledge on what that meant in terms of practical application. I would finish this 400 page book and still feel absolutely clueless as to where to start.
So I ended up doing nothing at all.
It took a lot of reading (countless books and blogs, and podcasts) and talking to people, for me to eventually feel more confident with my understanding of how to manage my money (and I’m still on the journey). I only wish I’d started that process earlier!
Do you have some of the same regrets? Or maybe you have different ones. What would you do differently with your money if you could turn back time?