Developing Good Money Sense

I know I have written about getting out of money trouble before, but lately a few of my clients have asked me “how do I change the habits that got me in financial trouble in the first place?” Having good money sense is about standing in your financial truth and what you do that robs you of savings. What are your behaviors and indulgences that give you a return? Developing money sense requires that you be honest with yourself. How are you wasting money? A lot of people will look to things like Starbucks and eating out, and I argue that some of those things may have a positive return. If knowing that you are going out to diner or picking up a Starbucks keeps your temperament, even if you need these things, you need to put a monetary value on how much this method of centering is worth to you. How much does being centered earn you?

Money is a finite resource, and when it’s gone that’s it. Most people who are struggling with money are drowning in debt. Credit is a killer. Living on credit means that you are living outside of your means. For most people, as long as they carry debt they struggle with saving and getting ahead. Understanding how much things like coffee and putting something on a credit card cost is the key to developing good money sense. Everyone knows about interest and that it make things cost more, but few sit down and do the math of how much more. A week of Starbucks costs on average 2,500 JPY or 30 USD or 15 Euro. Add the average credit interest rate to that and then multiply that by 52. That is the real cost of putting coffee on a credit card.

Most folks don’t look at their habits and instead look at a one day cost. Using JPY and coffee as the example 2,500 JPY * 27.94% (average credit card interest rate) and that coffee habit costs 166,322 JPY per year. It’s hard to make the daily sacrifice of a cup of coffee, but how much will it cost over 7 days? Over 30? Over a year? That is the type of calculation that needs to be made. Most of us have months that are more expensive than others, and we need to pay attention to what those months are and why those months happen and make sure we are prepared for those spikes. If we are living pay check to pay check, we have no reserves. What can we do to make our life as cheap as possible? For some, it means shopping at a grocery store that is a bit farther from their home and giving up fresh veggies for frozen. It starts with looking at our money with honesty and cutting where we can. If we cannot cut any further, for some it will mean needing to file bankruptcy and changing the habits that brought them to this place.