Pimp Your Finances

Going without teaches you to appreciate what you have, and also motivates you to improve your situation.

In a recent post on kiplinger.com, Erin Burt describes some of the other lessons she has learned from being broke.   Here’s her list and my commentary on each lesson.

1. Know your priorities

When you don’t have enough money, you quickly learn what is really important to you.  Do you improve your house or spend a night on the town?  Do you pay down debt more quickly or do you go to a concert?

2. Debt is a vampire

I completely agree with this.   I’m not losing any money to interest, but the opportunity cost of my debt is high.  If it wasn’t for my credit card debt, I could be maxing out my IRA right now.

3. Have a cushion to fall back on

This is a good idea.  Unplanned costs will inevitably come up, so it’s best to be prepared for the unknown.  Otherwise, you may fall into debt.

4. Set goals and tune out peer pressure

Two of the most important points of any successful financial plan.  You have to set goals.  If you don’t know where you want to be, you can never be upset about where you are. 

Ignoring peer pressure is another good idea.  You may not share the same priorities – or income – of those around you, so you shouldn’t make decisions based off of what others.

5. Small sacrifices add up to big rewards

It’s hard doing the right things at a young age.  Now is the time when your income is lowest, but it’s the most important time for you to be thinking about the future.  Time is your best friend, so you’ve got to make sacrifices to take advantage of compound interest.  It’s hard putting away money for something so far down the road, but it will pay off eventually.

6. The size of my bank account doesn’t matter

Having money is not a goal.  The goal is to be able to be stress-free, and enjoy more of what life has to offer.  It could be to spend more time with loved ones.  Or it might be traveling, or volunteering for a worthy cause.  You should be working towards something that is important to you.

I thought this was a great article.  Growing up, money was definitely an issue around my house.  I think that has motivated me to be in a better place, and also to appreciate what I have.