“If you wish to get rich, save what you get. A fool can earn money; but it takes a wise man to save and dispose of it to his own advantage.”
– Brigham Young
Basic personal finance for men
A lot of men, especially guys in their twenties, have a hard time managing money. They live paycheck-to-paycheck and are constantly going broke.
And these aren’t morons either. I personally know two aerospace engineers and a PhD who are all up to their eyeballs in debt. Men who are a million times smarter than me still have trouble balancing their budget.
Due to this very serious issue, I’ve decided to start a weekly series on personal finance. Today’s post is all about saving money. It’s a simple concept that a lot of men completely ignore until they’re buried in debt.
Develop a budget
Fiscal responsibility is one of the least sexy topics out there. Having a limit on your spending is what keeps you from buying luxury cars, ordering $40,000 watches, and taking vacations every single weekend. But it also keeps you from running your credit into the toilet and ruining your future.
One of the biggest misconceptions about budgeting is that it’s only for nerds and poor people. There are plenty of guys with decent incomes who scoff at the idea of balancing a checkbook.
In reality everyone needs to manage their money. If a guy makes $100,000 a year but buys a $40,000 C-Class and pops bottles every weekend he’ll be dead broke within six months.
It doesn’t take much to burn through several million dollars in just a few short years. Just ask MC Hammer or Evander Holyfield.
You don’t want to end up in a situation like this. But you probably don’t want to spend your weekends pouring over excel spreadsheets either. As a result, I’ve listed three good budgeting strategies that have all worked for me in the past.
- The T-Pain plan
Believe it or not, rapper/signer T-Pain (the man behind such classics as “Take Your Shirt Off” and “Reverse Cowgirl”) has a really good strategy for saving money. Whenever he earns anything he puts half his paycheck into savings.
(T-Pain discusses his savings plan at 1:43)
This works really well if you’re making tons of money without any major input costs.
Personally, I use this method whenever I have a big writing project. If you get $300 for one day of work, bank half of it. You’re still saving a ton of cash, but you also have a lot of room for fun.
Anyone with a side business or hobby might want to apply this rule. It’s awesome for entrepreneurs and people are overpaid, but wage slaves probably can’t do anything this extreme.
- The 15-25% plan
When I had a job I made $400 a week. Between transportation and food there wasn’t a lot of leftover money. Saving 50% of my income was out of the question.
At the time I’d put away roughly 25% of my earnings. This wasn’t terribly difficult and it was better than nothing.
At the very least you should be trying to bank between 15 and 25% of your income. This way you have some kind of cushion if things go badly. Getting laid-off or having your car breakdown isn’t as big of an issue when you’ve got backup money.
- The “everything extra” plan
This is the budget that everyone hates. You stay in on weekends, buy nothing, and don’t go out to eat. It’s the image that most people automatically think of when they hear the phrase “saving money.”
But it actually works surprisingly well.
I wouldn’t recommend adopting this method as a lifestyle choice, but it is something worth trying out at least once.
Right now I’m visiting my parents in Iowa, I came back before Thanksgiving to save $1,000 on rent and $300 on airfare, and am currently using this budgeting plan.
There’s really nothing for me to do in Iowa anyway, so I decided to focus on saving, and making, as much money as possible before I leave the country again.
Learn how to make money
If you can learn how to make money you’ll never go broke.
Dedicate some of your free time to developing a secondary stream of income. Learning how to make an extra $1,000 a month will eliminate a lot of stress in your life.
Additionally, having a side business can keep you afloat if times get tough.
There are a million ways to make money. Go to the library, pick up some books, and figure out a good side hustle. It doesn’t have to be fancy, but it should make enough for you to survive on if you had to.
$1,200 a month breaks down to exactly $40 a day. You can easily come up with a business that earns that.
Every young man should develop at least one secondary source of income. A service business, rental property, website, there are numerous options.
Curtail the credit cards
There’s a lot of debt about the merits of credit cards. A lot of guys love the perks like free flights and cash-back. Other people preach about the evils of charging purchases.
While cards can be great, if you use them wisely, most men shouldn’t be playing with them. If any of the following applies to you, try and minimize your reliance on credit cards:
- In debt from student loans
- Inexperienced with budgeting
- Inexperienced with business (entrepreneurs only)
Paying the government and MasterCard, missing a payment, and banking on a bad idea are all recipes for disaster. Guys who are established and know how to manage their finances can play around with cards. Young men should master the basics of personal finance before they worry about getting a free plane ticket.
Just the beginning…
Saving money is the most basic financial advice there is. It can be summed up in six words: “don’t spend more than you earn.”
But it’s still a huge problem for a lot of people. Most folks lack the self-discipline to watch their statements.
Before you start digging deeper into the world of personal finance you need to have your accounts in order.
Next week we’ll talk about the number one pitfall that most guys go into debt over. And it’s something you’ve all fallen for in the past…