Money might not buy happiness, but getting your finances straight is pretty damn satisfying. It took some effort, but I found that managing my own money made a big difference in straightening out my financial life.
When you build and take care of something yourself, you have a better idea of how it works. You might even appreciate it more. I think this applies to your finances, too. There are a few ways learning on my own, rather than hiring a professional, has helped me financially.
Control Is Everything
Money has a lot to do with mindset. Ask anyone who has climbed out of thousands of dollars worth of debt, and they will tell you: feeling in control is everything. Once you feel like you have some control of your finances, you can more easily develop a plan you can tackle.
Now that I manage my own money, I know the details of my situation, the history of my net worth, and what affects my finances. And I feel like I'm the one responsible for all of this. This control encourages me to stay on top of my finances and do what I can to improve them (and ensures I'm always thinking about the consequences of my decisions).
Here are a couple of other benefits to being in control.
I Know What to Expect
Before I started managing my own investments, I solely relied on my existing super. Once I forced myself to learn about my investments, I no longer flip out when the market goes down. I know enough about it now to avoid the following rookie mistakes:
- Selling all of my long-term investments because I'm scared prices will drop even more
- Making myself sick because my net worth has gone down a bit
- Not contributing to my retirement because the stock market changes scare me
Since taking a more hands-on approach, I know my money isn't truly lost unless I sell. And history shows, over time, my investments will likely recover. I now know what to do (or what not to do) when the market goes down.
There's Value In My Mistakes
Have I done a seamless job of managing my own money? Of course not. In learning on my own, I've made mistakes. For example, to get my investing feet wet, I once bought a few individual stocks to learn how it all works. I earned some money, then I lost it. Luckily, I broke even. It could have been worse.
But this mistake helped me learn that "set and forget" index fund investing is really the way to go (I wasted so much time trying to research and time individual stocks). It also did make me understand how the market works a little better. If I handed my money to a pro, I might never know this. (And I'd have less money from paying them, too.)
You don't want to make mistakes. Avoid them as much as you can. But when you do something yourself, mistakes are kind of inevitable. Gleaning information from your mistake, though, can be hugely beneficial.
How I Learned On My Own
Of course, one doesn't become a financial ninja overnight. I had to read a lot to get there, and learn from my own experiences and mistakes. But the more I learned, the more I got my financial life in order.
I Dug My Way Out Of Debt
I got my first credit card at 18. Without my parents knowing, I used it to buy a pair of $100 Doc Martens I definitely couldn't afford. Then, I bought more things. That $100 quickly turned into a couple of thousand bucks. Before you know it, I was in consumer debt for the very first time of my life. When coupled with my student loan years later, it felt overwhelming.
A few years earlier, my dad had given me a copy of Dave Ramsey's Total Money Makeover. He'd read it and said it was helpful. At the time, I tossed it aside. When I officially became a debtor, I cracked it open.
I found Ramsey's ideas and concepts about money totally relatable. My debt was intimidating, and his "baby steps" were doable. Like a lot of people, I had no idea how to start managing my money. But Ramsey does a great job of introducing the basics of personal finance. His "Snowball Method" worked well for me. I took small steps to get out of debt, paying my lowest balances off first, until I finally became 100% debt free shortly after college. If money is more about maths than mindset for you, you'd probably prefer the Stack Method.
Either way, these methods require you to understand and stay on top of your debt. Coming up with a plan to bust your debt, whatever the method, is a natural first step in DIY money management.
I Became A Better Budgeter
As someone obsessed with organisation, I've always been a fan of budgeting, even as a kid (fun, right?) But that doesn't mean I've always budgeted the right way. Again, I had to learn from my mistakes.
For example, when I first started paying off debt, I went about it all wrong. I decided I would live bare bones and simply throw every cent of my income at my debt. That was my plan; that was my budget. It didn't work. If I bought even the smallest luxury — a pack of gum, for example — it messed everything up. I'd overdraft my account, and my whole plan would be rendered useless.
The problem? I gave myself zero breathing room. I needed a better budget.
Basic rules like the 80/20 method and the 50/30/20 rule helped me do it better. I designed a budget, then tracked it using Mint. As I learned more about my financial behaviour, I adapted other strategies, like zero-sum budgeting, which is, more or less, what I use now. When I understood my habits better, I had a better idea of how to manage my money.
As for learning to save money, Ramsey's book also helped me realise I needed an emergency fund. I also got a lot of use out of a book called Your Money or Your Life. This one is helpful if your mindset gets in the way of your money habits.
I Learned How To Make Money
When I got my first real job, I was happy with the entry-level salary. In fact, I was happy just to have work. I never asked for a raise, but, occasionally, my team lead would put one in for me. For this, I was incredibly grateful. But months later, I found a similar job that paid double. I thought it was too good to be true, until I got the job and discovered the salary was actually adequate for the position, even at entry-level. I took the job, put in my notice, and my original employer offered to match it.
At first, I was upset that they could afford to pay me double this whole time. Then I realised: that's business. It was my fault for not speaking up and negotiating my salary or raise in the first place. I just wasn't good at earning more.
But that situation motivated me to get better.
I forced myself to ask for raises from that point forward, but I still wasn't great at negotiating my salary. A couple of things made a difference. First, this statistic on how you can miss out on $500,000 over the course of your career by not speaking up was sobering. Also, Barbara Stanny's Secrets of Six-Figure Women was motivating — in particular, her chapter on the traits of underearners. Unfortunately, I could relate to nearly all of them. Here are a few:
- Underearners have a high tolerance for low pay
- They're willing to work for free
- They're lousy negotiators
- They believe in the nobility of poverty
- They're codependent
Her book is obviously aimed at women, but I think it's plenty useful for men, too.
Ramit Sethi's book, I Will Teach You To Be Rich was also a useful and motivating resource for me. His basic money advice, like budgeting and paying off credit cards, is nothing new, really. But when it comes to advanced financial topics, like negotiating your salary, investing, and building wealth, this book is really impactful. It's a lot of information, it's well-organised, and it motivates you to take control of your own money.
When I Wished I'd Consulted A Professional
Managing your own money is great, but let's not pretend we don't need professionals. There are at least two instances where I should have consulted an expert about my finances:
- When I switched from full-time to freelance work
- When I started hiring subcontractors as a self-employed freelancer
In both of these instances, taxes were the biggest issue. Tax laws can be really difficult to navigate on your own. I figured out what I needed to do when I hired subcontractors, but it took hours upon hours of research. And even then, all of the information was so confusing, I wasn't completely confident that I truly understood how it worked. I ended up confirming my information with an acquaintance who's a financial advisor. He told me in five minutes what took me days to learn on my own.
It's also a good idea to talk to a professional when you go through major life milestones, come into a lot of money unexpectedly, or have a unique financial issue that you can't find the answers to yourself. When you have a lot of questions at once or you're transitioning into a completely different financial situation, managing it all yourself can be overwhelming and maybe even risky.
I can definitely understand why someone might choose to use a debt manager or hand their money over to an investment pro. Still, the more you learn, the more you can take control over your financial situation, and that's priceless — even if you do leave some things up to a professional here and there.