Two most important things I've done to straighten out my economy

I thought I should write a bit about the current status of my money situation and what actions I've taken that I find most helpful.

First of all I have separated my bank accounts to more easily manage my money. I'm not done with the process of settings up all accounts but I've started with what I feel to be the most important first changes. Previously I basically had two accounts. The first account was the account to which I got my salary and other incomes. It was also the account to which my debit card was connected. (I'm swedish and we don't use credit cards much but instead advocate debit.) I used this account for basically everything. From paying bills to pay for beer at the pub.  The other account was a sort of savings account. It didn't really have any high interest or anything, but it was an account to which i occasionally directed money that I wanted to save. However as my spending habits started to go crazy I all too often directed money from the savings account to the debit account.  Noticing this was the first indication that I should probably do something about my spending and money situation.

Now I instead have a set of accounts for specific purposes. First of all I've separated my debit card account from everything else. In this way I can conciously move the amount of money that I feel that I can afford to spend to my debit card and always check how much I have left (although I have other means to control my spending so I do not have to check). So in the beginning of the month I check my budget and set up weekly transactions of an appropriate amount from my salary account to the debit card. I use the salary account for all other bills.  This way I get a weekly allowance of guilt free money to spend. To make sure I have enough money for the neccessary food (i.e. groceries I keep at home) I keep a joint food money account together with my girlfriend to which we both transfer a set amount of money every month.

This is how my accounts look and work today. However, I then intend to have a set of savings accounts for specific purposes once my financials are on track. One for each targeted savings goal. I will keep this within the same bank to I can easily transfer money to the accounts and easily take money out of it when ever I spend on something from a specific category. For instance, I might have an account for clothes from which I will take money when ever I buy a pair of jeans, or an entertainment account from which I take money when ever I buy a Wii game.

I just recently also opened a savings account at www.avanza.se. They offer good means of buying stocks and mutual funds, and I intend to start investing money in index funds once all dept is paid. I will make monthly transfers from my salary account to the account at avanza for me to invest. This is money that is being saved for the long term.

The second most important thing I have done which is the thing I've been doing for quite some time now, is keeping track of my money. I built a web site on which I submit whenever I buy something. It tells me how much money I have left and calculates how much money I can actually afford to spend every day. This tool has been invaluable and has really inspired me to not spend like I used to. I would say that it is the main thing that has helped me change my spending habits.

So, all money I manage NOT to spend is now being used to pay off dept. The current dept I have right now is from when I used my credit card to much a couple of months ago. I'm really looking forward to have this dept paid, and I feel that once I have it will really be a new page of my financial life. Right now I have been spending much less than what I would like to be able to spend. I've had to say no to more social activities than I would have wanted. I will still say no to some, to stay within my budget, but I want to have the choice to attend them based on more than the content of my wallet. It will also enable me to instead save money and eventually start to invest it to try and build wealth.

To summarize. The two things I've done that really helps me financially is:

1. Debit card account separate from salary account. This makes me conciously decide how much money I want to spend.
2. Keep track of my money. This inspires me to not spend as much as everytime I do spend I have to make a note of it on my web site.

First things learned

So far I've become very good at being sure to keep my budget, however I'm still working on becoming completely dept free. My aim is to reach this goal by the next paycheck, a goal which I have all intentions to reach.

So the first and most valuable rules and guidelines I have come across and started implementing myself are the following:

1. Pay yourself first. You can always survive with 10% less than what you earn. Put those 10% away to savings BEFORE you pay bills and make a budget.
   
2. Track your expenses. If you don't know how you are spending you can't make a budget. It's easy to SAY that you are gonna spend $10 on food in one month, but a totally different thing to actually do it. But when you know that you spend $150 on groceries and $70 on candy, you KNOW that you can cut off atleast the $70 on candy, and if you look at what does groceries are, maybe even more.
   
3. Start saving now. There is a BIG difference in starting to save when you're 20, than when starting when you're 30, or 40. The sooner the better and there is no excuse not to start now.
   
4. Do not buy things on credit.
   
5. Plan your spending. Make budgets. When not using credit, you must have the money to pay for the things you want. If you want a new car, save for it. Put aside a set of money each month, and eventually you can buy it. It will be more rewarding, and you will own the things you buy.
   

For me I think the hardest part is the planned spending. This is where you need to change your habits. Instead of just buying the new wii game, you must conciously set a goal to buy it and save for it (unless you already have a savings account set up for buying video games). But when you start do this, things will become so easy that you will find it stupid not to do it - things will just work out financially by themselves.

Introduction

I want to learn to be rich. Inspired ofcourse by the personal finance blog I Will Teach You To Be Rich this blog is my personal journey from unconcious spender (broke) to hopefully be on my way of financial independence.

I was always good at saving money. If I wanted to. But I was always very good at spending money. Just like for anyone, increased income did not mean more money in the savings account. You always adapt your spending to your means. In my case, those means became a little bit wage when I started spending on credit. Without noticing it, I used the money in my easily accessible savings account to pay off the credit every month. Not until very late I noticed that something was probably not going in the right direction and so I started to think more consciously about my money.

My first actions to become better handling my money was to try and keep track of where the money went. Being the computer geek I am I started thinking about a simple tool for doing that. Being in the field of Human-Computer Interaction I started to think about how such a tool should be designed. While thinking about it, I figured I may just as well accumulate some sample data for when I eventually started building the tool. So I started to create spreadsheets.

After notoriously keeping track of every single item bought (from a new computer to a piece of gum) I started to get a sense of my spending. During three months I saved more than one month of salary - during a period when I actually paid two rents! However, after a while I got really tired of entering all detailed information into the system. I therefore just got bored of it (as I did not see how the benefit outweighted the burden) and stopped. Not until I went to the bank, got a big ass loan, and bought an apartment, I started think about money again. At this point, the money I saved during the first three months was spent on a two week trip to Vegas, and I had started to deplete my savings even further. Having a loan for the first time I felt it was time to really get a grasp of my money situation. Also I didn't feel good about having to borrow money for the down payment on the apartment - money I could have easily saved for in just a couple of months before having to buy it.

So I started to keep track of my spending again. However, this time I wanted to prevent myself from getting tired of it. I therefore decided not to be so anal about detailing my spending, instead thinking that having a rough idea about the spending was enough. I therefore built a simple web page intended to be viewed from my mobile phone, from which I simply input the amount I just spent, and on what. In this way, I could now quickly enter to the system that I had spent something, at the moment I spent it. I did not have to go through all receipts I had acquired throughout the day, and enter it into a spreadsheet. This tool proved to be really useful for myself and I ended up adding more and more features to it, such as tagging and simple statistical tools to see how much I was spending on different categories of my life.

From this point on I started to slowly grow more and more conscious and responsible of my money and spending. I also started to read alot of personal finance blogs on the internet, and have now been doing that for a couple of months. So therefore, here is my own blog, which I will hopefully keep updated with information that helps me, and therefore could be helpful to other people.