Summer is the time to live it up.
You know, eating tacos and drinking margaritas like there was a shortage, taking Ubershome on late nights out and barely pulling enough cash together to split an Airbnb for a weekend getaway with your buds.
Seriously, summer eats up all of your money. And even though it was all probably worth it, damage control is necessary by the time fall rolls around.
Of course, this doesnt mean youll have to cut back on having fun. It just means you have togive your bank account some well deserved TLC.
Im sure youve heard this vague piece of advice before, but what does living below your means ACTUALLY entail?
Your means is your income. Living below it means thatyour monthly expenses are well below the amount you take home each month.
For example, if you take home $2,500 a month from your job, living below your means would be only spending $2,000 on living costs, while the extra $500 goes toward saving and investing.
This is easiest to do when you pay yourself first.
That means the second you get your paycheck, a percentage of it should automatically go to your savings account, student loans and/or investment accounts. Heres a great resource on setting up automatic savings.
After months and months of consistency with paying yourself first, youll actually see your accounts start to grow and regularly have money in them. What a nice feeling!
Ideally, you should aim for 15 to 20 percent. You might think you dont even have enough room in your budget for that, but Im telling you, you do.
For example, this year I took a hard look at my spending history in Mint, my favorite money managing app, to see where my money had gone.
I figured out that for the first two years I lived in NYC, I spent $4,000 on cabs and Ubers.
Taking fewer cabs was an obvious area I could cut back spending without sacrificing the quality of my life.
Once I stopped spending so much on transportation (this was on top of the $117 monthly MetroCard I use), I had lots of free cash to put toward saving and investing.
Having money feels good.And if you dont really know what thats like to save and see the results of effective saving, its never too late to start.
You can always use a tool like Fidelitys Budget Checkup to figure out the best way to tweak where your money is going.
Taxes suck, but we all have to pay them.
Theres actually a legal way for you to lower the amount of taxes taken out of your paycheck each month, and thats by upping your contributions to a retirement account like a 401(k) or another tax-advantaged account.
Heres why this works: Taxes are taken out on the income that comes home with youafteryour contributions to a 401(k). So the more you put toward that account, the fewer taxes you have to pay.
Even though you cant really touch the money in a tax-advantaged account until youre of retirement age, its stillyour money, not the governments.
Over time, you end up saving more by contributing more and also having fewer taxes taken out of your income.
In 2016, the most you can contribute to a 401(k) is $18,000 per year. You still have four more months to get your tax break before the end of the year!
So, if you dont have a tax-advantaged account set up, get on it. You dont have to contribute the max, even just a couple hundred dollars can make a massive difference.
You guys, Im telling you, if you dont have a rewards credit card, youre missing out.
You can collect points toward fun stuff like vacations and earn cash-back on everyday expenses like gas and groceries. Theres a card out there for every type of reward you can possibly think of.
Im personally obsessed with my United Mileage Plus card. Ive been collecting points on that baby for three years, and Ive been able to take a free round-trip flight once a year.
Not sure where to start looking for cards? Check out Nerdwallet. They have a great feature for comparing different types of credit cards.
Do not fear the credit card. Just make sure you pay it in full every month, and thats literally the only credit card rule you really need to stick to.
Money is emotional. Everyones financial goals are different, but a having a saving and spending formula is the only way to make spending and saving habits stick.
You need to make money management simple and easy for yourself.
Not sure how to create a formula? Fidelity has an awesome one for spending, investing and saving, for example.
Their system is50 percent of your income goes toward essential living expenses, like rent, food and bills.
Then, 15 percent goes toward retirement and long-term investing.
Five percent should go toward short-term savings, like an emergency fund.
The last 30 percent? Do what you want with it based on whats most important to you.
That actually doesnt sound so bad.
These four ways to makeover your money are really necessary to do at SOME point in life, not just this fall.
Once you have a formula, a better sense of where your spending is going and regular contributions to savings, investment and retirement accounts, youll really be set for life.
After that, it doesnt take much effort to keep it going. You just have to make sure you keep your steady income.
Im telling you, start now. And next summer, youll have even more money to spend on fun stuff like tacos, margaritas and Ubers.