3 steps to comfortably build a “fun fund” and save from a financial expert

If you’re still thinking the “fun fund” isn’t necessary, it’s not. Why, try reading the article below!

* The following article is excerpted from Parween Mander, a Young Generation Financial Expert and Founder of We rich Wolfe – a digital financial education and advice platform dedicated to women of color :

3 steps to comfortably build a

My first job out of college was working at a bank, but from the beginning I didn’t feel confident about how much money I was making. To cover my student loan payments and pay off $4,000 in credit card debt, I spent my paycheck every month as soon as it was in my account. This is also the amount of money I made in my last year of school.

This dread maintains a fairly high level of fear, but there is another emotional layer involved. Because I was also constantly reminded of how my immigrant parents worked. My parents each work two jobs to fully cover the living expenses for the whole family, in addition, there is almost no surplus.

Over time, I understood that it wasn’t just standard stress about money. There are even studies that have found that operating from a place of scarcity can have a significant impact on how your brain functions.

At some point, I realized that I was so focused on escaping my hunger for money and anxiety over the actual money I had that I made only temporary choices. Time to “bandage” the problem, not “totally cure” or solve the root cause.

Now, however, I have saved $150,000 in 5 years, built a diversified portfolio, and started the money coaching business that has become my full-time job.

Here are 3 steps I took to get out of my pocket and start really growing my fortune.

1. Change your mental approach to money

One of the big things that changed my approach to money was to learn about something called a bandwidth tax. It was a concept I was introduced to in the last semester of my economics degree, but I forgot about it until I was in the real world and felt constrained with my money. Essentially, when you are frustrated and overwhelmed by the process of making a living, your cognitive ability to make sound decisions about money can suffer.

Using most of my salary to pay off debt meant I had very little income left. I can’t even do little things like go out to dinner with friends or buy makeup for myself, let alone save up for something bigger.

But instead of adjusting my budget or doing something to change my circumstances dramatically, I’ll feel frustrated, spend money on things I don’t need, and end up with more credit card debt. For me, having the choice to say yes or no is the most important thing. If I feel like I have no choice, that’s when my scarcity mindset is activated.

While I know I can’t afford to buy sushi on a whim, without looking at prices on Amazon or UberEats, everything else feels very limited and I find myself irresistible. But then all the momentary relief gave way to guilt and shame when I saw my credit card bill. Just like that, the cycle often ends and starts again – a vicious cycle that is hard to stop.

What I know now is that because I’m focusing all of my mental energy, not to mention most of my debt, my ability to logically step back and say no to things like impulsive purchases. copper has been weakened, because I have stretched to the limit of my perception. But understanding this helped me find a way forward.

3 steps to comfortably build a

Identify your priorities, don’t just focus on paying off debt. (Illustrated image)

2. Put your savings first

At first, I was too focused on paying off my debt up front because it meant I wouldn’t have to pay much interest over time. But with such good intentions, I still have to shoulder a lot of debt anyway because every month, the salary “flys” away quickly.

It was when I couldn’t travel with my friends that I knew I had to change the way I looked at it and handled it. Instead of tossing all of my paychecks into my debt, I started putting some into a separate high-interest savings account before doing anything else with it. At the time, I didn’t have a specific purpose for the savings I do now, such as an emergency fund. I just know I need to save.

Seeing how much money was left in my bank account for 6 months straight, it gave me a breather, made me feel that I wasn’t always stuck in “survival mode”. “of the brain.

For the first time, I felt that I no longer had to live in a situation just to pay off debt, everything was not what I thought it would be. At least I had enough savings to be able to make up the rest without having to use my credit card and still have a decent amount of money left in my bank account.

While not an ideal situation, being able to raise existing funds to help solve this problem has helped me continue to strengthen my confidence in my money.

3 steps to comfortably build a

“Fun Fund” will help you more than you think. (Illustrated image)

3. Create a “fun fund” to allow yourself to get rid of the guilt

A coffee outing, ordering from Sephora, or brunch with my friends are just a few of the fun expenses I never make while my finances are tight. These are purchases that I appreciate, and I know that to get out of the cycle of impulsive spending and heavy debt, I need a budget that allows me to spend comfortably.

Now that I felt I was on a stronger financial footing, I created a separate account and labeled it my “fun fund”. Every month, I will transfer over $100 for this. Since I’ve moved money into my savings, paying off debt and other bills, I know that this $100 from my paycheck has been allocated and I can spend it however I like.

3 steps to comfortably build a

Giving myself an allowance like this has reduced the negative thinking in my brain. Now I can make purposeful spending decisions to buy that coffee, go to brunch or anything else fun without feeling like I can’t afford it.

I felt like I failed in my twenties because I kept shopping in a hurry and increasing my debt, but looking back now, it’s clear that I struggled with deeper psychological factors that kept me going. difficult to advance.

I think it’s important to keep space and provide a safe space to talk about these issues without judgment, because that’s how we break the cycle of stress and shame so we can grow. financially strong.

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