Spend in life as you would in Monopoly
On the surface, it is difficult to understand why so many of us struggle to grasp the concept of spending less than you earn. After all, sound money management in its purest form is staggeringly simple, and it should be approached in the same way that you would approach a game of everybody’s favourite board game, Monopoly.
Monopoly, the perfect tutorial to money management
In Monopoly, success is dictated by our ability to take a smart approach to the relatively black and white task of managing what little money we have well. Oh, and a little good luck doesn’t go amiss either, admittedly. The key is to spend your money wisely and take a tactical approach to the game, by, for example, thinking carefully about which streets to buy when you land on them or where to build houses and hotels a bit later in the game. If you waste all of your money by spending without thinking, you will undermine your future, as you find yourself unable to buy a full set of brown, blue, pink, orange, red, yellow, green, or purple streets. This in turn will also prevent you from increasing your future income and consolidating your future financial security by investing in property. It is also important when playing Monopoly to save your money and keep enough in the bank as cover, just in case you roll the dice and find yourself on an opponent’s street and facing a hefty bill. Admittedly you will probably be ruined if you land on Mayfair or Park Lane with a hotel, no matter how much you have stashed away, but an emergency fund will probably cover your losses if you blunder onto Piccadilly with four houses. Again, all of these little dos and don’ts are metaphors for how we should approach our money in the real world.
Our emotional attachment to the money in our pocket leads us astray
So seeing as money management is as seemingly black and white as this (and on paper it is!), why is it so many of us take such a foolish and illogical approach to how we manage our money, when in fact the rules which underpin good money management are really rather logical? Well the answer to this is again rather simple; money is emotive, as are the things that we love to spend it on. The golden rules of money management might be the same in Monopoly as they are in life, but unlike in the world of Monopoly, life is full of choice and temptation. The world in which we live has socially conditioned us to define ourselves and our perceived success in life by our image, our lifestyles, and the things that we buy and where we buy them from. We place a great deal of emotional attachment on being able to go to the pub or that wine bar with friends, and on owning that car, house, shirt, holiday, pet, children’s toy, bike, or dress that we really want. And it is this emotional attachment which gets us into trouble; we want things so much, so badly, that we will override our inner voice of reason which is telling us that we cannot afford to spend what little money we have on these things, and we will simply go ahead and spend it anyway. Inevitably, such a delusional and undisciplined approach is only going to take us one way; into serious debt.
A good, old-fashioned budget can halt reckless spending
The natural way to counterbalance our destructive spending habits is to firstly recognise that we actually have a problem with spending in the first place, and then try to understand why we are doing it; the next stage is to take measures to stop this behaviour. Delusional thinking and behaviour takes place when we fool ourselves into believing something when the writing on the wall clearly tells us otherwise; therefore, the easiest way to prevent this is to force ourselves to see the truth to the extent that it is impossible to deny.
Financially speaking, the best way to force ourselves to face the true state of our financial situation and gauge our true financial boundaries is to draw up a budget. A budget allows us to dissect our finances and review our spending vs. income in the greatest detail, so that we can clearly see how much money is being paid out and to whom, and how much money we have left over once we have paid for the essentials, such as rent, bills, transport, childcare, and food shopping. If you can see clearly in black and white that that you have just £100 to play with a week, then you cannot in your right mind justify spending £300. You just can’t. This being the case, knowing the true state of your finances and what you can afford in this way will allow you to manage your money within the strict boundaries that your budget allows, which should in turn provide the financial discipline which is missing.