Learning from your own experience is good, but it’s even better to learn from the experience (and mistakes!) of others.
Although Mr. West made $72 million in the last couple of years, he clearly forgot to budget. Last year Kanye took to Twitter asking for help with his $53 million dollars of debt. Apparently, keeping up with the Kardashians isn’t cheap.
While you don’t want to emulate his spending habits, here six lessons you can learn from Kanye about money, spending, and goals.
Lyrics: “I got a problem with spending before I get it”
Lesson #1: Spend less than you make.
The number one rule to building wealth? Spend less than you make. Your savings rate (the % you save from what you earn) is a deeply personal decision, but know that the more you save, the more wealth you can build. The average Australian saves around 5% of their income (source: ABS), saving more than that means more flexibility, freedom, and earlier retirement. If you can, many financial advisors recommend aiming for a 20% savings rate.
Lyrics: “I feel the pressure, under more scrutiny, And what I do? Act more stupidly. Bought more jewellery, more Louis V”
Lesson #2: Spending is emotional.
Spreadsheets might be black and white, but we make decisions in shades of grey. Bad financial decisions often happen when we’re stressed, busy, tired, or feeling insecure.
Know thyself; know your spending triggers.
Lyrics: “Havin’ money’s not everything, not having it is”
Lesson #3: Money doesn’t fix everything, but it can make life less stressful.
Having money won’t automatically make your problems disappear. But not having money does result in more stress: low income households are 4X more likely to be behind on bills, or have to ask friends or family for money.
Lyrics: “The good life, let’s go on a living’ spree… they say the best things in life are free”
Lesson #4: Sometimes, the best things are free.
Laughter, naps, friendship… are all free. Need I say more? Although if I could buy naps, I would. 10 naps please!
Lyrics: “No you’re not perfect but you’re not your mistakes”
Lesson #5: We all make mistakes. Learn from them, and move forward.
We all make financial screw ups. Whether it’s a car out of your price range, or a late night online shopping spree at ASOS — whatever mistake you’ve made in the past, don’t let them define you.
If you’re in debt, make a plan to get out, and start cutting back on spending immediately (don’t bother asking Mark Zuckerberg for a bailout).
Lyrics: “Reach for the stars so if you fall you land on a cloud”
Lessons #6: Set big goals. Even if you miss them, you’ll be better off.
Evidence shows that setting goals increases success rates. I’m a huge believer in a goals-based approach to finance, that’s why we built monthly goal-setting into Clover right from the beginning.
But it’s not just setting goals, you’ll need accountability to actually change your behaviour. For example, instead of just saying “I want to save $10,000 this year”, make your goal to save $200 a week for one year. That way you have more check-ins, and you can track your progress to your goal. Even if you miss a few weeks, you’ll still be further ahead than if you didn’t set any goal.
Spending too much on the baby Louis Vuitton under your underarm? Take our free Financial Health Check and find out if you’re saving enough for your future!
Clover is a personal financial advisor and an online investment service for Australians.
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