A first step to the right relationship with money is to understand where funds come and go for a given period. For example, over a year, you may have earned $50,000 by working for a company and spent the money in various things. You may have purchased a TV, paid rents, spent on food and entertainment, and so on. Obviously, if you spend more than what you earn, you will have to borrow. Sometimes it is necessary to borrow and spend more than what you earn. But you cannot continue spending more than what you earn for long time when you will not be able to repay what you borrowed.

Suppose you want to lose weight. You know the straightforward solution: burn more calories than you consume.  Same thing with managing  your money. To achieve your financial goal, you should spend less than what you earn.  Simple in word, but incredibly difficult to do. How do you start, then?

To spend your money wisely, you should first know the value principle.  Value is worth in money. The value principle is making financial decision to increase your net worth. For example, consider your spending: a) essentials like rents and food, b) education and experience (for better life), c) entertainment and pleasure. The value principle requires you to think how you can get more value out of your spending.  There may be less question about the value of spending on a) and b). However, what is the value or importance of spending on eating out and drinking? Do cutting some of the spending and saving increase the overall worth of your money? That is, is it more important to save for the future than spending now? If you think you are spending too much on c), you need to cut down on your spending. If you compare your life to other people’s, you will always lose. Instead, you should focus on how you balance between your income and spending based on the value principle. If you can give yourself the security of having enough money instead of spending on impulsive items, then you will not be betrayed by money.

“Napoleon envied Caesar, Caesar envied Alexander, and Alexander, I daresay, envied Hercules, who never existed. You cannot, therefore, get away from envy by means of success alone, for there will always be in history or legend some person even more successful than you are.” — Bertrand Russell, philosopher

Increased use of credit cards puts college students at greater risk for financial problems after graduation. Credit card debt is linked to increased stress and anxiety, which in turn has consequences for academic performance and long-term financial health. Do you want to reduce your spending on impulsive items? You can make the shopping list of items you want to buy and stick to the list when you go out for shopping. One time-honored trick is to leave your credit cards at home and bring only the amount of cash you want to spend. Credit cards can lead you into temptation because they separate the pain of payment from the pleasure of purchasing something new.

Saving works the other way—you have the pain of less money to spend right now, and don’t necessarily see the benefits of having money to live on in the future. Saving helps in emergencies which are always unexpected, cushions against a job loss, helps explore more opportunities, helps get better deals for a car purchase or mortgage, and helps prepare for retirement. Above all else, saving gives you financial freedom and makes you more responsible financially than spending excessively in order to fit it.  Thus, saving is proactively and persistently building up your financial wellbeing.