Please note - Whether you earn £20k or £100k a year, this blog will still be relevant regardless of your income.
Begin by asking yourself the following questions: Are you smart with your money? Are you disciplined when payday comes in? Do you know where your money is going before it comes in? Are you a materialistic spender? Do you enjoy your party weekends? Do you drive the latest Mercedes on finance? Are you perhaps unsure on how to structure your money?
The idea behind the questions is to spark your thought process, about how you manage your money and where is it actually going? Do you really know and if so, can you justify the spending.
Disclaimer - this is not advice but purely my own preference.
"A penny saved, is a penny earned"
I will share with you several of my methods to which I use in order to structure money coming in, how I develop the right habits and continue to create a solid financial foundation.
Lets start by breaking down the areas you may want to look into and take on board:
1. Budgeting. (Self-Employed, Employed and Limited, they are all relevant) Regardless to whether your income is weekly or monthly, do you budget for your income and ensure the priorities are taken care of first e.g Bills, Credit Cards, Debt, Finance, Food, Children? We will touch on a method later in the blog, which will help you prioritise your spending.
2. Where is it going. Do you know EXACTLY where your money is going? If not, why not. In order to gain full control and begin building a solid foundation, you must have absolute clarity on where and what you are spending your money on. The best and most simple way to do this is by using applications such as: Yolt, Monzo, Emma and Money Dashboard just to name a few. All these apps will connect directly to your bank and in return provide you with a full, detailed breakdown of what you have been spending and where! It will amaze you the amount of money you spend over a week, a month just nipping into the local CO-OP to pick up a pack of chewing gum and a chocolate croissant.
3. Justifying and being honest with yourself. (This will likely be the hardest pill to swallow, but yet the most important and potentially where your biggest saving could come from.) Do you drive a nice car on finance, but knowing it stretches you each month? Do you like buying nice clothes but yet have a completely full wardrobe of clothing you have hardly worn? Whatever it may be that you enjoy spending money on, is it FULLY justified and did you REALLY need it. These are the questions you may want to start asking yourself, in order to begin creating the habits to question you spending. "Be TOTALLY honest. (I recommend downloading the applications mentioned above and see the reality of your spending habits.)
4. You need a reason why. Let me start with a simple example of how a human will typically need a reason why, in order to commit and achieve a goal. "Dan is slightly over weight and is going on a summer holiday in 5 weeks. Dan for the next 5 weeks will commit to a diet/workout plan, in order to show off his new physique on holiday (Dan's goal is weight-loss.) Your reason needs to be big enough in order to develop the necessary habits/characteristics: e.g. wanting to be financially free/comfortable - buy your dream home - wanting a comfortable retirement - wanting to leave your children a healthy inheritance - wanting to build a business which needs your own capital - investing your money - buying assets.
Please ask yourself if you can develop the characteristic's needed in order to gain full control of your money: Self-Discipline - Organisation - Commitment - Intention - Focus - Reason.
How to manage your money tips.
I would recommend this simple category system which I use for all funds and how to avoid spontaneous spending.
PP1's = First Priority payments. These are house bills, Mortgage, Credit card top ups, living expenses, standing orders for saving deposits, Stocks/Shares, investment funds, pension pot and emergency fund.
PP2's - Children's standing order ISA deposits, maintenance fund, family holiday fund and a second but yet small emergency reserve fund. (e.g £100 in cash)
FMP's = Fun money payments. This is the money left over which you can now justify going out and spending on an evening drink, a meal out with your partner, grabbing some lunch with a friend and buying new clothes or whatever it is you enjoy.
"Its not about how much you earn and that you cannot save as much as someone else, its about managing what you can afford and putting it in the right places first"
Summary:
Unfortunately we are in a time where society paints this picture, that we all should be driving around in Bentley's, wearing the nicest clothes, spending money like its going out of fashion and achieving success by the time were 25. "Well this is not reality" We need to stop worrying about what other people think and stop trying to prove something but showing off using materialistic things, which you have gone an bought because of what it may look like to others.
Let me finish on this and its worth thinking about! A person has £50,000 to spend on whatever they like, they go and buy, lets say a brand new Mercedes because whenever they see someone they know or used to know would think, WOW they own a Mercedes? They must be doing great. When really that is not the case! There is no money secured in the background, no foundation, no assets, no investments and if that Mercedes goes wrong, well they cannot afford to keep it, or if they do it nearly breaks them financially. "The Mercedes is nothing but a society FRONT."
Who cares what others want to see from you, or what they think. Build a successful, solid foundation of funds and plot in silence and then one day later down the line, if you choose to, then reveal your years of hard work which they knew nothing about and the Mercedes which you now own outright.
I hope you have taken some value from this blog and if you have made it this far, thank you for reading.
Aaron Knightley
Comentários