DISCLAIMER – I am not a financial adviser.
However, I have become genuinely interested in ways of managing my own money over the past few months and have therefore done quite a lot of research into saving and making money.
I do not profess to have the answers to everything, but simply want to pass on the tips that I’ve found helpful.
In this blog I am going to highlight some opportunities to manage your money and I’m also hoping that I can provide a bit of an insight into the steps I have taken to ensure that I make the best financial decisions I can (again, I have no idea what your individual circumstances are so make sure you ensure these are right for you!).
reassessing my mindset
If you think about your own finances; would you be able to hand in your notice now if you hated your job (without having another job lined up)? Would you be able to leave a bad living situation immediately if you needed to? Are you able to be as generous (either with your time or money, since time really is money), with loved ones or charitable causes for example, as you would like?
A change in circumstances made me realise that not having the security of easily-accessible savings meant that I didn’t have the freedom to make very simple life choices. I wanted to put myself in a position where I could handle the financial impact of the choices I wanted to make, or the choices of others which impacted me, and feel independently secure. Taking control of my money, at a time when I felt like I had control over very little else, also gave me some comfort and focus.
I began by writing down where all of my money was.
Bank accounts; credit cards; ISAs; gift cards; credit notes; loyalty cards; money I was owed by other people; the amount I had in a deposit scheme…everything went on the list.
I totalled this all up and was actually pleasantly surprised at the value of all of my ‘assets’ but less than a third of the total amount was ‘liquid’. I didn’t have any debt other than my student loan which, I appreciate, put me in a fortunate position; but I really didn’t feel that I was where I wanted to be in terms of my financial independence.
I wrote down my income (what was actually going into my bank account rather than pre-tax etc.) and made list (another one – I’m big on the list-making so this may be a recurring theme) of my monthly outgoings. My lifestyle was changing at the time so I wasn’t able to do this with concrete certainty but I felt that an estimate would be more useful than nothing at all.
Deducting these estimated monthly outgoings from my monthly income gave me an idea (albeit not a particularly accurate one) of what I had previously called disposable income.
This was the first change in my mindset.
This income was not disposable. This was what I had control over; what my own decisions would have an impact upon.
deciding to save
My sister has always been fantastic at saving money. When I say fantastic, I really do mean fantastic.
I had previously thought that my spending was enabling me to enjoy life and that her frugality was hampering hers to some extent. And, to some extent that was true; but I was now incredibly jealous of the security she had built for herself. I decided to take a leaf out of her book.
I was aware of the 50/30/20 rule (worth a Google if you’re interested). This was the idea that you should be spending about 50% of your earnings on the essentials (rent, bills, food etc.), about 30% on ‘discretionary’ items (eating out, clothes, gym membership etc.) and you should be saving the other 20%.
I appreciate that, for some people, this may seem totally unrealistic and unachievable, but I wanted to try as hard as I could to work towards this (or better it in terms of saving). I took the opinion that something would be better than nothing. I was already contributing the maximum amount I could into a Help to Buy ISA every month but I wanted to increase the amount I was funding my savings account with.
I have spent the past 7 months researching how to do this and I intend on sharing each of the ideas I have tried with you through this blog. Please keep coming back if you’re interested in finding out how I’ve completely overhauled my mindset and how you may do the same.