Do you know? This isn’t a joke you might find in a Christmas cracker, this is a genuine question. Shall I tell you? Just £27.40 a day of miscellaneous spending.... Let that sink in for just a minute.
Now, maybe you’re someone reading that total and the thought of ‘wasting’ that money daily horrifies you. How is that even possible?! I guess it depends on how you feel about spending money on small amounts that build up over time; do you like to do it? Or believe the value of the items being purchased is worth it? Are you even aware if this is you?
Whichever way inclined you are, it really doesn’t take very much for this amount of money to add up over a day, a week, a month.
Take a step back and ask yourself the question: where does your money go over the course of your average week, or month? Maybe daily is too small a timeframe to look at this:
– How much do you spend on Amazon on ‘essential’ purchases, such as stationery, organisation hacks, gadgets?
– That daily coffee adds up, how much do you spend in Costa/Starbucks/insert local equivalent here.
– Buying lunch on the go – how much does that add up to?
Maybe you don’t spend £27.40 a day, every day, but perhaps you make up for it at the weekend. A night out with friends, cinema with your other half, a treat for the kids to go ice skating, a nice birthday present, a bit of a blow out in IKEA when you drop in for tea towels, but end up refurnishing your entire bedroom AND the spare room.
Spending £192 over a week, or £833 a month, on ‘extras’ is how you go from not having a potential £10,000 in your bank account by the end of the year.
OR growing a credit card of the same value, without even really paying attention.
Do you see how easy it is? What happens when money and spending isn’t managed, or least by not having an awareness of it.
When I was younger, I was really not good with my credit cards. Having grown up wearing clothes from Preston Market and catalogues, the lure of ‘free money’ when I turned 18 was far too much of a temptation for me. The reminders of being in a private school and being teased for not wearing Levi’s or branded clothes could now become a distant memory because I could buy what I wanted! (Obviously ignoring the consequences of such an attitude!)
I could also buy nice gifts when my friends moved house, I could spring for a round of drinks after work, and even splurge a bit when shopping for face wash and come home with a whole new make up bag full of stuff as well that I didn’t know I’d always needed.
Add to this real life genuine needs and financial emergencies, moving house, relocating, and starting a family, and that frivolous debt grew to be just over £30,000 over the years.
Avoiding this, or tackling this depending on where you are financially, all boils down to the same thing.
Awareness of your money. Genuine curiosity and a steadfast belief in something better. Whatever that might mean for you, even if that’s just a better way of feeling about money.
It all starts with wanting to learn more.
A clear understanding of where your income comes from, and where it goes to each month.
If the thought of needing to get down and dirty with your finances makes you want to bury your head in the sand, then consider what you’re missing out on by not doing this. Think about what this money could do for you:
– debt repayment
– family holiday
– the flexibility and freedom to outsource to build in more free time
– investing for future, and taking advantage of compounding
And let’s not forget the peace of mind alone as a huge benefit of having a handle on your finances. The ability to sleep at night without waking up worrying about whether you’re making the best decisions; to just know that you have it handled and in order.
How good that would feel?
So how could you get started with this, if this isn’t something that you already do?
Go through your last three months bank statements
You can go through longer if you are so inclined, but the purpose of this exercise to get familiarise yourself with where your money is going. Instead of not knowing when your debit card will be declined in the supermarket, get down and dirty with where your money goes each month, and look at what you easily save. We’re talking easy, low-hanging fruit here. The direct debits and subscriptions that you pay for that you don’t use. Are there any you could cancel and save the money?
Start using a money journal
Each time you spend money, make a habit of writing it down. All habits are tricky to start with, so this might take some time to anchor it in. Maybe you put 5 minutes aside at the end of each day to check your purse/wallet and banking apps to see what money has been spent that day. Awareness of money being spent as it happens is a useful reminder of where you money is going in real-time. Sometimes even the conscious thought of needing to write the spending down is enough to make you question the spend.
Create a realistic budget/spending plan
I don’t know about you, but I hate the word ‘budget’. It makes me think of restrictions, like when you start a new diet and all you can think about is the food you aren’t supposed to eat any more.
I prefer to call this a spending plan, but call it whatever works for you.
You should have a good idea now where your money is going on a regular basis, so you can start to plan what money you’re going to need for your current financial commitments (the non-negotiables such as mortgage, rent, utilities, repayments, etc) and have clear visibility of what you have left.
You can then make a spending plan of how you intend to make that money last until the next time you get paid. Think about saving, investing and giving as well as part of this spending plan, if that’s important to you.
Put regular money dates in the diary
Whether you do this on your own, or with your partner, is completely up to you. But ringfencing some time to review your plans and your actual spending is a valuable part of this exercise. A plan is worthless if we don’t then compare that to what actually was spent, and on what.
So, how did you do? Were your original plans realistic? Did you come in close to what you expected, or did things go awry somewhere along the way?
A useful thing to add here is your emotions, or other important happenings to your money journal. We can often get derailed when unexpected things happen, as money is commonly attached to our emotions in some shape or form, so noting down if anything happened of significance will, over time, help you to spot patterns with your spending, and whether you go off-plan at times. Again, get curious with yourself. Why did that happen? And also ask yourself if there’s something you could do to change that behaviour if the same situation arises.
Were you with certain people, so you spent more than intended in the bar one evening? Are things particularly stressful in your business, so did you browse Amazon with a glass of wine in the evening? Spot your habits, and their triggers, to create awareness and enable positive action to be taken.
With more awareness comes knowledge, and the ability to plan differently, if that’s what’s needed.
Get yourself an accountability buddy
As with most things, you’re much more likely to stick to your plans if you are doing it with someone for support. You’ll also be less likely to not turn up or do your prep work if you feel you’ll be letting someone else down by skipping it.
Keeping each other accountable gives you the opportunity to talk out loud about any worries or hurdles that you face with this, and often highlight for you that your worries aren’t only yours – we all have money worries and shining a light on them can help to diminish them and find solutions.
What’s your North Star?
What’s the reason you want to get control of your finances? What’s your why? If you were to be in control of your finances, how would that feel?
These are all questions you can ask yourself at the start of this process, that you’ll need to remember when things get a bit tricky. Any hurdle has the capacity to make you throw your money journal out of the window, so these will be the times when you need to remember what you were doing it all for in the first place.
Financial independence might be one of them, but maybe make your why more specific than that – what is your goal financially for the end of the year? Or even the end of the quarter? Perhaps you set a savings goal, or a debt repayment goal, and each time you feel like not bothering one week, this will help to remind you why your future self will thank you later!