How to make sure you’ve got enough money
Ok, something a bit different from me today. Since we’re in the middle of a global crisis, and many of us have got this subject at the front of our minds, whether we’re self-employed, contracted workers, front-line staff, or anywhere on these spectrums. Money is the biggest stress in all of our lives, and so few of us know what we are doing when it comes to the money we earn. It’s something that we are all so uneducated about – in fact many of us tend to bury our heads in the sand, blissfully wandering into massive debts, unable to save for our futures.
Friends, we need to get to grips with our finances. We need to kill the fear we have about money, and start making plans to look after ourselves. A massive 80% of us don’t have enough savings to get us through our retirement. Many of us are unable to make any savings at all.
So what can we do, today, to start making a change? And how can we figure out what our financial state truly is?
Most of us view money and finances in completely the wrong way. Hands up, how many of you, as children, ever asked your parents for a new toy, only to be told “no, we can’t afford that.”? As a consequence, we simply accepted that there were certain items that we would have to go without.
But hang on – therein lies the problem. Our parents, either through lack of financial education or worry, failed to take that opportunity to explain, and therefore we have all taken the same approach to money that they did.
How different would our attitudes have been if our parents had instead said this:
“If you want that toy, this is what we have to do. Here’s what Mummy and Daddy earn every month. Here’s what that new bike/go-cart/dolls house costs. This is what we spend on bills and food, and here’s what’s left to save. So let’s work out how long it will take us to have enough money for what you want.”
If you’d had that conversation, do you think you’d have been better prepared to deal with finances now that you’re older?
What’s your situation?
The word ‘budgeting’ strikes fear into the hearts of even the bravest of us. It’s daunting, isn’t it? But let me show you a really simple way of working out why you’re not saving. Because you might be thinking that you don’t have enough money left each month because you’re not earning enough, but in fact, that might not be the honest truth.
Let me explain.
There are two reasons why a person is unable to save. First, they don’t earn enough money to save anything after the bills are paid. Or second, they fail to keep track of what they’re spending each month. In order to plan, you need to work out which category you fall into.
Try this – write down, using your bank statement, everything you spent over the last month. I mean everything – your mortgage and utilities, fuel for your car, taxes and insurances, food, those takeaway coffees you’ve been buying on your way to work. All of it.
When you have written your list, go through it and put a ‘B’ next to everything that is a bill. By that I mean anything that would land you in trouble if you didn’t pay it. Anything that you absolutely have to pay out each month.
Next, put a ‘C’ next to all of your cash purchases. That includes groceries, fuel, clothes etc.
If you have more B’s than C’s, you’re not earning enough.
If you have more C’s than B’s, you’re spending too much.
Simple, isn’t it?
If you are a ‘B’, now you know that you are definitely not earning enough to be able to save. So you know, without a shadow of a doubt, you need to take action to start earning more. If you’re self-employed, that might mean increasing your rates, finding more clients, or finding ways to diversify your business. If you’re employed, ask for a pay rise, or look at finding a better paid job.
If you are a ‘C’, you need to find ways to cut back on those purchases – take your own lunch to work, decline that cinema trip, cancel Netflix, or look at ways to save on your grocery and fuel bills.
No matter what your age or circumstance, the best time to get to grips with your finances is NOW. Don’t leave it – the future you is relying on you to do the right thing.