Hopefully by now you’ve started to realise that while money and finances may never be something that lights you up or excites you – the outcomes of having a great financial situation IS something you’re excited by.
It’s important as we come to the end to realise that while we’ve talked about looking forward, designing the life you want, debt, investments and the day to day – there’s still the ability for this all to be popped in the too hard basket. For life to get in the way and for you to realise that it’s been six months and while you had the very best of intentions – life kind of happened.
That’s why we need to set up some type of regular maintenance. Some regular financial grooming and repairs if you like.
Let’s consider your home for a moment. Most of us don’t buy a home, sit back and hope that it looks after itself. Instead, we appreciate that it takes work on a consistent basis for our home to look its best. That might involve a daily sweep, a weekly clean, weekly mowing, monthly gardening, annual spring cleaning, annual pest sprays, five-yearly painting and more.
Or we could think about our personal grooming. There’s the twice-daily teeth cleaning, daily showers, daily deodorant, daily makeup (for some of us), daily SPF, daily shaving, bi-weekly hair-washing, multiple times a week exercising, six weekly hair-cuts, six weekly waxing appointments, annual check-ups and so much more.
We could apply this maintenance regime to so many other things whether it’s fitness, lawn mowers, cars, boats, bikes and more.
Why do we think it would be any different for our finances?
If you want your finances to be great, to look their best, to be regularly maintained so you’re on the path that you want to walk down, then it’s essential to create a money maintenance routine.
Relationships Australia’s research shows that money is the number one thing couples fight about.
Your money maintenance routine needs to be one that works for you.
For some of you it will involve detailed spreadsheets and hours analysing your spending because let’s be honest, you kind of dig that stuff. You’re
the type of people who spreadsheet their holidays for fun. (It’s ok, I do too.) For others of you, it may involve a bit of testing and trying different things in order to figure out what works best for you. This might be a weekly check-in, a monthly money chat, quarterly revisiting of your goals and annual planning.
The important thing is you have a money maintenance routine and even more importantly – that you’re following it. That it doesn’t feel like yet another thing you need to add to your to-do list but eventually becomes as effortless as your personal grooming routine. Sure, some parts of it you may never love but others should become more or less like brushing your teeth.
So, what does a simple but effective money maintenance routine look like?
On a daily basis, you might take a two-minute peek at your bank account balances and allocate transactions on your tracking app (if you’re using one – my preference is to track your expenses rather than budgeting for them). That’s because it’s a good check-in on how your spending is going. Particularly if you’re following the multiple bank method and you’re limiting your day to day spending to your Everyday Account. You’re going to want to know how much is left in that account so you can make great decisions around whether you should be heading out or staying in this weekend, whether you should be taking your lunch to work every day this week, can you afford an unexpected night out and what do you need to be doing today to make sure it fits within what’s left in the account? Over time this daily check-in may drop to a one minute peek as you’re standing in line for your daily coffee, but it’s about forming a great habit of choosing to have a daily check-in with your finances so you’re mindful about both your bank balances as well and your spending habits.
Each week, grab a coffee, tea (or something stronger), sit down and have a slightly longer (say five minute) peek into your bank account balances, your tracking apps and the goals you’ve set. Take a look at your spending and saving via your bank accounts and tracking apps (if you’re using one) and make sure you’re comfortable with it. Decide what your financial challenge is going to be next week that’s going to move you along – whether it’s not buying your lunch more than one day, figuring out how many superannuation accounts you really have or researching whether you have the lowest rate credit card available. You can easily compare your rates through comparison services such as comparethemarket.com.au.
This is your bigger check-in and if you have a partner it’s the perfect time to check-in with them too so you start to develop a great money language together.
Relationships Australia’s research shows that money is the number one thing couples fight about. If you can be regularly and proactively dealing with your finances together hopefully you’ll take a giant pin to that big hot financial balloon waiting to explode over your relationship!
Maybe over brunch or lunch (it might be a treat to do money over food) look at your account balances and figure out whether you’re hitting the balances you wanted in your different accounts and credit cards. Look at the weekly financial challenges you achieved over the past month and pat yourself on the back. Then set up what you want to achieve each week for the next month. Maybe it’s finding more cash and the whole month is geared around that? Maybe it’s sorting out your super? Maybe it’s researching your next investment? Whatever you choose, make sure it’s aligned to your 12 month goals which means it’s a great thing idea to bring these to your meeting so you can make sure you’re on target.
If you’re not on track? The important thing is not to beat yourself up or stop. Instead, show yourself some kindness, figure out what went wrong and what you’re going to do differently next month so you get back on track.
You did it! But don’t just stop, shake off the mud and dust (or glitter) and thank god that’s over. Instead, take the time every year to go through the whole process again. Figure out what your goals are, and if you’re still excited about the life you’re designing or does that need tweaking, what’s your money story – the whole shebang.
I know I’ve already said it, but if you’re in a relationship I absolutely recommend doing this together so you’re on the same page and you’re both working together towards a common purpose rather than pulling apart.
If you have kids, involve them too. Let them know the part they can play and give them ownership over some of the plan. This way they’ll appreciate money doesn’t grow on trees and you don’t have a magical card you tap to pay things. And the bonus is that way the whole family is working together and your children are building great financial foundations themselves.
If you have a strong friendship group, why not do this together so that you can support each other and keep each other accountable.
Of course, whether we compare this to grooming or home maintenance, the end result is the same. It’s creating great financial habits that will replace the unhelpful ones you’ve carried with you up to now.
Now, you might have played along to this point and wondered why we’ve been talking about finances and not mentioned the B word once despite almost coming to the very end!
What word is that?
The dreaded ‘budget’. The one word designed to create fear and loathing in anyone who doesn’t love a good spreadsheet.
Now, here’s a dirty little secret that you may already know. Budgets don’t work for many of us. In the same way that diets don’t work for long.
My problem with most budgets is they include absolutely everything there may even be a teeny chance we might want to spend money on. We also add a whole lot of things we’d like to spend money on, so our budget becomes a giant child’s wish list instead of something that’s helpful. We up the grocery amount, we add gifts, we include haircuts, beard trims, leg waxes, dog grooming and every other thing we think we couldn’t possibly live without and then wonder why there’s nothing left at the end of the exercise to save. Or we make them super restrictive so that we’re all but eating dust which means just like a juice fast, we bust out and grab a BIG bowl of fries as soon as it’s over. Or in our finance’s case, spend big just because we finally can.
Don’t believe me? You might be surprised to discover that research supports this theory.
Professor Elaine Kempson is a Meritus Professor from Bristol University in the UK, and an international authority on consumer financial issues with over 30 years’ experience in conducting research and contributing to policy development. She confessed at the 2016 Good Shepherd Microfinance Financial Resilience Summit to being surprised by findings in her research that suggested budgets didn’t work. She was going back to do further research into why, but I for one wasn’t surprised. That’s because we’re far better at focusing on healthy eating than restrictive dieting.
Why should it be any different for our finances?
What does a no-budget world look like? It involves being mindful about our finances. It involves being strict about the number of bank accounts we set up, automatically transferring money to the different accounts every pay day and then ONLY spending what’s left in our everyday account. It means cutting up credit cards if they’re constantly at their limit because they cause us to overspend and for a time at least, tracking our spending using a Tracking App so we’re choosing to look at how much we’re spending money on different parts of our lives.
Aside from comparing plans and discounts to save on costs across a range of products, what are some other things you can do to make sure in a budget-free world that you’re being smart? Here are my no-budget finance hacks.
Automate. I’ve already talked about it ad nauseum but I wanted to mention it again here so you realised you just may as well do it.
Monitor your Expenses I mentioned this in chapter four so head back if you skipped it. It’s all about being mindful and a conscious consumer when it comes to your spending. Many banks have automatic tracking as part of their internet banking. If you’d like a separate option, comparethemarket.com.au has a Budgeting Calculator to help track your savings goals.
Siphon off a pay rise. Before you get used to all the extra cash hitting your bank account each cycle, make sure you increase your automatic transfer so that some of the pay rise is now being sent to your savings account. If your pay rise means you’re receiving an extra $100 per week then increase your automatic savings transfer by an extra $50 and keep the extra $50 to spend.
Reduce the limit on your credit cards. For some of us, the danger of having a $10,000 limit on our credit card means that we automatically count that $10,000 as part of our spending money. If that’s you, then take control by reducing the limit on your card to one you can pay off every month.
Reduce the number of credit cards. This is no different to reducing your overall limit. If you have two credit cards and a few store cards then choose the card with the best terms, the best interest rate and cut all the other ones up. Or you might transfer the balance of all but one to an interest-free card and then cut all but one card up (including the interest-free card) so you’re not tempted to spend.
Hide your savings. This is something I learned very early on about myself. If I was able to access my savings via my debit card, I considered them to be part of my everyday monies and I’d spend them. Sure, you might argue I should work on my willpower and keep my savings attached to my card in case of emergency – but it was hopeless. By understanding that’s how I act I became aware that hiding my savings is saving me from myself. What about you? Work out what you need to do to protect your finances from you. Maybe your savings aren’t attached to a card or maybe, like me, they can’t be accessed through internet banking. Work out how far removed they need to be and then don’t touch them.
Understand your natural instincts. You could of course work on your willpower, but if you’re a shocking chocolate addict like me you’ll understand that, if it’s in the house, all the willpower in the world won’t stop you from scoffing the entire bar by the time you go to bed. Manage your finances so the everyday funds you have available to spend are in an account and that way you can have guilt free spending without the fear you’ll end up in financial trouble. And for those of you who struggle to spend, this way you can relax and have fun with your money. It’s about spending without guilt and relaxing knowing you’re financially sorted and walking down the path you’re creating.
Compare and save. Often we sign up to a plan, a service, an insurance, a mortgage or an app and don’t give it another thought because it now just comes regularly out of our bank account. Sure, we might grumble at the cost but most of us, if we’re honest, would rather do anything else than shop around for the best price on say our electricity. Yet, comparing and saving on our regular costs and being prepared to swap is where you can save loads of money every year by doing nothing other than a little admin. My advice is to pick a product, service, utility, app or loan and each month (or fortnight if you get really excited) and challenge it to see if you can get a better deal. You can do that on comparison sites like Compare the Market who have done all the leg work for you.
All that’s left is for you to do something. Because the doing is the most important part. If you haven’t already done the exercises go back and do them. Set up your bank accounts, figure out your transfers, design the life you love. Work out maintenance, habits and how you’re going to invest. And no matter what you do, if you want a different result than you’ve had to date, make sure you’re doing something different than what you’ve done so far.
Here’s to you designing the life you love.