I have realised that it has been a while since I covered the basics so today I decided to give a few important principles for better money management.
- Don’t over commit.
This might sound obvious but it is not so easy to achieve. The reason for this is that in a week to week environment it is easy to miss the longer term expenses that only pop up now and then but they cost a lot when they arrive.
What looks like a simple task of paying for the weeks expenses becomes much more complex when you bring in the car replacement and the half yearly rates or car registration. Then a battery will need to be replaced out of the blue and the refrigerator will blow up. You can only under commit when you can anticipate everything that might come your way and then you need to leave a bit of room for the ‘just in case’ surprises.
The Simply Budgets software is loaded with lists of expenses to jog your memory of all the things you might need to set money aside for and it clearly identifies the three different types of expenses you will need to plan for.
Regular (fall regularly in a yearly cycle)
Long Term (repeat on a much longer time line)
Unpredictable or once in a life time.
If you have a copy, use the list to help you identify what you want to save for but do not feel you must include all of them in your budget plan. I often advise people to just start by budgeting for the 10 biggest expenses in their year and get them under control.
Later on you can add other expenses to the list that you decide you would like to cover in your budget plan. The important thing is to then put the money for these budgeted items in a safe place.
- Keep Bills money separate from Play money.
I remember a poem we studied in high school where one farmer kept saying to his neighbour “Good Fences Make Good Neighbours”.
In other words, when it comes to money you need to separate money into protected accounts for different purposes so temptation or slackness can not bring you unstuck. With no fences you just have a big bucket of money and now way of knowing when you overspent.
When you have a bills account you know the money in the bills account is never used for toys. That comes from the play money account! In this way you protect yourself FROM yourself!
- Never look at what others have
It is easy to distress over what appears to be your falling behind when you see others with fancy new stuff that you can not seem to afford. Never look at what others have but rather focus on what you have and keep a longer-term focus for your finances.
Remember; if you are doing what others are doing you will end up like others.
Statistics prove that most other people are not doing the right things and are not happy with their lives. That is why so many people are pinning their hopes on a Lotto win! Why would you want to be like them?
A friend with a new car might make you wish you had a new car too but if you wait and save for your new car and purchase it when it makes sense, your friend will be just as envious of you as you might be of them now. Everything has seasons and you just need to realise this and be patient!
- Nobody gets into trouble with money on purpose but 90% of the population gets into trouble with money just the same!
The other 10% are not heroes; they just get the right advice when they need it and they have a plan that they stick to. They have regular meetings with themselves and trusted professionals where they identify things that need fixing and they fix them! They identify things they want to improve and they work to improve them!
It is not rocket science.
I think the most important thing to remember is that life is a journey and not a destination. It does not start when you finally achieve what you have been working so hard for. It is happening right now so make the most of it!
The Life Management Workshops that are coming up over the next few months are designed to give you some really huge insights into HOW to make life the journey you get the most out of. Have a look at www.simplybudgets.com.au/life-
That’s all for now.
Have a great week!