How’s your financial situation looking? Are you pinching every penny you can? Living pay-check to pay-check? Paying for everything on a credit card and hoping not to get too far behind in paying it back? More money than you know what to do with? (Ha!) Personal finance is an area that I am weirdly fanatical about. Maybe it’s because I was never any good at it!
As a teenager I excitedly spent every dollar I earnt. As a young adult living at home and not paying board I saved a little… but only because I ran out of ideas of things to spend money on! And then as newlyweds with a brand new mortgage, Chris and I quickly blew through what little savings we had. It was normal to get to the end of our pay period with $1.18 left in our account. All it took to leave us fumbling for weeks was one electricity bill, one rates bill, or *ahem* one traffic fine.
Finally a few years ago we both changed jobs, and somehow decided this was it: it was time to take control. I still remember our moment of victory a couple of months in. We needed to buy blinds for our living room, and for the first time in our marriage, we had enough money in our savings account to do so! Purchasing those blinds felt like a massive win. And it wasn’t that we were earning more money than before, because we weren’t. We simply stopped burying our heads in the sand, and started taking control. Since then we haven’t looked back (though we have still made some mistakes along the way!)
If you’re in a financial rut, it’s time to take charge – this is your year! Here are my tips for getting on top of your situation once and for all. It may take time to get ahead, but as they say, the time will pass anyway – so you might as well make changes now that will help you reach your long-term goal of financial security.
It seems obvious, but the number one key to successful personal finance is to create a budget. And not just a basic system – Chris and I budget out our whole year in advance, day-by-day, using an excel spreadsheet. We schedule in monthly direct debits such as loan payments, charity donations, bills that don’t change (phone, internet, Netflix, subscriptions, insurance, etc), savings, and a fortnightly cash withdrawal which covers our groceries, fuel costs and personal spending. I will go more into our budget in a future post, as there is a lot to cover – but the key is to find one that works for you.
Budgeting is not a passive thing either – it’s not a set-and-forget kind of deal. Chris’s pay varies from fortnight to fortnight due to on-call hours that he works every 3-4 weeks. So the first thing I do on pay day is sit down with our budget and divvy things up. It sounds like a lot of work but honestly it’s only 5-10 minutes per fortnight. It’s simply become part of my routine.
Hold an emergency account
The first thing we did once we had saved up $3,000 was divert it all into a different account for emergencies. Sure, it meant we had to start building our savings again from scratch, but it also meant we were no longer needing to touch those precious savings for things like big utility bills, trips to the vet, wedding presents or home repairs. Each pay we usually have a couple hundred dollars left un-allocated, and if our emergency funds have dipped below $3,000, this is how we top them back up. Meanwhile, our savings account has finally been able to start growing without being touched, which is pretty exciting!
Avoid personal debt like the plague – and if you have some, pay it off ASAP!
I mentioned that we’ve made mistakes, didn’t I? Our number one personal finance mistake that we have made over and over is taking out loans. Over the years we have taken out four car loans, one renovation loan, and made countless purchases on interest-free store cards (to the tune of $10,000+). In our eight years of marriage, we have paid off more personal debt than we have paid off our mortgage. In fact at one point our fortnightly personal debt payments combined were higher than our fortnightly mortgage payment! Oh my gosh. Just think of all the interest we’ve paid!
It felt okay to take those debts on because we could afford the payments. But let me tell you something – five years after renovating our kitchen, we were still paying it off. When one of our second-hand cars died, we still owed over $9,000 on it. Having those constant drains on our account has been depressing, plus they massively affect our borrowing power if we want to re-finance our mortgage or move house.
These days, we attack personal debt like crazy. The year before last we kept our budget super tight so that we could pay off our renovation budget and store card – both a couple of years ahead of schedule. Once those were paid off, we didn’t say “Yay! Extra money to play with!” We diverted those funds onto the next loan. Now we’re close to paying off that one (again, way ahead of schedule), which will finally leave us with just one loan (and of course, we will start throwing extra money at that too).
Just because your income increases, it doesn’t mean your expenses need to
How many of us fall into the trap, when we get a new job/pay rise, of saying “Yes! More money to spend!” According to financial experts, this is one of the most common mistakes that people make. Now Chris is on a good salary for an unqualified position, but we’re not rolling in money! Over the years, he has had a few pay rises, and each time we have simply put that extra money each fortnight towards a loan (and if we didn’t have any personal debt, it would be going to savings, which would be even better).
This meant that when I was pregnant, we looked at the budget and saw that actually, we could afford for me to leave my full-time job and stay home to parent. If you had told me in 2012 that this would be possible, I would have laughed. And laughed. But we were able to make it work much more easily than I would have realized. Now I am back working one day a week and doing some paid freelance writing, but not one dollar of that money is required in our budget – so it usually goes straight into savings or a loan.
Commit to ruling that personal finance!
Taking control of your personal finance, when you’re not in the habit of doing so, isn’t just going to happen. If you want this, you need to sit down, make a plan that will work for you, and commit to it. You don’t need to be good at maths or a finance whiz either – you just need to have a good understanding of what you earn, and what your expenses are. Plus there are countless resources out there. Chris and I adore Mike and Lauren – their videos on personal finance spurred us on to start paying off our debts as a priority, and they have so much good info for anyone wanting to take control of their finances.
Have you got any great tips that have helped you? Let me know in the comments – I’m always looking for even more ways to rule our finances!
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