When first starting to sort your money game out one of the most crucial steps you can take is to get an emergency buffer in place, if you paying off debt and don’t have an emergency buffer there will come a point when your hard up one month and you will resort back to using debt to pay for that emergency.
A lot of finance books recommend you save six to nine months living expenses but for the average person and especially those who are raising a family this could take years, to begin with, concentrate on accumulating one thousand pounds, this one thousand pounds I would recommend keeping it in a high-interest savings account don’t be tempted to invest that one thousand although you may be thinking you’ll be missing out on potential returns if that money was invested but the idea of having a buffer is to relieve your animal brain when you have money set aside it gives you peace of mind and the return on that is invaluable. The Emergency buffer is there for when things go wrong, maybe you need a new fridge or car repairs you know you’ve got some cash put aside for those situations
“To be prepared is half the victory.” – Miguel de Cervantes
An impossible task to save £1000?
You’d be surprised at how quick this can be accumulated with small changes, one of the biggest changes in my financial life came with using Monzo and being able to manage my money a lot better.
After reading the book The Richest Man In Babylon I vowed to myself that whatever I earn 10% was mine to keep, now with Monzo one of the cool features is you can use is the salary sorter, if you are being paid a set amount every month you can automatically have your money divided up into certain pots, the pots are essentially sub-accounts inside of your main account.
One thing I do whenever I have any money deposited into my bank account is spilt the money across the allocated pots, work out what works best for you but I’ve done my accounts similar to how T.Harv Eker has his structured in his books The Secrets of a Millionaire Mind, he has jar which is spilt into percentages, so for instance, 50% will be used for necessities, 10% Financial freedom account, 10% Savings, 10% Play, 10% Education and 10% Giving. When you first get started in managing your finances these percentages will be virtually impossible, especially if you have accumulated a lot of debt over the years, but its something you’ll be able to work towards, to begin with, start with with the emergency fund, save where you can, go through your expenses and see where your money is going, think of your account like a bucket that’s gets filled up every month but its got a big hole in the side of it and the water is flowing freely out of the sides, this is kind of like your bank account
Stop the bleeding
Go through your bank account and find any direct debits or regular payments that your not using, those unused gym memberships, the magazine subscriptions that you stopped reading months ago, the sky package you’re paying over the odds for, there will be areas you will be able to cut back on, cancel and be able to use that money to put straight into building your emergency buffer, then once you have that buffer in place if you have any debts focus on getting them paid off, sell any used bits that are laying around the house, things shoved in draws gathering dust is just money sitting there.
There’s a quote that I love which says “if you manage your money correctly you will get more money to manage.” Think for a minute about the majority of lottery winners, why do 70% of lottery winners go broke within five years and one third go on to declare bankruptcy?
Famous philosopher once said, “If someone hands you a million dollars, best you become a millionaire, or you won’t get to keep the money.”
People who win large amounts of money by chance simply don’t have the financial IQ to manage that amount of money, you must first learn to manage what you have before you can manage larger sums if you are unable to manage £100 what makes people think they can manage £1,000,000.
Ask the majority of people what they would do if they won the lottery and they will tell you one hundred ways they’d spend it, they would buy a house, buy this, buy that, give a certain amount to family/friends, go on holiday, and before you know it the lifestyle they’ve created they’re no longer able to afford, they’ve become accustomed to spending money without thinking about what they’re buying whether its appreciating assets or depreciating they’ve just got used to having money in the back which has relatively quickly dwindled down
So what ends up happening?
The bank account depletes extremely quickly with no thoughts on protecting and growing that money and they are put in a situation where they either massively scale back their lifestyle, sell off everything brought just to get by.
Now Think about businesses or businessmen/women who have created million-pound businesses, would they be able to replicate their success if they lost it all?
If was a betting man I would say they’d be able to do it again because they know what it takes to do it.
I remember reading about an experiment that was done, I’m sure it was in Tibet, the wealth was shared amongst the population and in a relatively short space of time the money ended up back in the pockets of those who valued it most, those who know how to make money, grow their money and protect it, remember that money flows from those who value it the least to those who value it the most
If you truly want to change your life, learn how to manage your money, making money and keeping it are two separate skills, learn how to attract more money into your life through creating a product or service, providing value, solving other people’s problems, we as humans are here to serve and when you able to think about how you can serve other people rather than thinking about ourselves first you’ll begin to see big changes happen
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Don’t be afraid to invest in your education, most businesses have a research and development fund so should we, to grow we need to be working on ourselves all the time, always learning as Jim Rohn used to say a standard education will make you a living, self-education will make you a fortune, put your time and effort into learning a high-income skill, use spare time to commit to growing and bettering yourself, the best investment you can make in yourself.
Don’t get comfortable
If you saving a portion of your income aim to increase how much your saving every 3 months, let’s say you save 10%, in 90 days aim to add 10% to how much you saving, this either forces you to cut your expenses or to make more money, eventually, you’ll be able to save 50, 60,70 percent of your income, providing as the income increases you don’t increase your lifestyle along with it
Thank you for taking the time to read this post, if you want to check out Monzo you can check them using the link below:
Monzo: https://join.monzo.com/c/n8m8qpk
For those interested in reading the book Richest Man in Babylon you can find it using the link below: https://amzn.to/3L5XZxf
This book I really enjoyed reading, the thing I liked about this book is that it’s story-based so it’s different to other self-help books which are usually just information, but this one is a nice short easy read
You can Find T.Harv Eker book The Secrets Of a Millionaire Mind Here:
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