#MoneyManagement #FinancialTips #PersonalFinance
Hey everyone! 👋 So, I have a bit of a problem… I earn good money, run my own business, and enjoy the finer things in life like expensive wine and coffee. But here’s the kicker – I have 0 savings, live out of my overdraft, and have high outgoings. 🤦♂️
I need to fix my relationship with money ASAP. Can anyone offer some advice or point me in the right direction on how to get out of my overdraft, pay off loans, and start saving? I’m impulsive, hate dealing with numbers, and tend to spend more the more I earn.
Here are some possible solutions I’ve been considering:
– Seek help from a financial advisor or counselor
– Set up a separate savings account and automate deposits
– Create a budget and track your spending to identify areas where you can cut back
– Consider investing in financial education or workshops to improve your money management skills
Any other suggestions or personal experiences would be greatly appreciated! Let’s help each other out and improve our financial well-being together. 💪💸
Head directly to the flowchart on your right.
You’ve hit on one point here you could use as a motivator. You don’t get paid if you get sick, and you have a kid.
If you set some lofty goal of saving 6 of living expenses it will be a slog. How about you set yourself a short term goal of getting 1 months living expenses in an ISA for the specific purpose of ‘sick pay? If you are a competitive person, maybe even set yourself a time limit like save it within a few months or whatever. This way you have a genuine useable reason to do it.
Once you’ve achieved that, think about a different goal. That will have you saving in a different way for something else that you will see real value from.
Some people think £30k is good money. It’s above average. Some would only consider £150k good money. Boris Johnson referred to his £250k salary as chicken feed. Context matters, and will help to you with better answers.
Follow the flowchart.
Get used to paying yourself first, because spending money is fine and you are spending money that isn’t today you money.
You might also want to spend time not spending money intentionally.
I like to consider “Current Me” and “Future Me” when thinking about money.
Future Me wants to retire. To do that, current me needs to save a decent amount in a pension to do this. I make sure current me does that. I’m also putting some money into a long term investment account to pay off the mortgage a few years earlier, so Future Me can kick back and chill a bit more.
Mid-Term Future me likes holidays, so puts money away every month to pay for next years. He also dislikes unexpected bills, so puts money away in an account just to pay for car services and household emergency stuff.
Current Me hates debt. I have always aimed to pay that off BEFORE I spend it on stuff. An overdraft is a debt. Pay some of that down BEFORE you spend your money. If this means less coffee and wine, so be it.
Don’t let current You rob Future You. Not to mention your child – maybe set up a kid’s savings account and pay that BEFORE you spend stuff.
Also – set up a savings account if you don’t have one. Do not ‘save’ in a current account. You can get online-only banks like Chase that will let you set up loads of little pots to put money in for different reasons. Don’t even worry much about interest rates and stuff yet.
People say ‘follow the flowchart’ – which is true, but I think you need ‘your’ personal flow chart.
I am using an app called you need a budget, or there are plenty of the alternative ones, suggest checking it out. It helped me in the similar circumstances.
You are responsible for a child. Is that not enough motivation to grow up?
What are the numbers?
Well how did you buy the house?
I love and appreciate the flowchart, but not every answer on this thread is blindly following the flowchart.
Yes, the flowchart will help long term, but the individual needs to properly address the relationship with money, address the overspend, find out more about how his financial brain is working, THEN look towards the flowchart.
The flowchart isn’t wrong but everyone using it as the default response can be tiring sometimes.
– Breakdown your monthly spend
– Look at which bits you can cut/change
– Dive deeper in your financial relationship
– THEN follow the flowchart when you’re in a good head space
Other people have said the main bits, but it might also help to set up your money to automatically go into savings. As you spend as much as you have in your current account, and hate dealing with money, it could help as it automates the process.
It can just be a low-ball figure whilst you work on your mindset and add more to savings if you still have leftovers at the end of the month. But at least then you have saved something
Many years of undiagnosed ADHD caused me similar issues, direct debits on the 1st of the month were really useful but once I was diagnosed and medicated I did a proper budget and now I move 70% of the remaining cash into an online bank – I use monzo – my google pay / paypal / amazon all come off that account so I can a) see the amount I have left instantly reduce, and b) only spend what I can afford to spend.
Once I’d used that for 6 to 9 months I moved over to a credit card set to pay in full each month, but it wasn’t the same – I need to see the amount go down towards zero.
I’ve only been using this for maybe 18 months in total, and it’s really helped curb my (over)spending.
The 30% that’s left is emergency funds, but I’ve been using it to overpay my mortgage at the end of the month as my interest rate is really high.
If you just like buying stuff, start spending money on appreciating assetts. Often means you end up with loads of nice stuff that stores wealth. You probably increase your chances of getting robbed, though.
> Im impulsive and hate numbers i also get paid directly into my current account, the more i earn the more I spend.
Budgets are boring, I’ve never had one but I do like to keep track of category spending. I had a fairly lavish lifestyle living abroad and would spend a lot per month. Seeing this as restaurants 5k, personal training 2k, etc helped me actually ‘realise it’.
My change in spending coincided with covid which made it easy to reduce things like restaurants and partying, especially in a asia lockdown. You might have to do it the old fashioned way with will power. Try and categorise your spending and look at the headline numbers, it can be quite empowering (or depressing!)
I can relate to this. I struggled hard to self fund myself through university (to the point of frequently going hungry) and had minimal financial literacy. As I earned more, lifestyle creep set in and I spent as fast as I earned.
Others will recommend the flowchart, but it’s overwhelming as a first step. Starting simple got me in the right direction.
Personally, I would start by prioritising getting out of the overdraft above all else. I fell into this easily after years of having a student account which normalised this. Getting out of this month-to-month is liberating.
Once you clear a month without overdraft, put a small amount into a savings on payday (no later!) and do. It touch it. Even a tenner is a symbolic victory. Repeat this and increase gradually.
After a few months, return to the flowchart. Hopefully you’ll be on the way to an emergency fund and can consider your future goals.
For what it’s worth, I’m never going to make a detailed budget, and if I did I wouldn’t stick to it, so having simple rules and tools work for me. I do have the luxury of a reasonably high income, though.
How much do you earn vs what are you spending it on?
Im the same… But i immediately push a portion of my monthly income (the second it hits my current acc) into a pension and a not easily accessible savings account. If its out of arms reach and only appeared very briefly in my current account i don’t miss it.
Goals and rewards. You need to cut back on everything, you need to explain the situation with your partner. You need an emergency fund and you need to plan for the future. You will need to stop spending.
Once you work out what you want, come up with a plan. Eg 1. not rely on overdraft. Once this is achieved for a full month and you have a little surplus cash, treat yourself or your family to a nice meal or something.
2 try to build up an emergency reserve that will cover all your expenses if you become sick.1 month, 3 month, 6 month goals.
Basically try to wittle away at it. In a year or two you could maybe be debt free with 6 months emergency cash. Takes discipline and number crunching.
Save first! Day one of being paid, pay off your bills, pay off any bad debt you can and put whatever you can afford into an ISA. Even if it’s a small amount it will start to add up over time.
I found the motivation of seeing the savings increase also really helps to keep you on track.
Also by saving first you adjust your budget to automatically include savings as the amount you have remaining is your new budget for the month. Good luck!
A fool and their money are soon parted.
Consider long term goal, you don’t want to be working forever and if you don’t save anything and contribute to a pension that’s what will end up happening.