Month: May 2019

30/05/2019

9 Life Changing Ways To Supercharge Your Debt Reduction

  • Household debt is growing every year
  • The difference between “good” debt & “bad” debt
  • 9 proven ideas to pay off your debt faster (whether that’s “good” debt or “bad”)

A fact-finding mission

I was trawling through the internet, looking for information for this article on debt (as you do) and came across some interesting information:
 
  • Australian household debt has steadily risen over the past three decades
  •  The ratio of household debt to income has more than doubled between 1995 and 2015, going from 104% to 212%
  • This means if the average Australian earns $80,000 net, they are spending $169,600 per year.
  • Australia is now reported to have some of the highest personal debt levels in the world.
  • The average Australian household in 2015 owed $250,000, made up of:
    • Mortgages 56.3%
    • Investment debt, e.g. rental properties or shares 36.5%.
    • Personal loans 3.1%
    • Student debt 2.1%
    • Credit cards 1.9%.

 

The difference between “good” and “bad” debt

Not all debt is the same. There’s debt that builds your wealth, allowing you to buy shares or property. This is “good” debt.

Then there’s “bad” debt. This is when we use debt to buy things that aren’t going to make us money: cars, holidays, clothes, etc. This debt usually comes at a high cost (think 14% APR on credit cards)

If you look at Australian debt figures, most of our debt is in the form of “good” debt: 56.3% on home loans and 36.5% on investments. So, a total of 92.8% of our personal household debt is spent on potential wealth-creation.

The other 8.2% is “bad debt”, which if the average total debt is $250,000, means that $20,500 is “bad” debt: credit cards, personal loans and student debt.

And, by the way, whatever Western country you’re from, the figures are likely to be similar to these, so don’t get smug thinking that Australians are worse at handling debt than you are. The US has a much higher percentage of credit card/loan debt – 26.3%, and total debt at around 120% of income. The UK’s household debt stands at 150% of income and Canada’s is even higher.

The fact is, no debt is “good” if you’re struggling to pay it.

The easy thing to do is to stick your head in the sand and try to ignore it in the hope that it will go away because it’s just too hard to face.

But sometimes, disaster strikes and we’re forced to confront our circumstances head-on. A series of unfortunate events — a sudden job loss, an unexpected (and expensive) home repair, or a serious illness — can knock our finances so off track and we can barely keep up with our monthly payments.

It’s in these moments of disaster when we finally realize how precarious our financial situation is.

Other times, we just become sick of living paycheque to paycheque and decide we don’t want to do this anymore.

For many people, becoming debt-free the hard way is the best and only way to take control of their lives and their futures.

How to Get Out of Debt Faster

Unfortunately, the space between realizing your debt is out of control and actually getting out of debt can take months or even years. The trick is to make the process as easy for yourself as you possibly can.

Remember, we can only tolerate feeling deprived for so long before we rebel and do something to make ourselves feel good.

The secret to taking control of our finances, getting rid of debt and creating a solid financial foundation for ourselves is to make sure that we don’t feel deprived. Whatever plan we create must include things that make us feel good and don’t leave us feeling deprived.

Fortunately, some strategies exist that can make paying off debt a much faster and much less painful process — and a whole lot less painful.

If you’re ready to get out of debt, try these proven methods:

1. Make more than the minimum payment.

If you have a credit card balance of $15,000, pay a typical 15% APR, and make the minimum monthly payment of $300, guess how long it’s going to take to pay it off. Bet you can’t.

6 years and 7 months.

Yep, seriously.

And you’ll pay $11,000 in interest.

Bear in mind, you’ll only pay it off in 6 years and 7 months if you don’t add to the balance in the meantime. That’s a challenge on its own.

Whatever kind of debt you have, the best way to pay them down sooner is to pay more than the minimum monthly payment.

And to not use them again, of course.

NB Some loans charge early payment penalties. Just check that yours isn’t one of them. But do the calculations anyway: it may be cheaper to pay it off early than to pay the interest.

2. Use the debt snowball method.

This is how it works.

  • Make a list of all your debts from smallest to largest.
  • Pay the minimum amount against all of them except the smallest. You pay as much as you can against that one.
  • Once the smallest balance is paid off, start putting the money you would have paid against that toward the next smallest debt until you pay that one off.
  • Repeat until all debts are paid off.

You can use this same technique but by listing out your loans in highest to lowest interest rate order and pay off the ones with the highest interest rate first.

Over time, your smaller or more expensive balances will disappear one by one, freeing up more money to put towards your larger debts and loans.

This “snowball effect” allows you to pay down smaller or more expensive balances first — giving you a few “wins” for the psychological effect — while letting you save the largest loans for last.

Ultimately, the goal is snowballing all of your extra money toward your debts until they’re all paid off… and you’re finally debt-free.

3. Make some extra money.

Sorting out your debts with the debt snowball method will speed up the process, but if you want to make a much bigger difference, you need to bring in some extra money.

Relying on one income is dangerous and leaves you open to failure until you’ve got your finances all sorted. In the meantime, set up a second income from somewhere.

You could do odd jobs or weekend things such as mowing gardens or cleaning houses, or you can set up an online business, maybe a blog or learn how to become a Virtual Assistant.

Sites like TaskRabbit.com and Upwork.com allow nearly anyone to find some way of earning extra money on the side.

Note: any extra money you earn needs to go towards your debts. It’s not there for you to go out and spend. Sorry to be so blunt, but I wanted to just put that out there because I know that when I got some extra money in, the first thing I’d do would be to go out for a nice dinner or buy myself that pair of jeans I’d been eyeing up (or maybe a bridle for the horse or definitely something for one of the kids).

The extra money is to pay off your debts.

4. Do a backwards budget (and stick to it).

If you’re going to really get on top of your financial situation, you need to know exactly where your money is going 100% of the time.no excuses.

You need to know how much you’re spending on what.

I personally don’t like traditional budgets. For me, they set me up for failure because I can’t stick to them for long and I wind up feeling useless and giving up on the whole thing.

A backwards budget allows you to pay yourself first, i.e. pay down your debts and pay up your savings before anything else goes out.

Like I said earlier, always allow some room for those little extras that mean that you can treat yourself for doing a good job and working towards getting yourself out of debt.

5. Sell everything you don’t need.

If you’re looking for a way to drum up some cash quickly, take stock of your belongings. Most of us have stuff lying around that we rarely use and could easily live without.

Sell it.

The psychological impact of having a good clearout is huge. It lifts our spirits and leaves us feeling much clearer and freer.

So why not sell your extra stuff and use the funds to pay down your debts? It’s a double whammy in the feel good stakes!

You could sell stuff on Gumtree or Facebook Market, have a garage sale or go to a Car Boot Sale. All else failing, maybe call a second hand furniture place to see if they’re willing to buy it or call a charity and donate it to a good cause.

6. Negotiate your bills

Just recently, I got in touch with a broker about our health insurance. We’d been with the same insurer for about 20 years or so and they’d been great, but the monthly costs kept going up and going up and I seemed to be getting less and less in return.

I’ve now got a higher coverage of extras that I use and it’s costing me $90 a month less.

We did the same thing with our life insurance and saved $400 a month.

Then we did the same with our mortgage and saved over $800 a month.

The broker told me that the rule of thumb is to change companies every two years. All companies, whether that’s banks, insurance companies, utilities suppliers, whatever, offer great discounts to new customers but don’t offer the same deals to their existing customers. So, change.

Or phone up your provider and insist that they offer you the same rate they’re offering new customers or you’ll take your business elsewhere.

It’s your money, take care of it.

If you’re not the negotiating type and you’re in the US, you just got lucky because you have a service called TrueBill (there are others but Truebill was the first). The Truebill app will review your purchase history to find forgotten subscriptions and other repeating fees you might want to cut from your budget, and it can even negotiate some bills down for you.

Unfortunately, there’s no similar service that I can find in Australia, so my fellow Aussies, Kiwis & Poms… you’ll have to get on the phone.

7. Transfer your credit card balance

In the unlikely event that your credit card company won’t budge on interest rates, then consider a balance transfer.

Credit card companies are always offering 0% interest on balance transfers, usually for 15 months or so. Just be aware that there may be a fee of up to 3% for transferring your balance. There might not be, just check and shop around if necessary.

If you’re planning on paying your card off, this may be ideal as it may reduce the interest that you need to pay to zero. Whatever you’re paying off is purely the money that you borrowed.

8. Use any unexpected extra money to pay off debt

Most people come across some type of unexpected income throughout the year. It might be a pay rise, an inheritance, a bonus at work or a nice tax refund.Whatever type of unexpected money it is, spend a little on celebrating if you want to, but put almost all of it towards helping you become debt-free.

9. Change your habits: avoid temptation

We’re all tempted by something. It might be catching up with friends at the local shopping centre for a coffee (me), browsing the internet and “just checking” what’s new in our favourite online store (my daughter), or driving past our favourite restaurant and wishing we could pop inside for a meal (John). If you have a credit card in your wallet, the temptation may prove too big.

Whatever your biggest temptation, it’s best to avoid it altogether when you’re paying down debt. When you’re constantly tempted to spend, it can be difficult to avoid new debts, let alone pay off old ones.

So, avoid temptation wherever you can. Change your habits. Go a different way home. Go somewhere other than the shopping centre to meet your friends for a coffee. Do something other than browsing the online stores. Put the credit cards away somewhere safe, don’t keep them in your wallet.

Change your habits so that temptation isn’t put your way.

The Bottom Line

No matter what type of debt you’re in — whether it’s credit card debt, student loan debt, car loans, or something else — it’s important to know there is a way out. It may not happen overnight, but a debt-free future will be yours if you create a plan and stick with it long enough.

No matter what that plan is, these strategies can help you get out of debt faster.

And the faster you become debt-free, the quicker you can start living the life you truly want.

What are some strategies you have used to pay down debt quickly? Have you ever tried anything on this list?

 
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29/05/2019

7 Tips to Skyrocket Your Savings

  • How to set up a savings plan that you can stick to
  • The secret to saving money
  • Why you need to save money
  • What to do when it all goes wrong (and it will)

***This post may contain affiliate links, which means I may receive a small commission, at no cost to you, if you make a purchase through a link on this blog. I would never recommend a product I don’t use or love myself! You can read the long, boring, legalese disclosure here.***
 

If you’re anything like me, you’ll know from past experience that put money away into a savings account with any kind of regularity is just not your thing.

In fact, I’d go so far as to say that setting up a savings plan is one of the things guaranteed to make me feel like a complete failure.

Because I always fail.

But let’s face facts, there’s always a way to make things work and we need to give ourselves the best possible chance of succeeding, right?

And for me, these steps are how I give myself the best chance.

1. Set your goal.

The people who are the most successful at something have a strong ‘why’ behind what they are doing. So, first of all, we have to have a “why” that’s big enough to keep us going.

So, ask yourself: why do you want to save money?

  • Is it so you can live comfortably in retirement?
  • A holiday?
  • Your wedding?
  • The kids schooling
  • A new car?
  • An emergency fund?

Whatever your goal is, write it down and put it somewhere you can see it daily, to remind yourself why you’re doing this.

2. Know exactly where you are.

This is not the most pleasant experience when we know our finances aren’t in the best shape, but it needs doing.

Think of it this way, say you want to travel from Perth to Brisbane, but you have no map, no idea of which way is North, plus you don’t even know where Perth is. It’s going to make the journey impossible, right?

So, it’s time to look at all your bank, credit card, loan and mortgage statements and get a clear picture of your finances.

Don’t hide, don’t be disheartened. This is your starting point and you can’t go anywhere unless you know where you are, right? The minute you know where you are is the minute you can begin to take baby steps towards your goal.

As you’re looking through your finances, pay attention to the things you’re spending money on. Take note of the spending that doesn’t align with what’s important to you. What can you change? What needs changing? Where do you want your money to go?

This is when you start to take control and decide consciously what you’re going to spend your money on and create a budget for yourself. It doesn’t need to be detailed, but you need to know where your money is going and how much you have to spend on everything.

Take a note of all the things you’re spending money on that you don’t want to spend money on any more and add up the total. That’s the amount you’ll be saving.

Open a savings account, preferably in a different bank to your normal one, and set up a direct debit for the amount that you’re saving from your day-to-day account to the savings account.

Make sure that you leave enough for your day to day living without leaving yourself feeling deprived.

But transfer the money out of your day-to-day account each week/month before you have a chance to spend it.

3. Automate your savings

Based on your overall goals, knowing where you are and how much you can devote to saving, create a plan around it.

In another article, I spoke about ‘paying yourself first,’ meaning every time you get paid, save a percentage of your income before you do anything else.

It’s recommended that we save 10-20% of our income, but if you’re in a poor financial position (I.e. if you’re swimming in debt), you may not be able to do that.

But the secret is to start and to keep at it and automate your savings.

Don’t do it manually, make it happen automatically.

I can’t stress this enough: make it automatic!

Automatic.

We all know that if we’re left to our own devices (okay, if I’m left to my own devices), it’ll happen for a few months and then stuff will get in the way, and we’ll miss one payment… and then another… always with a good excuse.

So, automate your savings.

Shall I tell you who knows the power of automated payments? The Tax Department. Every tax department around the world takes their taxes out of their populations’ paycheques before the people get their money (at least, I think they do. They definitely do in Australia, UK, US, etc).

Take a leaf out of the tax man’s books and automate your payments to yourself.

4. Monitor your spending.

Online banking and all types of apps make it really easy to monitor your spending.

If you want to use an app, MoneyWiz3 is the best one that I’ve come across (and I’ve tried A LOT of them over the years) for the simple reason that it doesn’t just monitor and track your spending, it also forecasts your bank balances.

So, if you’re in a situation where you need to juggle between accounts, it’s the best app.

You can download it on iTunes here.

If you really want to get on top of your finances, the one thing you absolutely need to do is check your spending and your balances every day.

Every day.

Spend a few minutes each morning so you know exactly where you are. It’s five minutes that you’re investing in yourself and your future.

5. Redefine your spending habits.

A recent study found that people spend 12% to 18% more at fast-food restaurants when they use their cards instead of cash.

Maybe it’s time to switch back to cash. I know it made a huge difference for me in keeping me aware of exactly how much I’m spending. It’s so much different to hand over cash and see how much isn’t left in your wallet than it is to wave a card at a machine.

You might also want to try the old-fashioned envelope method to reinvent your spending habits. Basically, you have an envelope for each spending category. You draw out cash at the beginning of each month and put the relevant amount in each envelope and then you pay for everything in cash. When your envelope is empty, you’ve run out of money, it’s as simple as that.

It can be difficult to change our choices when they‘ve become habits, but realizing that you might have a habit that needs changing is half the battle. You can change your habits if your ‘why’ is strong enough — but don’t beat yourself up if you don’t get your spending habits the way you want them the first time around.

6. Bounce back quickly & learn from mistakes.

If you mess up – and you will, you are human – don’t worry about it! Just notice what happened, work out why it happened (were you stressed?  Upset? Did you just forget? Was it all too hard?) and get back on track as quickly as possible.

Preferably without beating yourself up about it too much.

And definitely without giving up. You will make mistakes, it’s how we learn. So, learn the lesson… and keep going. That’s the only way you’re going to get there.

7. Leave room for fun & rewards.

The biggest reason we’re likely to give up on something, whether it’s a fitness program, a weight loss program or a savings plan, is because we’re left feeling deprived.

When you’re making this plan, leave yourself enough money to enjoy yourself a little.

Fun doesn’t have to be expensive but having a little bit of it built into your budget can definitely help you enjoy the journey. Reward yourself for the changes you’re making and the hard work you’re putting in.

29/05/2019

(Potentially) Harmful Habits

Out of the blue

A couple of months ago, an old friend, Jane, got in touch with me completely out of the blue. In one of the bizarre twist s that life likes to put on us, we discovered that we were both going through pretty much exactly the same things in our lives. The similarities were really quite spooky.

We thought that it would be a great idea to set up a daily call to each other so we could share what was happening for us that day and to keep ourselves on track because one of the things we both noticed about ourselves was that we have all these great ideas, all these good intentions… and we never carry them out.

Actually, that’s not true, sometimes I carry out the ideas, but most of the time, they fall by the wayside and life goes on in the same old way that it always has and before I know it, bang! There’s another year gone by and I still haven’t started that project that was such a fantastic idea.

Sparks of life

It’s funny (both funny peculiar and funny ha-ha) how I have these great ideas that spark life in me, get me all excited, make me feel good about the future… and I don’t do anything about them. I just get on with my mundane, boring life, and every now and then, I take a quick squizzy over the fence into the lush, green pastures of “Wouldn’t it be nice if I could do that” without ever taking any real steps to actually climb the fence. I just walk right alongside it, dreaming about all the good things that might happen, whereas if I just climbed the bloody thing, I’d be able to caper through the heavenly emerald meadowlands eagerly beckoning me from the other side. And I wonder why life seems to be passing me by? Seriously?

Jane and I realised that this is how we both live our lives, always looking over the fence without ever climbing over it, so we thought that if we were going to break that habit, then maybe chatting to each other every day would help keep us on track.

Either that or we’d end up procrastinating together, one of the two. To be honest, it was touch-and-go which one it would be.

How things change

Fast forward a couple of months, close to a hundred phone calls, many hours of chatting about life, kids, hopes for the future, things that get in the way and all the rest of it, and here I am, running on adrenaline, not sleeping for more than 4 or 5 hours a night because I’m too excited about what’s happening in my life!

That fence of mine got climbed and I’ve been gambolling in the verdant fields of new things for the last month or so.

And this is where the habit of mine that I don’t like comes in. It’s not walking alongside the fence without climbing it. It’s climbing the fence and then falling in love with that I find on the other side. I always do this, I’m such an Ooh-Look-Shiny-New-Thing! kind of person.

Whenever I take something new onboard – and that’s a regular occurrence, despite the fact that I feel like I spend my life walking along the fence – my family & friends wish me a long-suffering (but hopefully fond) farewell, knowing that I’ll be present but unavailable for a short while. Then I launch myself into something head first and don’t come up for breath till it’s conquered, mastered and becoming just a tad boring.

Which is where I’m at right now.

Shiny new things

Having committed to actually having the blog be a money-making business by providing things that people not only enjoy but that also make a difference in their lives (that sounds really w*nky but you know what I mean), I set about actually putting myself out there, getting people to the website and providing people with the tools they need to support them (which I absolutely hadn’t been doing before).

And it’s working. Things are picking up speed.

I’ve found myself running faster and faster, desperately trying to keep up, all while trying to learn a million new things. At once. I don’t like to wait to become proficient at something, I like to be proficient at new things as soon as I start them. No excuses. I immerse myself in them, ignoring the rest of my life, not eating properly, not sleeping, possibly even not exercising (gasp!) until I become proficient. Interruptions to this almost vertical learning curve by way of one of my loved ones actually wanting to hold a conversation with me are greeted with a loud (and quite aggressive) “What do you want?” as they startle me out of my faraway learning place (aka another planet).

Unwanted habits

Now, I’m going to get all enlightened on you here because I’m going to tell you that I don’t really have any habits that I don’t like. That’s totally untrue and totally true at the same time. I’m trying to accept myself the way that I am, and if I do that, then I won’t have any habits that I don’t like, right? On the other hand, I irritate the crap out of myself sometimes. I’m loud, I’m tactless, I’m overly single-minded, I’m thoughtless and a gazillion other things. But you know what? One of the great things about getting older is that I don’t have the time to worry about crap like that. I’m just going to do things in a way that works for me.

K xxx

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28/05/2019

The Practical Guide to Budgeting… Backwards

  • Why traditional budgets don’t work
  • What is a backwards budget?
  • How to do one
  • Who it’s for
  • Who it’s not for
  • How this might be the quickest way to get ahead financially

Avoiding Budgets

I don’t know about you, but one of the reasons I avoid budgeting is because I can never, ever see how we’re going to live and save and pay off our debts.

When I look at our previous years’ expenditures and try to forecast and budget for the following year, I tend to just give up.

I can never see how it’s ever going to work: I lose hope, I give up, I close the spreadsheet and I walk away.

That’s how it’s always gone for me. Budgeting is a great way to analyse spending for me, but not a good tool to utilise for planning.

One thing that changed all that is the Backwards Budget.

I’d heard about Backwards Budgeting years ago, but how it landed for me was “pay yourself first”. In other words, go out, spend as much as you want and then, if there’s anything left over, put it away in savings.

Needless to say, there was never anything left over. I’d totally misunderstood the concept.

The “pay yourself first” bit is about paying off your debt, then paying into your savings before you pay for anything else. It’s not about spending what you want and paying bills with what’s left.

Sad but true.

I wish someone had explained this to me years ago. Like most people, we currently have very little in our savings accounts and we have a life filled with debt. Living that way is stressful and unpleasant and stifling.

We dug our heads in the sand about this for years and pretended this wasn’t happening, telling ourselves we’d rather “expand” than limit ourselves by budgeting.

But the unfortunate thing is, our very actions – not budgeting – made us feel more and more stressed, more and more limited, more and more stifled. The exact opposite of what we wanted to avoid by not budgeting.

Something had to change, and this is one of the things that did: creating a Backwards Budget.

What is a backwards budget?

Basically, a Backwards Budget is where you decide how much money you want to pay towards debt or into savings each month and then you live off what’s left over.

That’s it: you have only the remainder of the money to live off AFTER you’ve paid yourself first.

Traditional budgeting gets you to work out what you expect to spend on each category and what’s left over is the amount of money you can put towards debt repayment or savings.

Like I said before, budgeting in the traditional way can lead to a feeling of hopelessness and make us stick our heads firmly back in the sand.

This way – budgeting backwards – puts the control firmly back into our hands.

We decide how much we want to save.

We decide how much money we want to pay off our debt.

It takes the focus away from the bills and helps remove those hopeless and helpless feelings.

Why use a backwards budget?

When you decide to use a backwards budget, your focus is on how much you want to pay off your debts and how much you want to save or put into Super/pensions.

In other words, the focus is on you and your goals, the power over what happens lies with you.

With traditional budgeting, the focus is entirely on your expenses. The power in this situation is out of your control: it depends on what bills come in.

Steps to create a backwards budget

1. Take a long, honest look at where you’re at financially right now:
  • What debts do you have?
  • What savings do you have?
  • How much is in your super/pension/401k?
2. Decide what your financial goals are. Do you want to:
  • Build an emergency fund (3-6 months of expenses)
  • Pay off:
    • your mortgage
    • any car loans (or sell your cars and buy new ones cash)
    • credit cards
  • Save at least 10% of your income for retirement
  • Save a deposit for a house
  • Put aside money for your child’s school or Uni

There are plenty of other things you could write down, just list them all out.

3. Decide which of your financial goals are to be given priority,

i.e., pay off the highest interest loans/credit cards first before you pay off the mortgage.

List them out in priority order, put work on only the first 2 or 3 for now. As you pay them off, things further down the list can be added.

4. Work out:
  1. How much money you want to pay to yourself in total each month (this can be a fixed amount or a percentage of your income), and
  2. How much money you want to put towards each goal.

If you decide to do percentages for your backwards budget you can put 20% of your total income towards your financial priorities. Let’s do an example…

A Backwards Budgeting Example

Let’s say our friend, Kate, has a monthly income is $5,000 and she decides that she wants 20% of it to go to paying herself first, which gives her $1000 a month.

Kate’s immediate goals are:
  • Set up an emergency fund with 3-6 months of expenses in it. In this case, Kate will need at least $6,000
  • Pay off her $10,000 credit card (which is maxed out)
  • Top up her Super Fund

Initially, each month Kate will pay $500 towards her emergency fund and $500 towards her credit card (on top of the minimum monthly payment).

She will set up automatic monthly payment so that these payments come out of her income every month before any other payments.

The best way to teach someone a budgeting method is for them to see it in action.

So, let’s say that our friend Frank makes $3,500 each month after taxes and deductions.

After 12 months, Kate will have the Emergency Fund that she needs, so she needs to find a new home for that $500. At this point, Kate can choose whether to put it towards the credit card or towards her Super. There are arguments for both sides as to whether to pay off debt or start saving first. Do a little research and make your choice. In this case, Kate decides to keep the 50/50 ratio of debt repayment & savings and put the $500 towards her Super.

The End Result:

After all this investment in her future has happened, Kate is left with $4000 a month to live on. This includes mortgage payments or rent, groceries, bills, and all other living expenses.

Benefits of a backwards budget

1. You know exactly where you’re at financially.

The trouble with normal budgeting (and heavens knows I know this well!) is that you’re constantly checking spreadsheets or apps to find out where you’re at and whether you can afford something

With a backwards budget, while you will still have to budget the remainder of your money, you know that a certain amount is going towards your debt repayment and savings each and every month, regardless.

2. You put money into your savings & debt reduction FIRST.

The main reason people don’t save money or pay off debt is that they pay their expenses and then leave the rest of the money in their bank account.

3. When you backwards budget, your savings happen automatically.

You can build an emergency fund relatively quickly because – again – it’s coming out of your income first.

The downsides of backwards budgeting

There are a few things to consider if you decide to backwards budget:

– It is possible that you can save too much money and leave yourself with not enough to cover your expenses.

– It doesn’t work that well for people who are drowning in debt, unless they turn it into a debt payoff method before of a savings method. You can’t have $10,000 in the bank but have $10,000 worth of debt. They basically just cancel each other out and you’re actually still at zero.

– This method can fall a little short if you see an increase in your income. Let’s say you normally make $3,000 a month and your backwards budget plan is to save $500 a month. If your income increases to $4,000 and are still only saving $500, you’ll see a horrible thing happen called lifestyle creep. When you see an increase in income with this method, you must increase your savings by the same percentage.

– If you need to know how your money is doing at all times, this may not be the best method for you. The backwards budget method doesn’t involve tons of tracking and focus on your spreadsheets involved. It’s a set it and forget it type of budget.

Final Thoughts

If you’ve tried a ton of different traditional budgets over the years and haven’t been able to find one that works, it might be time to try out backwards budgeting.

This budgeting method is awesome and will grow your savings insanely quickly as compared to most other methods.

Would you ever backwards budget? If so, let me know in the comments what draws you to this kind of budgeting.

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27/05/2019

12 interesting ways you can make money (without quitting your job)

 

I just came across an article on Vital Dollar’s website that got me totally intrigued. You’ll find out more about the article later, but anyway, kudos to them for giving me the title of today’s article! Thanks, guys!

Why we need more than one source of income

Right, there’s no nice way to say this: if you want to get out of debt (this is a reverse royal “we” here, because I’m including myself in that “you”, if you know what I mean), it’s very likely that you’re going to need one or two side income streams.

In fact, while I’m on that topic, if you want to get wealthy, you need more than one income stream, especially if that income stream is a job.

However, the internet is full of fake promises that you can make $1000 a month or $500 a day or “I earned $80k last year just from doing this one thing”

If you’re doing a search, the quick way of telling whether it’s a legitimate thing or not is whether it costs anything to set up. If you need to pay a fee upfront, generally, walk away.

But here’s a list of 12 ways of earning a second (or third or fourth) income while you’re still working your main job or looking after the kids or whatever.

Now, let me say that I’m not including any information on the money back or coupon sites that they have in North America. I’m in Australia, I know nothing about them and it’s difficult for me to really find out about them, so they’re off the list.

1. Start a blog or online business
Online business is one of the easiest and cheapest ways to start creating money for yourself. You can create your own blog for free using Weebly, which is what I did. If, in the future, you want to sell products, you can simply upgrade your Weebly subscription and start selling right away.
 
  • Set up a Weebly blog or website
  • Buy your domain name and host your site through Siteground – hands down the BEST hosting company. They have the best, instant and FREE  support that I’ve ever come across, and when you’re a complete technical no-nerd like me, that’s absolutely essential. Click here to go to Siteground now.

Create a blog and leverage it into affiliate sales or product endorsement deals. Consider topics like:

  • Travel
  • Cooking
  • Health
  • Technology
  • Personal finance
  • Style
  • Shopping
  • Holidays

2. Test websites for $30 an hour
Ever visit a website and you thought about how bad or how great it was? Did you know that you can actually can get paid to share your thoughts?

There are companies whose job it is to test websites and they pay members of the public to do the research for them. You don’t need to be a tech wiz or anything, they want an everyday, ordinary opinion on how their client’s websites look and work.

All you have to do is visit the websites they send you to (and there won’t be any dodgy ones, don’t worry!), have a look around, make a note of what isn’t working (if anything) and get paid. That’s it.

This is how it works. User Testing, for example:

  • Go to the specified website or app
  • Switch on the recording app to record your screen and voice while you’re on the website
  • Complete a set of specified tasks and comment about them as you’re doing them.

Payment: almost US$30 an hour (just under $10 for each 20-minute video you record).

Their clients include Apple, Microsoft, Adobe, and other Fortune 500 companies.

This is earning money for expressing your humble opinion, lol.

Here are some home testing websites:

   

3. Become a virtual assistant
If you’re not sure what a VA does, basically they can do anything and everything from checking emails and making travel plans to handling internet research and posting on social media.

Experienced VAs command US$50-$100 an hour and work for clients across the globe.

Some reputable sites are:

But there are hundreds of great VA companies, check out ones locally to you.

4. Tutoring
Give private tuition classes at your home, either in person or online via skype

There is a growing number of sites for this kind of thing, with levels from early primary through to University.

You’re likely to want to work for a local company, so again, do a bit of internet research to find reputable companies.

5. Change your search engine
This is an interesting one but currently only available to (most) US residents. Do you use Google or Yahoo to search for something on the net?

Did you know that Bing will pay you to switch away from Google & Yahoo?

This is most definitely Microsoft bribing people away from the traditional search engines, but if you’re not that bothered by privacy issues (I use DuckDuckGo because it doesn’t track you and I hate the thought of someone watching my every move. Weird, I know), and you want to earn a bit of extra money in the form of gift cards, this could be for you.

All you have to do is sign up for the program, conduct your regular searches on Bing, make it your default search engine, and earn credits that can be redeemed for gift cards. You can earn as much as $5 to $10 per month.

Note: Make sure you’re signed-in whenever you do a search.

6. Data Entry
Use your accurate and quick typing skills to enter information from home.

There are heaps of reputable companies such as Seek or CareerOne where you can register and search for work. Just specify “online” when looking.

7. Work for Amazon
Amazon Mechanical Turk lists the online jobs that Amazon is on the lookout for. They’re all work from home positions with flexible hours for one of the world’s largest retailers.

Some tasks that people are asked to do include:

  • Select the correct spelling for these search terms
  • Is this website suitable for a general audience?
  • Find the item number for the product in this image
  • Rate the search results for these keywords
  • Are these two products the same?
  • Choose the appropriate category for products
  • Categorize the tone of this article
  • Translate a paragraph from English to French

There are also more technical tasks available. Check it out here.

8. Affiliate marketing
If you already have a blog on something that interests you, leverage on your hard work and earn some money from it.

I recently completed an Affiliate Marketing program by the lovely Michelle Schroeder-Gardner. She makes over $50,000 a month from affiliate marketing alone (she has other income streams, too) and this course tells you exactly how she did it and how you can, too.
The course has 6 modules, over 30 lessons, several worksheets, bonuses, an extremely helpful and exclusive Facebook group, and more. You go through everything that you need to know about affiliate marketing, such as:

  • What affiliate marketing is and how it works
  • Why affiliate marketing is so good
  • The exact steps Michelle took to earn over $300,000 from a single blog post
  • It gives the links to more than 80 companies for you to market, whether you’re an established blogger or a complete newbie.


Click here to check out the program.

You can also check out the affiliate programs at Amazon Affiliate or Google AdSense. You simply apply for the program, choose products to promote, and advertise them on your content site. Whenever someone reads your blog or article, clicks on the links, and buys an item, you get paid.

9. Sell Your Unwanted Stuff For Cash
If you are in need of extra cash, your unwanted possessions can be a great source of income.

Just recently, we raised several thousand dollars selling things we no longer wanted or needed on Gumtree and eBay. You can also use Facebook and Amazon.

Alternatively, hold a garage sale or go to your local Car Boot sale.

10. Rent out your spare room on AirBnB
Did you know that you could rent out your spare room on AirBnB and make some good money?

If you live in a city or town centre, university town or holiday destination, you can earn good money by renting out your spare room.

You can even rent out your entire house when you are on holiday or away yourself. It can be a lucrative way to earn money without a job.

11. Be An Amazon Seller
There are many people who make a very nice income just by selling on Amazon.The easiest way to work with Amazon is to sign up for their Fulfilled By Amazon (FBA) program. You can click here to find out more. You simply list your items for sale, send your inventory to an FBA warehouse and Amazon takes care of the rest: payment, picking, packing & sending.

They take the payment for your items, they pack and send your products to the customer, and they take care of customer service for you. For that, Amazon charges you a standard set of fees for handling all this (click here to find out the costs), but it’s still worth it, particularly because your items are then  listed as Prime, which means more sales.

Many people earn a living selling exclusively on Amazon. For example, The Selling Family, are a husband and wife duo making six figures a year selling on Amazon. They also have a fabulous set of courses and programs that teach others how to do the same thing.

You can sign up for their free 7-day email course on how to make money on Amazon here.

12. Become a Rent-A-Friend
Yep. Seriously.

A blog post titled “Rent A Friend: How to Make Money by Being a Friend” came up in my feed this morning and I just had to check it out!

And I found out that this is actually a legitimate thing! People will pay you to be their friend! I’m not sure whether I’m sad, horrified, perplexed, upset or all of those things at once. I have to say that making money by being someone’s friend is the number one weirdest extra money idea that I’ve ever come across.

Check out the website here. They now have people both available as friends and looking for friends across the world. This isn’t a dating agency, it’s simply about finding someone to accompany you to say a wedding or a movie or whatever.

Basically, you can earn yourself $10+ an hour, the amount is entirely negotiable.

There you have it: twelve incredibly good and interesting ways to earn money without quitting your job.

Caring is sharing! Share this with your friends…
 
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16/05/2019

9 Ways We Sabotage Ourselves With Money

Menopause, Marriage and Motherhood
  • How we sabotage ourselves around money.
  • How to identify our habits around money.
  • What we say to ourselves to justify those habits.
  • How to create new money habits and new things to say to ourselves.
  • Learn to recognise when we’re in our old automatic habits and how to switch to the new ones.

***This post may contain affiliate links, which means I may receive a small commission, at no cost to you, if you make a purchase through a link on this blog. I would never recommend a product I don’t use or love myself! You can read the long, boring, legalese disclosure here.***

 

What happens in the “quiet” of our mind…

“I deserve it!”“I’ve had a rough day, it’ll cheer me up.”

“It’s a bargain, they’re 50% off!”

“My friend Katy swears that everyone needs one of these.”

“I need the right car and it’ll only be an extra $500 a month, I can afford that.”

“I live a stressful life; a drink at the end of the day helps me wind down.”

If you’re anything like me, you can relate to one or more (maybe all!) of these quotes as things that you’ve heard yourself say to justify your spending. It’s these things that keep us locked into constant debt, in a state of living from paycheque to paycheque. If we want to change things, get out of debt, get out of the cycle of overspending and living from hand-to-mouth (even if it’s a silver-plated hand-to-mouth situation like ours is!), then we need to take three steps:

  1. Identify our habits around our finances and what we say to ourselves to justify those habits
  2. Create new money habits and new things to say to ourselves
  3. Learn to recognise when we’re in our old automatic habits and switch to the new ones
    •  

The 9 Areas to look at:

When we’re trying to find the ways that we sabotage ourselves and the things that we say, there are nine distinct areas we need to look at, but before we do, we need to be aware of something: our entire advertising industry, possibly even our entire media system, constantly bombards us that we are right in saying each and every one of these things. I’ve put an example of something an ad may say under some of the areas. Being aware of them can help us to see what’s going on and give ourselves the opportunity to buy into that behaviour/belief… or not.

1. Entitlement

Ad Example: you work so hard, don’t you deserve to treat yourself to this?
If we’ve ever said “I deserve this” as we grabbed something and took it to the cash register, that’s entitlement. We may try to fool ourselves into thinking that we’re completely justified but if we were being completely honest with ourselves, if we were completely justified, we wouldn’t need to reassure ourselves about it, would we? (That sentence got away from me completely, lol!).

Entitlement is something like a reward system: I work hard so I should be able to buy this for myself. It’s about changing the way we reward ourselves; pay off debt rather than adding to it.

2. Instant Gratification

Ad example: Lose 7lbs in 7 days
Instant gratification is the desire to experience something now. The problem with instant gratification is that it’s instant, it’s fleeting and it’s soon over. Very quickly we need the next fix of instant gratification, and then the next one. Anyone marketing anything knows that people will go after quick fixes, including me. What got you reading this article? The headline: 9 Ways We Sabotage Ourselves Around Money. We want to know what the problem is and how to fix it, now. We don’t want to know that it may take some time or that it might be hard work, we want easy to follow, step-by-step magic pill.

Unfortunately, it’s this that keeps us in our downwards money spiral and it’s something that we must recognise and change into delayed gratification if we’re going to become debt-free and enjoy our money.

A quick fix to this problem is to have a 72-hour wait time on any purchase we make. In other words, if we see something we like, we need to put it back, walk away and wait 72 hours before we actually purchase it.

3. Retail Therapy

Ad example: 1970’s Coca-Cole ad, “I’d like to buy the world a Coke…”
The idea that buying something because it will bring you joy is something that’s been around for decades and that old Coke ad is a classic example. It’s all about the idea that going out and buying something will make us feel good. And it does, it brings a rush of joy and exhilaration. For about five seconds.

To move forward and change the way we view money, identifying our retail therapy triggers is the first place to start.

Ask yourself these questions:

  • Is shopping a stress reliever for me?
  • Is shopping my reward system?
  • Do I shop to avoid boredom?
  • Does my socializing often involve shopping or do I meet for coffee at shopping centres?
  • Do I ever experience guilt or remorse after shopping?
  • Are my credit card bills so large that I cannot pay them off every month?
  • Do I get an endorphin rush when I shop?
  • Do I use payment plans to help make a decision as to whether I can afford it or not?
  • Are home shopping shows an entertainment for me?
  • Can 0% interest or interest-free periods be a deciding point in my purchases?
  • Are there clothes in my wardrobe with the tags still attached?
  • Am I on a first name basis with the delivery drivers?
  • Have I ever hidden purchases from friends or loved ones?
  • Do I buy something thinking “I can always return it” but never do?

If at all possible, we need to avoid using shopping centres as meeting places. If we do, apply the 72-hour rule or leave our cards, money or wallet at home and only take enough cash out for what we’re likely to spend at the coffee shop.

4. Addictions

Alcohol, cigarettes, drugs, sex, food, exercise, video games, shopping… we may become addicted to any of these things (the list isn’t conclusive). If we feel the need to do something, if we crave something and we’re unable to control that craving, then we need to address it and we may need professional help to do so. The intent of this article is solely awareness, so that we can begin to identify where we sabotage ourselves and then do something about it.

5. Self-Worth

Ad example: beauty ads
We’ve all been there. Our neighbour pulls up in their driveway with a brand new car and we instantly become a green eyed monster. We instantly start feeling bad about ourselves, our financial situation and our possessions. We feel the need to keep up, to buy something bigger or better (or at least equivalent), just to show that we can do that, too. Or even because we’re worried about what others will think if we don’t do that.

It doesn’t matter how many things we have or what is going on in our lives, when this kind of thing happens, we can feel insignificant, depressed and not good enough. This is when we’ll go and blow a bunch of cash just to feel good enough.

We’re obsessed…

…with celebrities and everything that they buy, even though the majority of these things, such as designer handbags, are out of reach for most of us. We love to see the expressions on our friend’s faces when they see our new purchase, or hear the happy sighs of our children when we buy them some expensive toy or clothes. I’m guilty of spending $1,000 on clothes from Nike or I Am Gia for the kids to keep them happy and make them look good, then hesitating over a $20 pair of exercise leggings for myself. It’s a rush showing off new purchases, particularly if we’re making our loved ones happy. I feel validated, approved of, good enough. In other words, my self worth is linked to the things that I buy and it’s a cycle I have to break to get out of this trap.

My solution:

I had a conversation with my children and got them onboard with what I was doing. They now get a weekly allowance and they save up and buy their own clothes, and hopefully learn the lesson of delayed gratification (they’re actually much better at it than me!). Then I apply the 72-hour rule: put it back, walk away and see if I still want it in 72 hours. Most of the time, I’ve forgotten about it and I wonder why on earth I felt such an urgent need to buy something a few days’ prior.

6. Relationship with Credit

Something weird occurred to me a few years ago. We bought a new house and along with the new mortgage came – joy of joys – a new credit card. I had ZERO intention of using it but, you know, things happened, I put a few dollars on the card here, a few more there, then – oops, – something big came along and thank heavens I had the credit card, and before I knew it, the card was maxed out and I was only paying off the minimum monthly amount.

The interesting thing is that I viewed that credit card as my money. In my mind, it was the same thing as the cash that I had in my wallet. The only concern was whether we could afford the monthly payment. It’s been the same thought process when we’ve bought new cars, new furniture, even new houses. Most of us believe that our ability to make repayments on debt is a measure of whether we should buy an item or not.

It’s this relationship with our repayment ability that allows us to justify carrying as much debt as we can.

7. Complacency

We live to our means. No matter what we earn, we spend it and find ourselves still living paycheque to paycheque, even though it’s a much bigger paycheque. Our (as in mine & John’s) solution has always been to earn more money, it’s never been to get a grip on our finances or to save or even to live within our means. We found it easier – and less confronting – to make more money than to deal with our beliefs around money. In other words, we were complacent about the whole thing, saying to ourselves, ”Oh, we’ll just make more money, it’s not a problem”, which meant the issue just kept pace with our income, it was never resolved.

There’s an old saying that if you look after the pennies, the pounds will look after themselves. Yeah, we never took that onboard. I would go out to a café to work and get lunch. Every day. I justified this by telling myself that my time was better spent in producing content and writing programs than it was shopping and making my own lunch. But again, that’s complacency: we’re not taking care of our money. All of those little things – the morning coffees on the way to work, the lottery tickets, the unused subscriptions, the auto-renewals for products we rarely use, the health insurance that we could get cheaper elsewhere – is us not taking care of our money and it leads us nicely into the next area…

8. Lack of Planning

If we’re ever – ever – going to get ahead, we need to plan. When we’re experiencing money problems, it is easy to disconnect from our spending, lose interest in saving money, and avoid looking at our bank accounts. It’s so much easier to stick our head in the sand and ignore the whole thing until it hopefully goes away.

Only it generally doesn’t. Most of the time it just gets worse (speaking from painful personal experience).

Think about the TV show Dragons Den/Shark Tank. Business owners come in with the hope of one or more of the Dragons/Sharks investing in their idea. The Dragons want to know details of their plans, what the budgets are, what are the projected figures, how they will  deal with x, y, z. Inside the Shark Tank or out, no business is likely to get off the ground unless it has a plan, financial and otherwise. Yet most of us think we can go through life without doing the same thing. We rack up more and more monthly payments, accumulate more and more debt, have less and less savings, and blithely put our heads in the sand and pretend everything is okay (I’m totally talking about myself here). It’s so easy to make excuses and feel hopeless and do nothing.

When we don’t have a personal plan and budget…

…we have no clue where we are, where we’re going or how we’re going to get there. We have no idea how we’re spending our money, we have no plan for retirement, or doing anything else. When we don’t budget our money, when we don’t take care of it or pay attention to it, we end up living month to month because we haven’t worked out how we’re going to do things differently. When we do this kind of thing, we end up using our credit cards as our emergency funds (if we haven’t already maxed them out).

Take a step back

If we step back and view our finances like a business, we will naturally develop healthy habits and build wealth.

Think about this for a minute: a business operates off a set of plans — actions that are designed to produce a financially secure outcome. Monitoring our cashflow regularly is a basic requirement to ensure there are reserves available for the inevitable rainy day. A healthy business engages in risk assessment, debt reduction, spending cuts, and works to maximize growth opportunities.

If we want to get out of our money problems, we must plan. Actually, we must have the main Plan A and then the backup Plan B.

9. Not Taking Responsibility

All of this behaviour is simply us not being responsible for ourselves, our money or our lives. If we want to get out of debt and get out of the cycle of living from paycheque to paycheque and always owing people money, all we have to do is get responsible.

That’s it: just be responsible.

Australians are in denial

Here are some facts about Australian’s aged 45 and up from an article in the Sydney Morning Herald titled “Australia’s retirement savings gap among the world’s biggest”:

  • They expect to spend 23 years in retirement but their money will run out after 10 years.
  • 45% say they cannot afford to prepare for retirement due to more immediate financial commitments like mortgage and other debts.
  • On average, they have $67,000 per person less than the amount needed to fund an ‘adequate’ retirement (NB not a ‘comfortable’ retirement).
  • 35% describe themselves as “completely unprepared” for retirement
  • 51% feel they are “somewhat prepared”
  • 14% feel they are financially prepared.
  • 25% have less than $50,000 in super
  • Only 12% have $50,000 to $100,000 in super.
  • 46% are not confident in their ability to be able to maintain a comfortable standard of living once they have stopped working.

“Australians are in denial about retirement planning,” said Graham Heunis, head of retail banking and wealth management at HSBC Australia.**

The problem with being ill-prepared

The thing about being ill-prepared is that it is no one’s fault but your own. Our long list of excuses as to why things are the way they are is the real reason why things are the way they are. We must acknowledge that and take action. There’s no blame, it’s just the way things are, and if they’re like that and they’re not working, change them. That’s all. Instead of putting our energy into self-recrimination, guilt & shame (along with burying our heads in the sand), we can put it into changing things to reflect what’s really important to us. Like being debt free!

The realization that you are not prepared may be a bitter pill to swallow because facing the truth can be uncomfortable. The thing is, once we see the cause of our financial problems, we then know where we need to put our energy to get our act together and start saying goodbye to our money problems.

Do then repeat

There we have it: nine ways we sabotage ourselves around money and suggestions on how to fix it. As with anything new, it will take time for it to become an automatic response but if we repeat something often enough, it does become automatic, so the only thing to do is stick with it.

**[Statistics and quote from article: https://www.smh.com.au/money/super-and-retirement/australias-retirement-savings-gap-among-the-worlds-biggest-20150119-12t2l0.html ]

16/05/2019

7 Steps To Fix Your Money Problems

    • Easy steps to fix your money problems
    • Find out what you need to do BEFORE you take any action with your finances
    • Identify what your money blockers are
    • Map out your path to financial success
    • Learn to recognise when you’re back in your old ‘poor’ habits

In the financial doldrums…

A few months ago, we decided to finally – finally – take control of our finances. Don’t get me wrong, we thought we were in control of our finances… actually, no, if I’m perfectly honest, we never really have thought we were in control of our finances.

We budgeted… and then promptly ignored the budgets, justifying ourselves with comments like “But it’s on sale! It’s such a bargain!” and “I’ve worked really hard and I deserve this! I’m going to treat myself!” or even “But it’s so nice, I’ve got to have it! It would be a shame to miss out!”

We reconciled the accounts and checked what we’d (over)spent against the budgets… and then went out for a nice drink & high quality meal to make ourselves feel better and drown our sorrows.

We got anxious and depressed whenever a visit to the accountants was coming up because we were ashamed and embarrassed by how we’d managed our finances.

The things is, I know we’re not alone in this. People have rarely had any real financial management education; we’re taught to SPEND, not to manage.

Lovers of Instant Gratification

We’re taught to buy things now, get another loan, start using that credit card.

We’re taught that if we’re feeling sad, we should go out and buy things because that ad on the TV says that we’ll feel better if we do and the magazine said that car is the answer to all my dreams.

Then we’re judged by what car we drive, what house we live in, the street that it’s located in, the stores that we shop at. We feel the very human need to fit in, so if we don’t have what “everyone” else has, we do whatever we can to get it, regardless of the cost.

And we’re trained to do all this; we simply don’t know anything different, no alternative way to be.

Only a tiny portion of financial mismanagement is down to lack of knowledge or training. Most of it – probably more than 90% – is emotional; purely emotional.

The reasons we overspend are the important things, we must address those before we can take any other actions to get out of the mess we’re in.

Think of it this way: we all know that if we want to lose weight, we’ve got to do two things: exercise more and eat less. Do we do it? No. Not unless there’s a big enough reason.

In other words, we don’t do things unless our we get our emotions onboard with the whole thing.

7 Steps to Fix Your Money Problems

So, let’s have a look at the steps we need to take to fix our money problems:

1. Realise that our emotions rule our money

Q: Why do we (and I’m including you in that ‘we’ because this likely applies to you in some way, too) really have our money problems?

A: Because the decisions we make around money are emotional ones not logical, rational ones.

John & I pride ourselves on our integrity, respect and honesty, yet none of those values were immediately obvious in our financial life.

Actually, if I’m totally honest, they were completely non-existent for us around money. We had no integrity: we didn’t do what we said we’d do, we didn’t take care of our money, we didn’t respect either our money or the time and effort we put into creating it, and we definitely weren’t honest with ourselves about what we were doing.

We’d rather not be honest with ourselves

Rather than being honest with ourselves and facing the fact that we were screwing ourselves over, we stuck our fingers in our ears, and sang  “LALALALALALA!” at the tops of our voices while skipping to the local Indian restaurant with a brief stop at the bottle shop for some wine along the way. That was how we dealt with our money situation.

Let me point something out here: I’m a site Quantity Surveyor by profession, I manage the financial side of construction projects. John runs our property developments with such a firm grip on the finances that one of the tradies commented, “I thought you were from Liverpool not Scotland” (he was Scottish himself, so it was in no way racist). Yet when it came to our own finances, we had zero idea where we were at any point in time and zero control over anything.


2. Identify Our Money Blocks & Triggers

Once we begin to see that becoming debt free (or losing weight or any of those other things that we talk about and say we want to achieve but never seem to manage) is really an emotional/psychological puzzle that needs to be figured out BEFORE we can do anything, then we can start to take action.

This is the moment to grab a pen and paper, a cup of hot, sweet tea (we may be in for some big shocks!) and find ourselves a quiet spot to work in.

This bit is not going to be pretty but there’s no way around it. If we’re going to get this sorted for once and for all, we need to dig deep and be honest with ourselves.

What are the things we say to ourselves about money?

There’s never enough?

Money doesn’t grow on trees?

Filthy rich?

Us and them?

3. Running On Automatic

Our automatic behaviours (aka habits) are what keeps things in our lives. If our habits lead us to having no money, being in debt and living from paycheque to paycheque, but we want something different to that, then we’re going to have to change our habits.

Simple!

But not necessarily easy.

Breaking our old habits and creating new ones takes a fair bit of effort, it’s like a train starting out from the station; at first, the engine is putting in a lot of effort and not much forward movement is happening but after a little while, there’s enough energy been put into that forward motion that momentum begins to take over and going faster and faster becomes easier and easier.

In essence, that’s how forming a new habit works: it will be hard work at first but it will become easy very quickly (depending on the effort you put in!)

4. Realise When Our Automatic Emotional Response Has Gone Into Action

It was one of those days:

…one of the kids couldn’t find one of their school shoes (how does that happen?),

…we were late leaving the house, we’re out of petrol and there’s a huge queue at the garage,

…then we hit a traffic jam because the council have decided to do some work on the road in rush hour,

…the worst client we’ve ever come across in our entire working lives gave us hell,

…our boss took their bad mood out on us,

…we leave work and head to the shopping centre to pick up something for dinner and when we get home, we realise that not only have we bought far more in the supermarket than was on our shopping list, we’ve also spent several hundred dollars on a new dress, some face cream, some shoes for the kids and a couple of nice candles for the lounge.

We live UNconsciously

In other words, we were in a totally unconscious, automatic mode when we were out shopping.

We’d had a bad day, we were feeling stressed so we did something to make ourselves feel a little better.

For about five minutes.

Then we felt even worse than we did before because now, on top of all the stuff that’s happened to us during the day, we also feel guilty and ashamed with spending all that money.

That’s what we do, right?

Or another automatic behaviour (one of my personal favourites) is when we see money in our bank account, we immediately think “Okay, what can I buy?” and we go out and spend it.

These, and the behaviours like them, are just the automatic ways we behave with money. We need to notice them (and not cast judgement on them!), write them down and recognise them for what they are: the things that stop us, the things we need to change.

5. Identify Our Money Habits (Particularly The Bad Ones!)

There are nine ways in which we all sabotage our financial life. We may all have slightly different ways of tripping ourselves up in each area, and some areas may not apply to us much or at all…

…Actually, I’ve learned to be most wary when my immediate reaction to a suggestion that I may have something to learn in that area is a flat “No. That’s definitely not me.” Because those areas are where the biggest have always occurred.

If we find ourselves just dismissing something out of hand, that may very well be the place where we have the most to gain.

The Questions To Ask

So, it’s time to ask ourselves this: how do I behave in these areas? What habits do I have? This is the key: what habits do I have? A habit is something that we do automatically, unconsciously, without thought, and doing it makes us feel good because it’s so familiar.

We are designed as human beings to try to make ourselves feel good. We want to feel happy about ourselves, life, everything, so we do things that will make us happy.

Only we tend to go for instant gratification, which is where the problems begin to occur.

This isn’t bad, there’s nothing wrong, this is just about recognising what’s happening and asking ourselves if we want to do something different in order to get a different result.

We need to identify our rotten money habits and replace them with new ones.

6. Figure out what we actually want and map out a new path

That may sound like a ‘duh’ question but most of us would answer it either by saying what we don’t want – “Well, I don’t want to live from paycheque to paycheque” –

Or by talking about some vague dream that we have – “I want to be debt free and travel the world in first class style” (that’s one of mine).

Yeah, okay, that’s nice, but how much income will you need to allow you to do that?

How much money will you need in the bank?

What will your sources of income be?

My answer to all of those has occasionally been, “I’ll win the lottery”.

Cue rolling eyes.

Seriously? It’s like saying, “I want to lose a bit of weight!” Nice. How much weight? By when? How will you achieve that?

Think about it: we’re most successful when we have clear goals and a clear plan of how we’re going to achieve them.

7. Practise the new habits DAILY until they become automatic & unconscious actions

This is when our focus and intention is most needed: when that train starts to leave the station.

This is where our reasons for changing are most important. It’s also really important to recognise that this may get seriously tough and to make sure that we’ve set ourselves up for success.

Here’s how to do it:

  1. Get an accountability partner – Find someone who we can talk to and who will remind us of our goals and intentions
  2. Change our morning routine – This sounds a bit weird, but if we change some of the things we do automatically, others things change more easily. Instead of getting out of bed, then going to the bathroom, then cleaning our teeth, then getting dressed, then making a cup of coffee, followed by feeding the cat, mess up the routine a little and do things in a different order. It’s amazing how weird it feels!
  3. Write down our intentions for the day each morning – not a To Do list, merely a little writing to remind ourselves what’s most important for us. This may be things like “Spend quality time with my daughter” or “Put $10 into my savings account” or “Check out about starting that second income stream”. It’s about reminding ourselves why we’re doing this and that new habits have now replaced our old, automatic routines.
  4. Practise watching ourselves – Become aware of what we’re doing, what we’re thinking, how we’re reacting. Get into the habit of writing everything we notice down in a notebook.
  5. Recognise and acknowledge when things are changing – It will take time, baby steps are the key here and it’s important to acknowledge every little win that we have, every time we manage to recognise something, even if we didn’t recognise it in time to catch ourselves before our old habits came into action, it will get easier and quicker and we will change things… if we keep at it.

Set yourself up for success!

We need to set ourselves up with a structure to succeed. No structure, no succeed, it’s as simple as that!

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