Three Scary Stats

I came across a few UK studies recently, which highlighted the following stats:

  1. One third of us go over budget more often than not.
  2. 42% of Londoners have less than £100 in savings.
  3. And one out of ten confesses to being terrible with money.

 

So, we are introducing our first mini-series of Eelah blogs, where we will try and dissect the meaning behind each one of the above. We will see if we can make some sense of these and provide some simple solutions to help you if you feel you may be in one of these scenarios.

I am definitely guilty myself - even as a money professional - of having fallen into the negative side of these stats at more than one point in my relatively short life. So, you’re in good company.

Mr Micawber

  1. One third of us go over budget more often than not.

 

"Annual income twenty pounds, annual expenditure nineteen pounds, nineteen shillings and sixpence, result happiness. Annual income twenty pounds, annual expenditure twenty pounds and six shillings, result misery." Mr Micawber, David Copperfield.

Who knew a book written in 1850 would contain such wisdom. Yet, still over 30% of us go over budget more often than not. And, I bet there is an awful lot more of us who go over budget frequently enough to just not be ‘more often than not’; myself included.

Why is that? Life can expensive. It is difficult saying no. A beer for less than a fiver only happens in Eastern Europe. A chocolate Freddo now costs 68p… 68 effing p! But then, we also earn more nowadays, we have better opportunities, we have access to better information and ‘free’ help around life and money.

So what does it mean to go over budget? At the basic level, it’s spending more than what’s coming in. Here’s my view, for what it is worth, to maybe help with getting to grips with your expenditure and your income:

Expenditure

You need to know how much you’re spending. I know, boring. It sucks. Better not to know. But, knowledge really is power when it comes to your spending. And actually, it can be simple too. Here’s the trick. (N.B. the principles can be applied for joint accounts too).

Set up two bank accounts - just two. One is called BORING the other is called FUN. Simple. (Most banks let you change the name of the accounts now, I suggest you do this.)

BORING is the account that your income goes into. This same account should be the account that all of your fixed expenses come out of (rent/mortgage, bills, gym, Netflix etc.). Basically, anything that is the same each month. This includes monthly savings and investments, which we talk about in next week’s blog.

You should be left with a net amount. (Income – Fixed Expenses/Savings = Net Amount). You then transfer the net amount to your FUN account. You then ONLY use this spending account for all of your discretionary spending that month. Food, drink, shopping, enjoying life, whatever that is. In fact, cut your BORING account card up. You only need access to it online.

Do this for a year and I swear your life will be better for it. Result, Happiness. We have knocked up a useful spreadsheet to help you manage this, CLICK HERE for a free copy.

Income

This is also the other side, which is putting yourself in a position to earn more. Invest in yourself, read everything, be curious about the world, experience new things.

There are millions of different ways to earn some additional moolah; you just need to go do it. To quote the legend that is Gary Vaynerchuk (Gary Vee), “You need to hussle, earn a side income, do what you gotta do to earn more money. Working hard is difficult as sh!t, moaning about not having enough is easy.”

Whilst I cannot directly help with anyone earning more income, I do know that you can help yourself.

 

Alfie Mullan, September 2018