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What a difference a budget makes..

Many of us have big ideas for our money in the new year. However, without a plan in place, those resolutions may already be slipping away.

A budget could be your lifeline to get your money plans for 2020 back on track. A budget is simply a plan for how you will use your money. It is the best way to take control of your day-to-day spending – the key to achieving your long-term money plans.

The idea of following a budget might sound restrictive or overwhelming, but it needn’t be. There are plenty of techniques for budgeting and it’s worth testing a few to see which works for you. However, if you want to get your 2020 money plans back on track today, one easy technique you can use start using straight away is splitting your money into three “pots”.

The Three Magic Pots

The first pot is your essential expenses (your rent, phone or internet bill, food, bus pass etc.) The second pot is money put aside to achieve your money goals (like building up savings or paying off debts). The final pot is for flexible spending (such as money for a night out, concert tickets, or birthday gifts). This method was originally proposed by Elizabeth Warren and Amelia Warren Tyagi, who developed the 50/30/20 rule, advising people to spend 50% of their income on essential expenses, 30% on financial goals and 20% on flexible spending.

There is no need to rigidly follow this 50/30/20 split, which is certainly not realistic for everyone, what matters is deciding on – and sticking to – proportions that work for you. It is worth spending some time adding up your essential expenses, thinking about what you would like to put aside for your financial goals, and what that leaves for flexible spending.

Once you have worked out your own split, the important part is the order that you allocate the money. First of all, make sure you put aside the amount you need for essential expenses. Secondly, put into a separate savings account (or directly to paying off debts) the proportion you have decided to put towards your money goals. Then, you can use the proportion leftover for guilt-free spending, knowing that both your essential expenses and money goals are already taken care of.

There is nothing wrong with putting aside just a small amount for your money goals in the beginning. Perhaps you need 80% of your income for essential spending and decide to put aside 5% to paying off your overdraft or saving for a laptop, leaving 15% for flexible spending. You can always decide to increase the proportion set aside for your money goals later, if you find ways to increase your income, reduce your essential expenses, or are willing to allocate less to flexible spending.

Keeping it realistic is key 

To be able to stick to your budget, it’s important that it is realistic. There is no point coming up with an overly stringent budget and putting a chunk of your money into savings, only to end up having to spend into your overdraft or credit card because you underestimated your essential expenses. Think carefully about what you realistically need to spend each month and don’t be afraid to review and change the proportions during the first few months.

Finally, if you don’t manage to keep to your budget one month, don’t be too hard on yourself. You have already taken an important step forward by being honest with yourself about how you spend your money and how you would like that to change. As you get to understand your money habits better and adapt your budget over time, you’ll soon be sticking to a budget and be well on your way to your money goals.

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The secret to saving is to keep it small, keep it regular, and be realistic.  Thankfully, there is some brilliant tech out there that will help you make a start. You can do it!

Round up your spending

Most banks today are offering clever apps which will ‘save the change’ –  whenever you use your card they round up the difference to the nearest pound and sweep it into a savings account. Smaller spends mean you save more because think about it: a £2.50 coffee nets you the same saving – 50p – as a £29.50 meal out.  The interest, that’s the amount of money you earn from saving, is pretty low and sometimes even nothing on these accounts. But once the pot builds up a little (it will) you could shop around and look at moving it to a more generous savings account.

Nudge your way to higher saving

If you want to have a bit more control over your spending and saving, why not go for a chatbot like Cleo, Plum or Chip. They monitor your spending and work out when and how much you can afford to save. They’ll either do it automatically or send messages nudging you to save the suggested amount. In the meantime, they’ll help you budget by keeping an eye on your spending and telling you if your coffee habit is getting a BIT too out of control. Kinda like a cross between your mum and a financial adviser!

Easy like Sunday morning

This is your Yikes fund, the pot you’ll be glad to have if your boiler breaks down, your granny isn’t well and you need to go and visit, or you lose your job. Aim for a few months of your typical income, or enough to cover a rental deposit if you have to move out. (P.S. emergencies don’t include those shoes you MUST have or late-night pizzas!)

Be sure that your account is ‘easy access’ – you don’t want to have problems getting your money in a real emergency.  So avoid ‘notice’ accounts (where you have to wait) and investment accounts, which put your money in the stock market and are only suitable for REALLY long-term goals.

But going easy-access means you’ve got to be strict with yourself. If you can resist dipping into your Yikes fund during the good times, boy you’ll be glad when you do need it!

Suss out your savings goals

You’ll have other stuff you want to save up for, like a holiday, new tech or Christmas presents.   So figure out your short-term, medium-term and long-term goals. For shorter-term goals, you want easy-access accounts but in the medium-term, you can lock up your money for longer to get a better return: try looking at regular saver accounts, fixed-term bonds or even current accounts that offer great interest (just make sure you don’t use their overdrafts!)

For long-term goals which will take more than five years to achieve, you might want to consider investing. This is riskier because you might lose money. But historically, the stockmarket has produced more wallop than cash accounts across most timeframes. There are plenty of apps known as ‘robo-advisers’ which could could get you started.

Switch your savings mindset

 Finally, it’s crucial to get in the right mental zone for saving. Don’t think of it as a sacrifice but as an act of self-care. Remember, it’s still YOUR money: you’re just putting it one side to give yourself more options, choices and ultimately freedom in the future. That’s why saving is so empowering – and so worth doing.

It does mount up.  The consumer group ‘Which?’ reckons that just by sweeping your change, you might save £1.22 a day on a typical spend. That adds up to £450 over a year.  And imagine if you could target £10 a week on top of that. That would bring your yearly saving to almost £1000. Wow!

Good luck on your savings journey. Starting it today is a decision you won’t regret!

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Perhaps you absolutely smashed it out of the park when it came to your finances…I hope so! But the start of this New Year is the perfect time to ask: are there lessons we can learn to help us absolutely OWN our finances in the next decade? There sure are!

Spending has got a LOT easier.

The teenies was the decade that we started using debit cards – and specifically contactless debit cards – for EVERYTHING. Just tap and go, baby. Unfortunately, that has made us all far more likely to spend more, bust our budget and go into debt. When money becomes totally virtual, it’s tricky to get a handle on its REAL value.  So, as we go into a new decade, make sure you’ve got a grip on your spending. If you use contactless cards, at least make sure you also have an app that allows you to see your spending in real time, and categorise it so you know exactly where all the money is going. And maybe, just maybe, take some cash out once in a while to keep the spending in check. Just a thought! 

…and so has borrowing!

At the beginning of the teenies, thousands of young people were taking out instant, so-called ‘payday’ loans with hardy any credit checks. That didn’t end well, with dozens of lenders going bust and lots of borrowers getting into huge debt.

Towards the end of the decade, we started seeing a new debt danger: the rise of buy-now, pay later schemes like Klarna. These allow you to buy something, see if you like it then send it back, with no money changing hands. But if you keep anything, the bill’s due in exactly 30 days, and late payment will hurt your credit score, and therefore your borrowing prospects, in the future.

So before you click on the cute pizza icon at the checkout, think. Would you still buy this if you had the money? Do you really want or need it? I say stick to buying what you can afford right here, right now.

An overdraft is the quick fix, and from May an unarranged trip into the red will probably be cheaper, because the banks have been told to slash their super-high interest rates.  But the sensible, much cheaper, ‘agreed overdraft’ that many of us rely on will actually get more expensive. So be warned!

….but so has saving!

The teenies was the decade that the smartphone took over the world – and our finances! Today, we have a huge range of banking apps, which typically have

a “round-up” savings feature.  These round up the amount you spent to the nearest pound and transfer the difference from your current account into a savings account. You may also be able to choose when to round up or transfer spare cash, such as on payday. These apps are a game-changer for those who find active saving too difficult and well worth checking out next year, if you haven’t already. 

If you want to take things to the next level, you can now link your account to a chatbot like Plum or Cleo. It will analyse your spending, help you budget, flag up spending weaknesses (mine are beauty products!) and decide how much you can save and when to do it.

Social media rules

At the beginning of the decade, it was all about Facebook and Twitter. But later Instagram, YouTube, Snapchat and TikTok took over, partly thanks to the rise of influencer culture. As a new decade arrives, it’s important to keep influencers and their commercial activities in perspective. Numerous studies have shown a link between excessive time spent on these apps and mental health problems.

We view people who appear to have a better life than we do, and this can subconsciously influence us to spend money we can’t afford. Always remember that social media tends to present the edited highlights of other peoples’ lives, not the messy reality. Keep it real and resolve to live more IRL: it’ll do your finances (and your peace of mind!) the world of good.

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Set a financial goal you can stick to – if you were spending frivolously during the Christmas period, it’s likely that you’ll want to start the New Year with a resolution that includes managing your finances better. One of the common mistakes people make here is setting unrealistic financial goals that they can’t stick to – which in turn causes early disappointment, loss of motivation and before you know it everything goes downhill. If you need help creating a budget plan for the year, Money for Life’s ‘Penny to Pounds’ app is a great place to start.

Stay away from expensive takeaways – the winter season can be another cause for those January blues to creep in. As it’s the coldest, darkest time of year – most of us tend to feel sluggish and let’s admit it would rather just stay indoors snuggled up with a Deliveroo and Netflix right! But as tempting as it sounds, this can put a huge strain on your bank account. If comfort eating is a habit you find hard to let go of this time of year, try deleting all fast food apps from your phone so the temptation won’t be as easy. Also cooking in bulk and having your meals prepped for the week will do wonders on those days when you’re feeling lazy!

Volunteer – One of the best ways to break out of the dull routine of studying or working is to dedicate an hour or two a week to trying something new. Volunteering is not only a perfect way to help other people in the community – it’s also a way of meeting new people and improving your mental wellbeing. Whether it’s joining a charity, helping a neighbour, or walking someone’s dog – the satisfaction gained from knowing you’ve positively impacted someone’s life or made someone happy is what will also make you feel a lot better about yourself.

Get active – Aside from the obvious physical benefits of working out, there are also physiological ones too. Did you know, the chemical hormones released in your body when exercising naturally improves your mood by making you feel happier? Another great benefit of regular exercise is that it doesn’t have to cost a penny and provides a routine for you to stick to – which is also great for the mind and for staying productive. So, make plans with a friend or head to the park by yourself for a run or a nice long walk (have you hear of exercise snacking?).  Even socialising and being out and about can help.

Research and plan a holiday – Christmas isn’t easy on the wallet, and it’s certainly a key reason why many see January as such a depressing month. But there’s no reason why you can’t start making holiday plans for later in the year. Having something to look forward to can make the month fly by, and the search for hotels and things to see and do once you get there is a great motivator to keep going. If you’re really low on cash and/or desperate to get away sooner, check out towns or cities near to you that you’ve never explored and consider a day trip or night there – a change of surroundings can do wonders for shifting the dreadful feeling that you’re going nowhere.

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There are loads of easy ways to make money for the Halloween season, and you can complete all of them in your own time. Take a look at the suggestions below:

Fill out surveys

This is becoming an increasingly popular way for people to make fast money in their spare time, in return for a few minutes of filling out a survey, you can bag up to £10 on some survey sites!

Research companies are always looking for new members worldwide to complete surveys and test out new products, so now is your chance!

Write music reviews

Some sites will pay you to listen to music if you leave a review of a song once you’ve listened to it. The songs are anonymous until you have reviewed them, so your opinion can’t be influenced.

Sell your clutter online

If you want to make money fast, selling your old clothes and DVDs online can be one of the easiest ways to begin. You will need to take some decent photos of your items and write a detailed description, but for little effort, you can make a lot of money from it!

Heard of the saying ‘one man’s trash is another man’s treasure’? What one person may consider worthless could be highly valued by someone else!

Get paid to watch TV

If your dream job is staying on your sofa and watching telly, it actually does exist! There are market research companies out there that will pay you to watch your favourite programmes from home.

You can earn anything from £40 to £70 for a 90 minute to 2-hour informal group discussion, which seems like a fair deal to me!

Exam invigilating

This is a great way to earn money around exam time, as all schools require invigilators to sit in exam rooms and ensure correct conditions take place.

You can also make money from marking exams, although you must have some knowledge in the subject you’re marking, which makes this a great way for students or graduates to make some extra cash in their spare time.

Smartphone apps

There are many smartphone apps that pay you to do small tasks around where you live, such as mystery shopping or taking photographs of product displays.

You can even do these tasks on your lunch break or during a shopping trip if you want to! You can expect to receive around £6 for completing a 15-minute job.

Competitions

Entering competitions is a fun and easy way to make money, and some people in the UK have made up to £50,000 a year from entering all sorts of competitions.

Types of competitions can vary from liking a Facebook page to filling out a simple registration form, and you can put as much or as little time into it as you want – however, the more time you put in and competitions you enter, the better your results will be.

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After running two successful businesses over the last six years I achieved it all – a book deal, being self-employed, recognition and financial freedom. My view of wealth has changed greatly since being a teenager, I always aspired to be self-employed but had no idea of ‘how’ it would happen and viewed financial wealth as the ultimate goal in life.

Yet.. when I sold my first business which was the final tick on my goals list, I didn’t feel very wealthy at all. Although I had life-changing money and an incredible career I realised that the ‘wealth’ I thought I wanted wasn’t my version of wealth at all. This sparked a deep journey within myself to redefine my version of wealth and help others to feel truly fulfilled.

What does wealth mean to you?

So let’s look at your current version of wealth. It might help to write this down so you can look back on your answers. Normally when I ask people this question, they answer ‘money, a big house and a successful career’. There is absolutely nothing wrong with that answer but it’s important to get clear on what wealth truly means to you.

When I achieved all my life goals at twenty-five and had the ‘wealth’ I thought I wanted, I realised this wasn’t my version of wealth at all and that having a family and being fulfilled was really what I wanted. So my questions for you today to help you explore what wealth truly means to you are ‘what do you want to be written on your gravestone?’ and ‘If you were to die tomorrow what is one thing you’d be sad you didn’t create or achieve in this life?’. It may seem a bit morbid but asking yourself honest questions like this helps you to be able to see the bigger picture and re-evaluating the value of money in your life.

How to redefine your version of wealth

My top tip for redefining your version of wealth now that you’ve hopefully established what wealth truly means to you is to start by writing down your answers to these questions.

Go through each of your goals and ask yourself – ‘Am I hoping this goal will fill avoid or will this simply add to the joy and happiness I already feel in life?’

What is a non-negotiable for you off your goals list? 

What areas of your life do you currently not feel wealthy in?

Are you aiming for someone else’s version of wealth and goals or are your goals your true version of wealth?

What wealth do you currently have in your life?

How to create a more mindful relationship with money

The most important part of creating a positive and wealthy lifestyle is to create a mindful relationship with money. This can be done by setting regular goals and targets with money and by also feeling grateful for what you currently have. It can sometimes be hard to simply feel grateful especially if you’re in a difficult situation financially, but gratitude attracts more reasons to be grateful. The more positively you can choose to look at your current situation, you will be more likely to attract more positive situations and money.

Another great tip for being mindful is when purchasing anything ask yourself ‘does this feel good to me?’ When spending money on luxuries if it doesn’t feel good do you really need it and will it bring joy into your life? This is key when creating a positive relationship with money that every monetary exchange feels good to you and isn’t going to put in you in a worse position. If it’s bills you’re paying and you can’t feel happy about parting with the money I would suggest repeating this affirmation ‘Thank you for the money to pay this bill each month’. Switching your fearful feelings to gratitude will help you to focus on the money you do have instead of the lack. Finally, rewrite your story with money – how do you currently view your relationship with money? I hear a lot of people say ‘I’m really bad with money’ or ‘I never have enough’. Change this story to and affirm ‘I’m really good with money’ and ‘I always have more money than I can spend’. These positive statements will help you to change your relationship and interaction with money.

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Get thrifty with your decorations – Buying Halloween décor year after year can really take a bite out of your budget. But if you need your coins to stretch further, the key is to buy reusable items, so you do less trashing and more stacking by the end of the season. Take for instance the infamous pumpkin – unless carving contests are the highlight of your Halloween, creating one from scratch can be costly and time-consuming. But if they’re not high on your agenda, fake plastic ones can be just as effective!

Ditch going brand new – Who said new was best? Probably a marketing campaign aimed at Halloween costume shoppers. Second-hand clothes, however, can really make for great affordable costume pieces at a fraction of the cost. A good place to start is with the people around you. If you have a group of friends with already worn costumes from last year, why not host a costume swap? As long as you weren’t partying it up together last year, no one will be the wiser.

Sell previous costumes – Alternatively, instead of swapping, try selling your old costumes! Plenty of like-minded, frugal shoppers would love to get a deal on something you wore once because they’ll only wear it once. See the cycle? Make it a cycle of savings.

Look for budget friendly activities – From blood bathed bashes to free fancy dress festivals, there are heaps of cheap and free Halloween events you can attend this time of year. The hardest part is finding them all, but that’s what we are here for right? If you want to hang out with the ghouls and gals of the night take a look at these from DiscoverMyNight.

Plan for the year ahead – Did you know, the markdown on Halloween items starting from November 1^st is larger than any other holiday period? Yet many people miss out on these deals because, at this point, everyone’s thinking about Christmas. It’s all about shopping smart. If you resist making last minute impulsive buys and plan for next year instead – you could grab yourself unbeatable bargains in the long run whilst staying one step ahead of the rest!

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On the day A-levels results come out, the internet is overflowing with articles about famous people who failed their exams. People like Jeremy Clarkson, Richard Branson, Prince Harry, and JK Rowling. The message is clear – you don’t need formal education to succeed in life.

However, what is left unsaid is that these are very special exceptions. As Jim Rohn said: “Formal education will make you a living. Self-education will make you a fortune.” He is right. You need education – both formal and informal to make it work for you. A combination of street-smart and book smart will go a long way. Always keep learning!

#2. You must buy a house young

Your dad bought a house when he was 24; I get it, but you don’t have to do the same. When your parents bought houses in their 20s, their lives and careers were more settled than they are these days.  Young people today are expected to change careers over ten times in their lives; research shows they change jobs much more often than that. These job changes often go hand in hand with geographic moves. What does this mean? It means you should pay less attention to studies suggesting buying a house is a great idea but genuinely think about why you’d want to buy a house (tangible reasons or societal pressure reasons?) and do the math of if it’s worth it. Renting a home is not a waste of money; it can be the smart thing to do until you settle down.

#3. You must get, and keep a job

When I was in my early 20s, my path was clear; I’ll finish my education, get a job, marry a great guy, and live happily ever after. I finished my education and, much later, married a great guy. Jobs turned out to be a bit trickier. I moved to the other side of Europe and got a job. Still, failure to win work, or research funding, would have meant losing my job. You were taught to expect a job, and this isn’t working too well. Don’t feel down but think of smart ways to make money when life’s a bit tough.

#4. You must become an expert

An expert knows ‘a lot about very little’. Industrial societies valued experts highly. Times have changed and, with them, the knowledge, skills, and competencies valued by industry and business have too. Expert knowledge and skills are automated. Computer algorithms select and trade stocks, build machines, predict song success and write novels. Become a maverick who knows ‘a lot about a lot’ and leave the expertise to robots.

#5. You should learn to save money

Did your mum teach you how to save money? Most parents believe their children must learn how to save.  I think instead of learning how to save, you should learn how to spend mindfully. When there is nothing left of your wage once you’ve paid your bills it’s hard to save. Instead, learn how to spend mindfully and potentially attend a money management workshop or two, to help you with your spending habits and spending mindfully.

#6. Money doesn’t grow on trees

‘Money doesn’t grow on trees.’ – my dad used to say. What did I learn? I learned making money is hard and opportunities can be scarce. But also, guess what? Money can grow on trees, and money-making opportunities are plentiful. It’s all about learning to spot and implement great ideas. You’d be surprised how many opportunities to make some money are out there. And if you decide to start some side freelancing, make sure to get financially rewarded for your work. Check out the Multi-Hyphen Method book by Emma Gannon or the Creative Rebels podcast if you need any inspiration!

Finally…

Now you know the money lessons it is time to put this knowledge to good work and practice. Here are seven money lessons to replace the outdated ones:

• Learn something new every day; become slightly better at life and money every day.
• Rent your home without feeling like a failure; you can still win the game of wealth.
• Focus on work rather than jobs; you’ll get further and earn more.
• Become a maverick and expend your competences and skills; all the time.
• Learn how to spend money mindfully, and saving will take care of itself.
• Opportunities are plenty; learn to spot them and act fast.

Congratulations on taking steps to become a money master!

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