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A Simple Money Management System

March 1st, 2022 Posted in Money Tips
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The definition of financial wellbeing is a feeling of certainty and empowerment around your money, both now and for the future. Setting up an effective yet simple money management system is certainly one way of helping to achieve that and gaining valuable peace of mind at the same time.

Can you image a beautifully organised walk-in wardrobe? With a place for all your clothes, shoes, bags and more. For me something like the Great Gatsby, comes to mind, with all his shirts and suits perfectly tidy and organised.

Now imagine the opposite, all your belongings just thrown into a pile or dumped into an inflatable paddling pool. Every morning you rummage through trying to find a matching sock, or a top which is not too obviously un-ironed. If this feels a little extreme just picture a typical teenager’s room to get the idea.

Its safe to assume that most of us would prefer door number 1, the organised, systematic and tidy system for the ease, comfort and certainty it brings.

After this detour into home makeovers, you may be asking what has this got to do with personal finance? Allow me to explain…

A Simple Money Management System - image of a tidy dressing room / wardrobe

In many cases our bank accounts and financial lives are more like the paddling pool than the tidy, well-ordered system.

Money comes in and flows out but we are not entirely sure how much or to where. There are direct debits and standing orders, credit cards, PayPal, Apple Pay and who knows what else. All in the big paddling pool and we hope that the important bills are paid and there’s a little money left at the end of the month.

Surely there is a better, less stressful way?

The first step is to know your numbers. This was explained in a previous post, so if you haven’t read that one yet you might like to catch up when you can.

But assuming you have a pretty good understanding of how much you earn and how much you spend, here is a 3 step plan for an effective yet simple money management system.

  1. Additional Bank Accounts

Opening an additional bank account can be easily achieved by either contacting your existing provider or perhaps opening a new one with one of the online banks such as Revolut or Starling. (If you are listening outside the UK – firstly hello and secondly there will be equivalent banks local to you). I suggest having 2 current accounts plus a savings account.

2. Pay Yourself First

Rather than waiting until the end of the month and hoping there is a little money left to move to savings, after all the bills and everyone else has been paid, make yourself a priority.

I am going to suggest you set up an automated transfer for two amounts. The first is for savings, the second for Walking Around Money. Let’s concentrate on savings first. Take a proportion of your income and move it to a new or existing savings account.

How much, well that depends on your circumstances. In some ways the habit is more important than the actual amount. Because you are showing yourself and the universe that you are now taking control of your finances and honouring your financial future by paying yourself first.

As a rule of thumb aim for 10% of your monthly income, more if you can but less is ok if that is what your current circumstances will allow.

The second transfer is for your Walking Around Money, or WAM. This is discretionary income which is not already allocated for bills, food or credit card repayments for example.

Again, knowing your numbers is crucial here because by understanding how much you need to cover your monthly costs, you will also know how much you have left to spend as you please.

You can transfer your WAM either monthly or weekly to your newly minted second bank account. Then only use this account for your day to day spending, secure in the knowledge that it will be topped up again at the end of the week.

3. Using Your Primary Bank Account

Your original bank account is used to receive your monthly salary and from it you pay all your bills and regular expenses. You feel secure knowing that all your expenses are covered and automated. Then you can leave that account to happily run along in the background, with just the occasional check to make sure you have included everything and there is always a small positive balance.

Meanwhile you have a growing savings account thanks to your regular contributions and a weekly allowance which you are free to spend as you like.

So there you are an effective yet simple money management system that you can have up and running in less than an hour but will save you time, effort and worry for years to come.

If you liked this post you will enjoy listening to the fearless finance podcast. I look forward to having you join the growing tribe improving their financial wellness together.

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The 7 Pillars of Financial Wellbeing – Awareness

February 22nd, 2022 Posted in learning about money, Wellbeing
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Awareness – Understanding where you are now, where you want to be and creating a plan to get there

If you were asked how much money is in your bank account right now, how accurate could you be? Within £100? Within £10?

If that was challenging, you are not alone. When I ask that question to a group, the majority has no idea.

Yet most of us know how much we earn and will soon notice if an expected sum on payday is different by even a small amount.

So what’s going on? It would follow that the gap in our understanding is in how much we spend.

if you would prefer to listen to this post it is available on The Fearless Finance podcast

The 7 Pillars of Financial Wellbeing - know your numbers. The importance of awareness - looking in a mirror image

I remember travelling one time and allocated myself a budget in the local currency in cash. Everything I spent, physically came from my wallet and I could easily see at a glance how much was left. Setting aside money for a coffee at the airport and a taxi to get there, I was pretty confident and certain how much I could spend throughout the week.

And it feels good to be certain.

Contrast that with how most people manage their money day to day. It arrives electronically and leaves electronically and if we only glance at a balance once or twice a month, we really have no idea how much is available.

Rather than certainty, we are in the realms of assumption and denial.

Know Your Numbers

A great starting point in financial planning and regaining control of your money is to know your numbers.

Make a list of your regular outgoings, housing costs, food, transport, subscriptions etc. Next add on other spending, which is less predictable such as nights out, or clothes maybe.

If you total the list, you now have a pretty good indication of how much you spend each month and where it goes.

If you enjoy being even more granular you can use tracking apps or a spreadsheet to dig deeper or automate the process.

To some this may seem like a bit of a pain, but the process can be liberating in several ways.

If you were thinking about changing jobs or starting a business, now you know how much you need to earn as a minimum.

By comparing with your current income, you can see how much of a surplus or deficit you have each month. If a deficit you can take action to reduce or re-evaluate your spending. A surplus can be directed towards saving, investment or paying off debt.

A good practice is to pay yourself first by taking some of your surplus at the start of every month, rather than waiting to see what’s left at the end.

A third benefit is becoming more conscious where you are spending your money. If petrol is costing you X hundred pounds a month, how much could you save by taking public transport? If home heating bills are spiralling, maybe it’s time to nudge down the thermostat? Small savings add up and its better for your wellbeing to be in control rather than in denial.

Setting Goals and Plans for The Future

One of the most popular categories for New Year’s resolutions is around money. Many people set well intentioned ones such as to get out of debt or increasing their income.

One of the keys to effective goal setting is to understand your why. Having a compelling reason for doing something will help you find the way to achieve it.

Some things are more under your control than others. For example, getting out of debt is achievable by identifying spare money and targeting debts in a systematic way. Stop spending money on credit cards and look to switch to lower rates of interest will also accelerate your success.

Doubling your income is more of a challenge especially if you earn a salary. Mostly because there are more factors beyond your control. However, if you ask powerful questions you can expect to receive powerful answers.

For instance, asking ‘why am I always broke’ is not a powerful question. But asking ‘what would need to happen for me to double my income’ could be.

That might lead to some ideas such as asking your boss what you would need to do to qualify for a promotion or raise. Taking additional training or qualifications. Working extra hours or starting a side project. Perhaps even switching careers all together.

A definition of financial wellbeing includes feeling comfortable and empowered around money both now and for the future. Therefore, a better understanding of where you are now and where you want to be is a great first step in improving yours.

If you would like my free guide – The 7 Secrets to Financial Wellbeing – please click here

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How Can ‘Financial Stability’ Be Defined?

January 6th, 2020 Posted in learning about money, Money Tips
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The aims of financial management are never ‘completed’. Just like fashion, it is a perrenial and important part of the means in which we plan our lives. Things move on. Just as you wouldn’t likely wear bell-bottoms outside of a period disco event, you needn’t factor in inflation statistics from the 70s in order to manage your households – things change and the means in which we deal with those changes will also change over time.

Financial management is an active, dynamic art, because money is an active, dynamic energy – or it can be thought of as such. This means that when assessing ‘financial stability’ it’s very easy to get confused if not coming at things from a certain mindset. You may earn less one year than the previous, but that doesn’t necessarily mean you’re doing worse off financially.

So, for those just starting to grapple with their financial management, how can ‘financial stability’ be defined, and is it even something we should aim for? Moreover, how can we use this knowledge to avoid falling into difficult financial traps we would rather not have been part of? We think we have some answers to this end:

Pexels – CC0 License

Living Within Your Means

Living within your means should be considered sacred wisdom when it comes to managing your financial stability in the best sense. We all know that if we’re struggling for cash, heading out and purchasing a new car on our credit with payments we cannot hope to afford is a silly idea, no matter how many irresponsible salesmen out there may be willing to grant us that opportunity.

That being said, living within your means can become too tight, to the point where you refuse yourself the ability to pay for reliably speedy internet despite working from home all day every day. Living within your means signifies tailoring your daily living situation to you, and from that vantage point saving money as appropriate.


If you’re a bachelor living alone? Perhaps you can easily do without the most luxurious accessories such as silk-lined toilet tissue, or whatever we can exaggerate to seem silly in context. If you’re running a family household, however, purchasing high-quality school uniforms may be worth the investment, as well as a sewing machine for the inevitable repairs you will have to make. This last example shows how worthwhile, intelligent investment in the things that matter and frugality exercised through repairs both have an important place in the daily financial lifestyle of a household.

Overarching Financial Priorities

It’s worth keeping your overarching financial priorities in mind. When we measure stability, we often measure it in response to the environment around us. For example, a boat is not ‘stable’ if it’s docked on land, or at least that’s not the environment we would measure its use within. We would consider it stable if it holds stability within the ocean, in conditions we expect the design to meet. As such, financial stability can be best measured when it’s set against the overarching intent of our financial priorities.

Perhaps the most obvious and fundamental part of this would be considering your survival needs. Are you able to eat three square meals each day, and provide those to your family? Can you pay your rent? Can you purchase new shoes when you need them, or fill your vehicle up with fuel when empty? This might be considered your first financial priority.

Then we have those higher up the pyramid. Are you managing to put away some money in case of emergencies each month? How about saving to build your credit? What about potentially earning enough to settle down and be viable for a mortgage in five years time? It’s these questions that are worth asking, and can help you measure the relativity of your financial situation among many different criteria. This way you can make your budgeting decisions effectively. It could even help you use your financial stability to give grounding to someone else, such as when using a guarantor loans comparison site to help a financially needful (yet earning) relative with a cash injection.

Defending Your Finances

Defending your finances is also a part of financial stability. It can be easy to be a victim of financial fraud if you care little for where you store your documents or how you store them, and the same goes for ignoring suspicious transactions in your bank account. Learning how to shake the card reader section of an ATM can help you also find scanning devices placed by those without scruples.

There are many ways to defend your finances. From ensuring you apply adequate fingerprint protections in your mobile banking app to avoiding taking on loans with predatory pricing terms, it’s important that you have your financial health in mind at all times. This can sometimes be through defensive action, or aggressive action such as disputing an outstanding charge that has since appeared on your credit file.

Overcoming Worries

We all have our financial worries from time to time. It’s not exactly something that is inevitable, but many can find themselves somewhat lacking in their financial allowances or potential and may suffer as a result.

Overcoming those worries can often be found by direct, worthwhile action. Sometimes, you may have to work overtime or take on an extra shift depending on where you work. It can be that through using debt charities you are able to get a handle on your debt and get back to normal, contacting and consolidating creditors to the best degree.

Financial stability is not always supposed to mean having the best and strongest financial sitting, with thousands in the bank and the ability to purchase anything you want without any recourse for the consequences. Instead, it’s about doing what you can to become stronger and more stable in your financial efforts, no matter how humble a starting point you may be beginning from.

With this advice, we hope you can accurately and adequately define financial stability in the best sense possible.

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Managing Your Money – Small Beginnings, Big Changes

August 20th, 2019 Posted in Money Tips
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The concept is straightforward enough, you want to save a little each month and build up a fund that will be there for you to tap into in case of an emergency or that you can grow in order to get that house renovation done, a new car or the holiday of a lifetime.

But while, yes, it seems straightforward it appears that for some of us those good intentions of saving for the not-so-distant future are hard to turn into reality. But what is it that’s holding us back? What prevents us from saving for the things in life we really want? Perhaps it’s a lack of organisation, a problem that exists around our monthly budget or the fact that we always seem to find something better to spend our money on. 

If you’re looking to make some changes in the way you manage money then you’ve come to the right place. In this article, we’re taking a look at how you can get yourself organised in your monthly outgoings and manage to start saving for those big things in life that seem so far out of your reach just now.

Managing Your Money - Small Beginnings, Big Changes - coins growing in jars image
Image by Nattanan Kanchanaprat from Pixabay

The Dreaded Spreadsheet

You knew it would come to this, but if the idea of inputting all your incomings and outgoings into a spreadsheet bores you to tears or fills you with dread, then there are some far more user-friendly options out there to help keep track of your money.

We’re talking, of course, about apps and one of the best out there at the moment is Mint. You’ll find it helps you to set a monthly budget, see exactly where your money’s being spent and with a free sign-up, it’s far more satisfying than pouring over that Excel spreadsheet each month.

But yes, despite the more modern approach you are still tracking your finances and this is exactly where you need to start. Give yourself a long-term goal and simply spend the first two or three months getting used to tracking your money so you can figure out some of your spending patterns. You don’t need to change anything at this stage, this is the data gathering part of the process.

Analysis

When you do go back and take a look at where your money goes, you’ll begin to see some patterns emerging. Perhaps you spend the majority of your money at the beginning of the month and, what with your bills leaving at the same time, you’re left with very little spare cash for the last two weeks before payday.

You’ll also see what you’re spending your money on. That latte bought on your way to work every morning has, over three months, mounted up to quite a cost. This kind of analysis is worth going through to help you make some judgements and changes over how you ration your budget.

Finally, you’ll also be able to see all the direct debits and standing orders that are attached to your account. That insurance for a long ago expired laptop that still goes out or the expensive gym membership that never gets used, it’s a good time to make some changes and to see if there are any cancellations that might help you out. It will also give you the opportunity to shift around the dates that direct debits leave your account if that’s going to help you plan a little better.

Prioritise

Once you’ve analysed your spending, it’s time for the action part of the plan to get started. You’ll need to get to the point where you start prioritising. This might mean that you ditch the latte habit completely or set aside a budget for it where that weekly purchase becomes a once or twice a week treat instead.

You might think about dividing your budget up into several pots, including bills, essentials such as food and entertainment, including socialising and of course luxuries such as that latte.

Once you’ve found a natural rhythm for your outgoings, you’ll be in a great position to then add savings to that list.

What to Spend Your Money On

Once your savings are on their way then you’ll be able to think about what you’re saving for. We can’t recommend enough clearing your debts as a first priority. Not only will it free up your money in the long term, it will also help to improve your credit score. If you’ve been asking yourself How can improve my credit score? Then this is the very best way to make those changes.

Get those debts paid down and enjoy greater financial freedom. What you’re saving for is, of course, entirely down to you, as is the amount you’re able to put aside each month. Some experts believe in following the 50/30/20 rule where 20% of your income will go into your savings pot, 50% on the necessities and 30% on discretionary items.

If this works for you and if you have a fixed monthly income, then this can be a great method. Another equally as valid, though slightly more flexible approach is to set up a sweeper account. In this version anything that’s left in your account the day before payday or at a date you specify is swept into your savings account. It allows for those unexpected expenses, like a broken boiler and recognises that some months the savings are going to be minimal while other months there might be a lot more.

However you save and whatever you’re saving for is your choice but your active decision to begin managing money should be applauded. The difference you’ll make to your account with regular saving will seem minimal at first but you’ll be surprised at how quickly that small pot can grow. The sense of satisfaction, not to mention security you’ll feel is worth the effort of getting your accounts in order. Download an app, go through the process and add an extra layer of security to your finances.

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Kids Make Great Entrepreneurs: Here’s How To Teach Them About Business And Life

February 22nd, 2017 Posted in Entrepreneurship, kids and money, learning about money
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If you don’t fancy the idea of your children spending all their holiday time watching TV and down the skate park, what should you get them to do? One idea that is becoming more and more popular among parents is getting kids to start their own businesses. Not only is this a good idea, given the direction that the economy is going, it’s also beneficial for helping kids develop confidence and people skills.

Here’s how to help your kids achieve their business goals.

Let Them Pursue Their Passion

Kids find it really difficult to focus on things that they aren’t interested in. This is why getting them to go to school can be such a mission: smart children hate the fact that they have to sit in rows all day, doing things which are boring.

Kids Make Great Entrepreneurs: Here's How To Teach Them About Business And Life - lemonade stand image

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If you want their new business venture to be sustainable, take a step back and ask them what sort of business they’d like to run. Kids who love animals will probably be quite happy to set up a dog-walking business or even a pet sitting business. Children who are gifted in music or acting could hold their own after school classes. The possibilities are endless.

Tony Hsieh, the founder of Zappos, set up a worm farming business when he was a child, selling worms to passers-by at the tender age of nine. His goal was to become the number one worm farmer in the world.

Introduce The Concept Of Money Management

Because parents provide all the resources that kids needs, many children grow up with the impression that money is infinite. The reality of business soon teaches them that it is not. In fact, it shows that it is often very hard to come by. They’ll soon find out that most companies have to go through lenders, like Colbeck, in order to make ends meet, especially for the first few months and years. Teenagers, for instance, can do things like calculate profit and loss, and how much they would have to repay to a lender every month at a given interest rate. Younger children can practice things like counting up how much money they have in the till and what they’d need to spend to expand their business.

If your children are particularly adept, you could even hold your own investor meeting, where members of the community come to hear the business pitch and commit small sums of money if they like the idea. This will get children used to the fact that they have to offer value to investors in order to receive money in return.

Teach Them About Customer Service

Being able to listen and communicate with people is an essential entrepreneurial skill. It’s what forms the building blocks of all entrepreneurial careers. One of the key skills children need to learn is how their business idea can actually benefit other people. Why do people want to have somebody sit their dog, for instance? Getting children to understand that people want problems to be solved (like the fact that they are worried what their dog will do to the house if it gets distressed while they are out) is the key to giving them good “business sense.”

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