There are some people who are good with money, and some who are not. The difference between being good and not so good with money comes down to a handful of mindset traits and behaviours, and today I’ll tell you about the ones which you can get started on right away.
Control your narrative
Take a step back and look at where you are. Seeing yourself in a big picture is important because it allows you to understand better where you are vs where you want to be. And once you see the big picture, really consider where you want to be and what that means financially. What will your life look like? What is your narrative?
This end goal of where you want to be in terms of wealth varies from person to person. Not many of us are born entrepreneurs or born into wealth, but most of us have the skills and sense to build a comfortable, well balanced life and avoid financial hardship. For me, my first big goal was to be in my own flat by the time I turn 27 (I made it with 12 days spare!). This was followed by many others, some completed already and some which I am working through now. My ‘last’ big goal to achieve is retirement by the seaside with access to my own small pleasure boat.
Whatever your financial goals are, the key to achieving them is getting to grips with what you need to do to achieve them and following through – I call this controlling your narrative. As example, you can want a newer car, but if you are spending all your money out in the club on the weekend, you’re not going to have anything left for that car. So get a hold of your narrative and follow through – you can do that and you will if you really wand that car. Remember that you are capable of making choices which lead you to your goals. Hold on to that knowledge whenever you are tempted to spend frivolously on anything not worth sacrificing your big goals for.
Practice delayed gratification
You know that saying good things come to those who wait? It’s not entirely true – good things come to those who seek them out is more accurate, but seeking out can take time and energy. The concept of delayed gratification can be particularly difficult if you have gotten used to the instant gratification economy – everything seems to be within arms’ reach and everything seems instant. Except that’s only a facade – most important things in life need time, finances and personal effort to achieve.
As example, I want to buy another flat. In order to afford a buy to let I’d need approximately £60k for a deposit. I am at £40k and steadily working up to the rest of it – while my life does not entirely revolve around this goal, the goal plays part in my decision making and in how I spend. Or more precisely, in how I don’t spend.
Divide your money up
Did you know that most people suffer from the same odd syndrome? Money in our pocket seems to burn – I don’t exactly know why it’s so tempting to spend when you see that you have money available, but if you suffer from the same urge too, there’s help. To deal with this temptation, I have one simple trick which has been working for me for years:
I keep my spending money away from my ‘other’ money.
You can do this in many ways – use cash, use a separate accounts, use a pre-paid card or just put a spending limit on your usual checking account. I personally use pre-paid Revolut card (alternatives include Monzo, N26 and a bunch of others) and with every monthly budget I simply transfer what I am going to spend onto it. And once that money runs out…I either make more or stop spending until next budget rolls over.
Get savvy with everyday costs
Everyday costs add up quickly. One of the often overlooked but very effective ways to save more is to find cheaper alternatives to your everyday costs. These include:
- mobile phone bill – can you switch to SIM only cheaper deal?
- broadband – shop around and if you can’t find suitable cheaper alternative to what you already have, call up your provider and ask for a discount, nicely
- energy costs – switching to even a marginally cheaper electricity or gas supplier can save you significant amount over the course of a year. If your accommodation uses pre-paid meters, now is the time to switch and save up to 40% (yes, there is a huge markup on pre-paid meters!). If your home uses standard credit meter, get online and shop around
- groceries – this can be a big budget buster BUT it can also be a big money saver if you are able to cook. As example, instead of going out 2 x per week, host one evening at home. You might spend around £20 and some time in the kitchen, but you will likely end up spending less compared to if you were to go out to a pub or a restaurant instead. With Covid here you might also be able to keep things even more affordable by just going to a socially-distanced picnic in the park instead of hosting!
Pay yourself first
The very last mindset feature I will cover is the ability to prioritise you over everything else. And this means just one thing: before you spend on anything or anyone, your own goals need to be met. In practice this means that you will flip your budget and put saving (and investments, if you will) as the very first line item. Everything else comes second. This approach does two things:
- it ensures that you do in fact work towards meeting your own goals
- it pushes you to make more money
If you wonder how the second point works, imagine a scenario in which your budget is £100 short this month. You dealt with your savings goals, you paid your bills BUT you’re not making enough to pay for a birthday gift for your kid’s best friend and a date night with your loved one. The simple solution would be to save less if your savings were the last thing you are considering. However, your savings come as a priority and you will not touch them – instead you’ll find a different way to make money and cover the shortfall.
I hope this article helps you in your journey to achieving that big goal you have on the horizon. And if you are willing to share, let me know what that goal is in the comments section!