I reflect on my own money journey that has been moulded from such a young age by my family’s values. Our money mindset was built on what made us truly happy as a family – memorable EXPERIENCES!
We all have our own dreams and priorities for our money. Your money matters whether you are single and spontaneous, or you have a big family with lots of responsibilities. But no matter who you are, your money is finite.
So, I give you my top 5 tips to manage your monthly expenses (relatively painlessly) in order to live now and enjoy the future. You will thank me later!
- Watch the pennies and the pounds will follow.
- We spend our money on what we value. This is a combination of price and quality.
- You are forced to prioritise how you want to spend your money because it is limited.
- You also need to be ready for those unexpected expenses!
- So we have two choices: we can either drop our expenses OR we can earn more income.
- I’m a great fan of increasing your income. But HOW?
- Dollar millionaires have a minimum of seven sources of income.
- Start a SIDE HUSTLE TODAY!
- It takes time to start your side hustle that becomes a sustainable replacement of your income.
- Lisa’s 5 tips for managing your expenses:
- Be frugal about your day-to-day spending.
- Have a fund for guilt-free purchases (after all, YOLO!)
- Save gently (and separately) for your holiday throughout the year.
- Pay yourself first! Take the money off the table.
- Build an emergency fund that has at least 3 months’ worth of your salary.
- I unpack each point in detail. Have a listen and take notes!
- Good financial management is a DAILY game that makes the difference to live now and for the future.
- Building a side hustle helps promote a sustainable solution to make ends meet.
- Only 6% of us will retire with enough money to live to our normal standard of living. That is a shocking statistic!
- Sign up for my side hustle course that will launch in September 2019.
- Live your best life by being brave to be free!
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Lisa Linfield: 00:09 Hello everybody and welcome to today’s episode of Working Women’s Wealth. This week I’ve been thinking a lot about my own money story and some of the subconscious ways that I have absorbed little messages from when I was a little girl. One of those stories I was told was watch the pennies and the pounds will follow. Or watch the cents and the rands or dollars will follow.
My mom is one of four girls and I love going shopping with my extended family. I actually feel quite proud when we shop because each price is compared and the base value is selected. Value being the combination of price and quality. Why would you pay more for two breads that are exactly the same quality and so each rand is saved. But the interesting thing about my family is that whilst we watch our pennies on our everyday expenses, my family’s also very generous when it comes to special experiences.
My mom and aunts are great foodies and so they deeply appreciate the experience of great food and will buy the best value prawns one can get. Or they will pay for a great restaurant with fantastic food and exceptional ambience. Never do they waste, those pennies get stacked up in the day to day so that the pounds can be spent on truly worth it experiences.
As I was going through the money story exercise, I realized that this is definitely a philosophy that not only did I absorb, not only do I use today, but that I like and will continue to choose it consciously and keep it as a practice. I see it in me driving a small car. When people ask me why I would do that, when I could afford a bigger one. For me, the answer is so easy. Sure I could buy big car. I’d love to buy a big car, but I keep thinking each year of the holiday I’d rather experience with my family and that to me feels like a better use of my money.
Each one of us has our own priorities with respect to how we spend our money, and that’s absolutely perfect. What I choose to spend it on might not be what you choose to spend it on. The challenge is that each one of us has a limited amount of income and more often than not far more expenses and unexpected expenses that we need to pay out of that limited amount of money. So we have two choices, we can either increase the income that we have or drop the expenses. As you know, I’m a far bigger fan of increasing your income. Dollar millionaires have seven sources of income and so should you, you should always be developing your side hustle because like a tall tree that eventually will be big enough to either be sold for paper, used for shade, or for the beauty of the landscape around it, it takes time to grow that tree from a little seed to a sapling to something that can replace your income. But with patience and time it will grow.
So let’s focus now on how to manage your expenses. There are five tips that I’d like to take you through. Firstly, be frugal with your everyday expenses. Secondly, make sure you have an OLLI fund or you’ll give up on prudent saving forever. Next, gently save for your holidays through the year. Fourthly, pay yourself first. Take money off the table. And lastly, create an emergency fund. So let’s start with point one. Be frugal with your everyday expenses. I remember a long time ago advising a friend to invest 500 rand, the equivalent of roughly 50 dollars a month. “But that’s such a small, insignificant amount of money,” she responded. “It won’t change a thing,” so she didn’t. Today, 14 years later, she would have had 170 thousand rand. Or the equivalent of 17 thousand dollars.
Be very frugal with the money that you spend on everyday things. Watch those pennies. Don’t eat out often and over time those trees will grow from saplings to big oak trees.
Which leads me to point two, you’ve got to have an OLLI fund. What’s an OLLI fund? I remember clearly the conversation like it was yesterday. I was chatting to one of my team when I was in corporate and he was sharing his frustrations at the difficulty in sticking to a budget. When I asked him if it was his wife who overspent, he paused, thought carefully, and admitted that it wasn’t her. So then I asked, “It must be you?” The pause this time was longer. After a while he said, “Yes, I guess so.” I asked him what it was that blew the budget last and he responded, “I bought myself a new iPad.” And then almost immediately said, “But flip it, I work so hard, I should be able to buy a new iPad, which I use for work anyway.”
It was then that I realized that we all need to give ourselves room in the budget for guilt free spending. Both partners should get a little bit of money that’s guilt free that they can spend it on anything. No questions asked. Cappuccinos with the girls, hair done, new iPad, or if they’re a saver, they can save it away. Whatever it is, you need an OLLI fund, one life, live it.
I don’t believe in starvation diets for longterm health. They never work. You will always cheat. Similarly, I don’t believe in budgets that squeeze every penny from you. You need to be able to breathe in your budget and have a little stash of cash to do whatever it is with your money, without your partner questioning it.
So that brings me to point three, you need to save gently for the holiday season. I look at budgets every day. Big Ones, small ones, they all have a line item for holidays. Usually the total amount has been divided per month for that holiday. So if the holiday was going to cost you 12 thousand, each month has one thousand in the holiday column. The thing is, when I ask anyone whether they actually put it away each month, they all say no.
So what ends up happening is that when that holiday actually comes, it can’t fit into the budget because that 12 thousand space already has the monthly expenses that need it, and then people go into debt. So I recommend all my clients have a separate savings account attached to their main transactional account that they use to manage cashflow. When there aren’t expensive months, that extra little bit leftover gets put aside. And when there are expensive months, you can draw money from that account rather than going into debt. And let’s face it, holidays are always expensive months, whether it’s returning home for Thanksgiving or going away for your summer break, it’s always going to be an expensive month.
So reduce the stress by stashing the cash so that you can enjoy your holiday without that underlying worry that you’re going to be putting yourself in financial difficulty.
Which brings me to the next step, pay yourself first and take the money off the table. I can’t begin to stress how important it is that you pay your future self first. We all tend to spend what we have so you need to take that money off the table. Don’t allow yourself to include it in your thinking of what’s available to spend. Make sure that you automate your payments to your investments, to your holiday fund, to your OLLI fund, and to your emergency fund. On the same day or the day after your paycheck hits the account. Automating savings and investments are so easy these days and takes away that level of mental energy in deciding whether or not this month you should save or remembering to move it across to another account.
The great thing about the automation is the peace of mind it brings. Firstly, you know deep in your subconscious that you’re taking care of your future self. That removes a level of stress. Secondly, you know that whatever’s left in the account is yours to spend or to put towards an experience that’s worth more to you than the difference between the 13 rand bread or the 11 rand bread. Automation is one of the fundamental keys to making your financial freedom targets.
Lastly, pay into an emergency fund. You should have a minimum of three months expenses saved into an emergency fund. Because let’s face it, emergencies happen and when they do, no one has enough money in their account for them. I usually find it takes three to four years of saving to build up an emergency fund if someone’s also contributing to other investments. Emergency funds help you not to have to use credit cards and overdrafts or short term debt in order to pay for those unexpected expenses.
It also helps you not to use the capital of your mortgage over payments to fund day to day expenses. And let’s be frank, whenever I see clients needing an emergency fund, they usually are hit with more than one thing in a short time period. The car breaks down, the child needs medical attention or they get made redundant. So make sure it’s there because we will all need it at some stage.
Good financial management truly is a daily game, and like health, it’s in the daily things you do that will make the difference between being able to live now and save for the future, or living now only and having the stress of emergencies and not saving enough for your retirement.
As I said, I always think it’s better to find more sustainable ways to make money with a side hustle. In September I’ll be launching the side hustle course that teaches you how to build a business from scratch. I won’t be launching it again this year. So if you want to do it, please do sign up for the wait list on my website, workingwomenswealth.com.
Otherwise, the next time you’ll be able to do it is sometime next year. I strongly believe that everyone needs a side hustle. Only 6% of people will retire living the life they want to live, and 94% of us will struggle and need extra income, but side hustles take time to build. So start now and start creating an income stream you need to live your best life. Take care. Have a great week. I’m Lisa Linfield and this is Working Women’s Wealth.