This might sound like a strange title for a money management blog but getting personal with your finances is often the crucial first step to start forming great spending and saving habits. We set out some top tips for ‘financial’ beginners, to help you take your money on a date!
- Setting the mood:
We suggest that step one is finding the right time and place to settle down and work your way through your money habits and spending plans. Set a day and time in your diary where you know you aren’t going to be side-tracked and can focus your attention on the task at hand.
Even pencil it in, make it a formal meeting in your schedule, this stuff is important! If your best time is at 5am before the rest of the household has woken. Whatever floats your boat (so a 5am start is not strictly necessary, for all of you night owls reading).
Think of your conversation starters on a date the same as you would if you were to take your money on a date. To get to grips with your money you need to lay out the firm foundations of what you want to achieve with it:
What is your intrinsic purpose for your money?
Is it to heat and eat and spend the rest?
Is it to create a nest egg for later life?
Is it to provide you with some level of comfort that you can dip into for emergencies?
Spend time thinking about what your goals are and the purpose of saving or spending. Where you would like life to take you and how can organising your finances help? No two plans will be the same, some may be looking to plan for that fancy yacht they’ve always wanted, some may simply want to build up a security net.
Saving without a plan is like setting off without the satnav, you’ll probably get there eventually but without a set journey, you may take a few wrong turns or it may take you longer to arrive.
Figure out what aligns with you and your values make it part of your end destination. Extra top tip, you are more likely to achieve your goals if you write them down, it helps to better focus your mind on your stated objective.
Do some detective work:
If it’s not a blind date, chances are you’ve used the wonders of the internet to scope out your date beforehand. Do the same with your money. Know your numbers inside and out before you properly formulate your plan with them.
Understand what comes in, if you’re employed this is simple, just gather your most recent payslips. If you’re self-employed, you may want to sit with your accountant or indeed use your accounts to find your likely average weekly or monthly income as a baseline to start from.
Finally, analyse what you spend. It may be easier to categorise spending into three categories:
Basics: the things you absolutely have to pay for, in essence your basic household bills, food, transport, utilities, council tax, mortgage/rent etc. The things that usually come out as direct debits, that you absolutely have to spend on to maintain a basic standard of living.
Nice to haves: this could be anything that you regularly spend on that helps you to live a life with a level of enjoyment. If that gym membership or that cooking class brings you a level of fulfilment and remains affordable, plan for it! If you have an old subscription running that you no longer use or a hobby that no longer fits your bigger vision, you may want to re-evaluate if it still aligns within your wider plans.
Luxuries: These are things that are more likely to be the bigger items on your wish list that you’ve outlined as a goal or milestone. Therefore, they may be things that you want to specifically set up a savings plan for as part of your money date. However, they may also be every day things you cut down on in order to reach your goals faster – think here the age old cliche of cutting out your morning coffee shop run. .
When you are finished doing some Line of Duty investigative work on your finances, assess if it is affordable to set aside any spare capital for your bigger life goals and plans.
In short, once you’ve given your finances a good ‘spring clean’ take your expenditure from income to assess whether you have affordability to save for bigger milestones.
- Success! Arrange your second date… and your third and your fourth….
Plans change, life changes and priorities change. The goal posts may have moved, or you may have achieved some targets and want to work on the next. Make your money date a regular social feature in your calendar.
To give some examples, you may want to track your spending every week as a reflection exercise, or you may want to make your money date a monthly shindig! If you are planning to review any investments or pensions you may have, it may be that you chose to look at these annually, given the longer-term nature of these types of contracts.
However, like most suggestions in this article, it’s your date, you control it and therefore schedule ‘date night’ for a frequency that is realistic for you and your plans.
Happy dating!