I’ve always been a spender. I love to shop, I enjoy the thrill of spending money (it doesn’t give me a hernia like it does some friends), and I’ve never had much cash in the bank at one time. I would look at people like my sister with envy because even as young teenagers she always had more money than me. Always. And more chocolate, for some reason.
But my sister Hayley had always been good at maths. Budgeting seemed to come naturally to her and didn’t make her hair curl. I assumed that I would never be any good at it.
They say the first step is admitting that you have a problem. My bank account had already told me that. Repeatedly. Even though the three years I’d spent out of home after turning 18 had taught me how to manage enough to get by, I knew I wanted more than that.
I wanted to be able to nod along (and not be faking it) when people referred to a “savings” they could dip into. I wanted to become one of those people who didn’t have panicky money emergencies, one of those people who just saved for no reason (for many years the idea seemed pointless to me while there were still countries in the world that I hadn’t visited).
My financial life went something like this: save up a lump of money. Travel to a new country on my bucket list. Come home with nothing. Save up a lump of money… I was on a financial rollercoaster, and when my relationship with my boyfriend Jacques started to get more serious, I realised I needed to change my ways.
Unsurprisingly, my savings had taken me to Europe, on a Contiki trip, and while riding on the top storey of a red double decker bus in London, an almost-stranger gave me my first key.
- Open up a restricted-access savings account with a separate bank Thank you, fellow traveller (I don’t remember her name). So when I got home—with a considerable amount of credit card debt—I went to a different bank than usual and opened up a smart saver account, or something like that. When he offered to set me up with a debit card I responded with a “no!” that was probably too vehement. Then I explained that while I wanted it to be easy as pie to shuffle money across into it from my everyday account, I wanted to make it as hard as possible to get this money out.
Now almost a year later I haven’t removed so much as a cent from that account, so you could say it worked. Although I can transfer into it on my phone via the app, as well as check my balance, there are no outgoing accounts connected to it. So basically if I want to get my money out I have to go into the bank and beg them face to face, which I am too ashamed to do for the sake of a cute pair of shoes. In addition to this, the interest only accrues monthly and if I withdraw more than once a month I get slapped with a fee. Perfect.
- The Cushion Concept
My mum, Joanne, had also been noticing my lack of natural financial acumen for some time now. She had tried countless times to introduce some money-saving measures into my life, but every time she used the word ‘budget’ I would pretty much gag. Due to my strong aversion to maths, my budget when moving out of home had only lasted a week and a half (which my dad pointed out is the definition of not lasting).
Mum, because she’s a genius and was committed to helping me save, called me one morning before work and presented me with two principles. Now she was speaking my language. The first one was the concept of a financial cushion. She and I agree on an amount that I save towards as security in case anything goes wrong or unexpected expenses appear. Then if I do have to spend out of the cushion, my first priority (before a shopping spree) would be to get that cushion back up to the previous amount. We agreed on $2000, then once I had that comfortably, we could up it, and up it again … you get it. I had been riding by the seat of my pants and it had burned me more than once (for example, being stuck in a Mexican restaurant in Florida on a shakey wifi connection waiting for money to come through from my sister in Australia after I ran out of money so I could cross the street to the bus station and make my way across two states, back to South Carolina).
- The Cash System
Everyone is so quick to tap their Pay Pass these days but the problem is that it’s too easy to spend more than you realise. Cash is very visual and finite, so Mum also encouraged me to take out a certain amount of cash every week for spending (it can help to tell someone your amount to provide some accountability). This didn’t include rent, tithe, bills or petrol … things that didn’t really change week to week. It included all food, entertainment, gifts, shopping, and lately I’ve been trying to make it include my petrol as well.
I find the cash system very effective because it shows you how close you are to running out. But for it to work you have to make an agreement with yourself that you’re not just going to take more out if that lot runs out early. This forces you to plan your spending and you are more motivated not to spend on impulse things when you know you have social plans or another expense later in the week.
I never thought I would be able to say this but I can honestly attest to the excitement of reaching financial goals. With these measures in place, I have the most money in my bank account that I’ve ever had, my credit card balance is down to $0, a third of my car is paid off, and none of my bills come as a nasty surprise.
And all of this without doing maths.
(And thank you Mum for the wisdom.)
Image: http://www.broncocatholic.org/personal-budgeting-for-students.html, sourced 24 September 2017.