Financial Literacy Digest TWO: Simple Habits to Transform your Financial Life

This week we return to the financial literacy material I'm so hot on.  Today I'm offering 3 straightforward actions that will improve your relationship with money and increase your wealth! 

By seizing control of your moula on a daily basis you will gain the confidence to tackle bigger tasks like opening a business account or paying down credit card debt. 

As I mentioned in my last finance blog , I think it’s cuckoo that financial literacy isn’t taught to us at school, starting from a young age.
 

Money is a language. If you can speak it, you’re in a much better position to earn it.
 

IMHO if Financial Literacy was taught widely and consistently, it would help close pay gaps and contribute positively to balancing out economic inequalities.

Since 2017, I have been on a massive journey with my relationship to money, debt and earning.  To be clear, I have a BFA in Acting -- I am not a financial expert at all!  I'm an artist who got tired of being panicked about money all the time and I'm sharing what I've been learning. 

I've done my best to be succinct, but this email is a bit of a doozy! I hope these tips are useful. Please hit reply and let me know of any great financial literacy resources or hacks that have helped you. 

1. TRACK YOUR SPENDING EVERY DAY 

This was the first action I took towards getting my debt under control in 2017 and I can't stress how transformational it was. It's a great place to start, because it lets you know where your money is going on a daily basis.

Here's how to do it:

• Everyday write down everything you spend money on. Check bank statements (for payments taken out automatically, i.e. Netflix) and don't forget cash purchases.
  
  Take 5 mins every night, or when you wake up, to do this. Commit to it for at least a month.

• At the end of each week enter your numbers into a spreadsheet.
  
  I recommend doing tallies for your spending in terms of categories (restaurants & cafes, public transport, ubers, rent, clothing, household stuff, groceries, phone, etc etc). You're getting a picture of what your life costs given your current choices and habits.
  
  Take aLOOK AT HOW MUCH YOU SPENT that week (total) and ON WHAT.
  
  Consider where you could spend less. I was shocked by how much cash I was burning through in restaurants and cafés.

•  At the end of each month figure out how much you EARNED.*
  
  Go through your bank account and add up the money you received that month.  Now do a little math: subtract your spending for the month from your earnings. How are you doing?  
  
  *As a freelancer, it's wise to do it at the end of the month because pay schedules can be wonky. Another method is to look at your earnings over the last 6 months and take an average, as the nature of the work can be feast to famine.

• Get real about how much money you need each month to cover your expenses (and have fun and save for the future, but one step at a time!). How far is that from your current situation? Crunch the numbers so you have a number to work with.  

  Once you've got that number, here two ways to make it happen…

2. WORK ON SPENDING LESS / EARNING MORE 

There are two ways to increase your money pot: earn more or spend less. The magic recipe is doing BOTH.

From talking with my friends it seems people are likely to lean one way or the other.

I was definitely a “Spend Less” person. I’d put myself on austerity measures without much of a plan, and feel guilty about every purchase without addressing a.) How much I actually needed to live comfortably or b.) Making changes to ensure I earned enough to support myself.  Daily tracking changes all of that. 

“Earn More” pals have said that their problem was when they earned more they spent more. So they stayed (or went deeper) in debt. Their increased income gave them license to indulge. Which would have been fine IF they’d had a plan to hold them accountable. 

In both cases, I think the root of the problem is a haphazard and chaotic relationship with money.  Again daily tracking saves the day. 

In terms of earning more, there are many avenues to pursue: ask for a raise, up your fees, side hustle, pick up part-time gigs, put the word out you’re looking to work. If you're skint, give yourself the task of sending one hard email a week, focussed on raising your income.  And play the long game here by investing in yourself when you can: hone new skills, take a class, create a project that you’ll use to further your career. 

When it comes to spending less, your task is to use the info from your daily tracking to implement a weekly budget and stick to it.

While you wait for funds to raise, tighten your belt, reduced spending and challenge yourself to live within your means by cutting out spending on things you can do without.

For extra help saving try a...

3. WEEKLY BUY NOTHING DAY 

One day each week, simply BUY NOTHING. 

I did a little research on ‘Buy Nothing Day’ which rose to prominence a couple years ago as a reaction to the crazy consumerism on Black Friday.

I’ve been trying to do a Buy Nothing Day once a week.  Whenever I do it, it feels amazing. 

Essentially it highlights how much of my spending is out of habit, or itch scratching, rather than necessity. I don’t know yet how much I’ll save from doing it, but I think the mindset shift it provides will be really helpful.

Choose a day and give it a try for a month!