Net Worth = -$36,877.54
Total Liabilities = – $20,411
Variance from Last Month: $2716.75
I feel like that which I am about to say would not be news to many people but I feel the need to say it anyway. January is a FREAKING long month. If there was an equivalent in Personal Finance terms to the Eastern Ethiopian Rain Dance, I would have been doing it with full vigour around the office. Even nude, if that added any extra veuve. However, much to the delight of my friends, family and the HR team no doubt, I stopped short and instead reflected on a few ways to further stabilise my finances and be less dependent on my next Pay Cheque fix to keep me going. Consider it Salary Rehab if you will.
Living Pay Day to Pay Day is something many people consider the norm when it comes to household budgeting but it shouldn’t have to be that way. I want my money to be working for me and not the other way around.
The Post-Christmas squeeze has reminded me once again of the emotional ties we have with money and how not having a handle on it can touch almost every area of our lives. Below are two little lessons I learnt last month which have helped me turn a corner.
Wins this Month
The Barefoot Investor aka Scott Pape has been a sight for sore eyes this month. For those of you that have yet to come across this chap, he is a bit of a legend in the Aussie personal finance space, chiefly, I think, owing to his no nonsense approach to managing one’s money. I picked up his most recent book and while he is clearly experienced and the book itself, well researched, the main thing that struck me was the simplicity with which he is able to describe money management. The image that has framed this month’s blog post is what he calls his ‘serviette strategy’. The idea is that if you need more than a few moments and/or a simple diagram to explain your financial strategy, and you’re not the head of the IMF, it’s probably too complex. TO find out more check out his book, I’d really reccomend it.
After having rehauled my Mensa-worthy budget spreadsheet and slotted my thinking into this serviette strategy I took on board one of his primary recommendations which is to switch to an online bank, which in light of its low overheads, will charge you less and hand over more of that juicy interest that is going to make my money grow. (PS why should I be paying fees to have a bank account open in the first place? I’m basically paying someone to be able to play around with my hard earned cash.( Not cool. Scott’s bank of choice for everyday banking is ING Direct – one cool factor with these guys is that if you deposit a salary of $1000 per month you can withdraw money from any ATM in AU (even dodgy 7-11 ones) and pay NO FEES. Win. They also handover a healthy slice of interest p.a. to me, the consumer, which means my money is working harder for me just by being in the bank. Double Win. Other banks are available so do your research but I’d encourage you to think pro-actively about who is going to best manage your money, as opposed to the ‘Brand Banks’ which are considered to be better purely because they’ve been around for so long.
Spins This Month
An interesting phenomenon in Australia is that grown-up salary and rent can be paid weekly, fortnightly or monthly. This sometimes means that your salary may come in every 25th of the Month but your rent is due every second week. Given the way the weeks fall this can mean that some months your salary goes further than others (a 6 week month is like a punch in the guts, for example). I am one of the people with this little life struggle (rent fortnightly – salary monthly) and as such January was all the more pinchy.
The solution for bills we have that are fixed in time-frame but variable in amount is to spread the increases over the long term. What this looks like for me now is modelled below:
Assumed Rent= $220 a Fortnight or $100 a Week (You’re DREAMING in Sydney)
$100 x 52 Weeks = $5200 annual rent owed
$5200 / 12 = $433 avg rent per month (smoothing out the bumpy shorter/longer months)
$433 / 4 Weeks = $108.25 avg rent per week.
In this hypothetical scenarios, I have spread the payments over the course of the year meaning a little more money gone from week to week but fewer months spent penny pinching. This is a pretty rudimentary tactic (I’m a basic chap) but it could easily be applied to saving for your winter fuel bills or any seasonal clubs you are a member of. Also be aware if you are making these adjustments part way through the year they may be a shortfall you need to make up. If the way you pay affects other people i.e. your landlord you may want to talk this through with them first, obvs.
Until Next Time Finance Fans