“Don’t touch my lunch”– My wife had taken it upon herself to find ways in which we could cut our expenses, when she said to me that “Yemi you cannot afford to spend more than £2 for lunch at the office otherwise we will be in trouble”. Then I knew that we were already in trouble, because a simple £5 lunch should not be an impossible asks for a working man! I was adamant that it wasn’t my lunch that was putting us in trouble, neither was the £60 we would save per month from my smaller lunch that would put our finances right; it had to be something bigger. So I turned it on its head, looked at our expenditure and asked how we could save on our 3 biggest expenditures- I would think our biggest expenditures are similar to most middle class families at least in the developed world. We identified them as rent, debt and taxes.
If you are worrying month-to-month about getting your rent paid, you finances are already out of sync; it should be a decent and just about comfortable amount to pay.
My wife loved the house we lived in and therefore was ready to negotiate cutting any other thing than moving to a cheaper apartment. A t that time, I worked away from home for a good part of the week; as we reviewed and discussed we concluded that if I didn’t have to pay for a room in the town where I worked we could have a further £280 in our pocket. Coupled with a range of other issues, I summoned the courage to request a better arrangement from my boss; he allowed me to work largely from home and authorised that company paid hotel and expenses for the reduced time I needed to report to work. Wow…it was a relief, it saved us more than the rent, and even the cost of travel was reimbursed. Why hadn’t I summoned the courage to ask earlier? If you never ask….you will never know!
When it was time for us to purchase a house, we negotiated a mortgage that was a further £150 per month cheaper than what we were paying in rent. Now we do not really lose sleep over paying our mortgage because it is pretty affordable. If you are worrying month-to-month about getting your rent paid, you finances are already out of sync; it should be a decent and just about comfortable amount to pay. I have no recipes for what percentage of your income it should be; but it should not be painful to pay; if it is painful….perhaps it’s time to find something cheaper.
the average UK household pays £2,292 of Interest on their debts in a year; apart from servicing the debts itself!
It was question time after I spoke to a group of business men who have all been in business before me. The question focused on debt as I showed statistics that the average UK household pays £2,292 of Interest on their debts per year; apart from servicing the debt itself! I showed them a couple of spread sheets my wife had used to track our debt payment for since late in 2010. It showed that we had a total of 9 separate debts/loans/car finance/credit card etc and were bleeding over a thousand pounds every month to service these debts. She learnt a very simple method from a brilliant book ‘how to debt-proof your marriage’ (I will share its idea of debt reduction in another post soon).We decided that we would not take or use any more credit whatever the temptation ; through following the method prescribed in that book our debts are now down to only #4 individual debts and all our payments have been halved; keeping a little more money in our pockets. The beauty of the approach described in this book is that you solve your debt problems over a few years without really affecting your current daily life adversely.
We decided that we would not take or use any more credit whatever the temptation
One of the biggest disservices of being an employee is that you have little control over your taxes. Hence we do not usually think of the amount we pay in taxes as our money. But back in the day our forefathers used to earn money and then pay taxes but now it is reversed; tax is taken away before your money reaches you pocket! However self-employed people and business owners still earn their money, take away their expenses, before paying the government from only their profit and legally so- therefore they are likely to pay a less than you in taxes and they don’t have to pay it until the end of the financial year; so they have a better cash flow through the year. The effective flow of cash, it’s availability as and when needed (without the use of debt) is the only difference between those who have their personal finance in control and those who do not.
When I moved into self-employment and business in the middle of this year, the pay-as-you-go taxes, stopped; putting ample money in my pocket. The important thing about this is that this ample amount is not for me to spend buying an I pad or whatever, but it provides potential cash flow for me should there be an unforeseen emergency and for the really business savvy folks, it can be reinvested to yield even more money before payment is due.
The effective flow of cash, it’s availability as and when needed (without the use of debt) is the only difference between those who have their personal finance in control and those who do not.
If you can look at your finances and deal with the big issues, I am convinced that like us you will be on the road to recovery. Shying away from our financial challenges or simply wishing and ‘faithing’ them away does not always work because with a little wisdom and a little discipline, at least with the first two points above; we can get our finances in order. Have a blessed week.
Photo credit- photo credit- http://goo.gl/U6R8Tm
- 5 Important Personal Finance Tips (debtconsolidationusa.com)
- How To Create A Spending Plan (debtconsolidationusa.com)