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If you are one of those people that finds themselves forever without money, then this post might just be what you need to read. In my experience there are several reasons why people fail to improve their financial circumstances and it is not about earning potential or getting a raise. I have found myself in many of the situations below in the past so I can completely empathise. Have a look! Do any of these sound like you? Are you fed up of being poor?
This one might not entirely be your fault. I’d say that the average person in the UK understands very little about money. We know that we need it to buy stuff and that we can get it by working. For the majority that is where it ends.
If that is all you know about money then it is going to be hard work for you to make more money. You’ll be working for every penny. Not only that but that hard-earned money will slip through your fingers and at the end of the month you’ll be wondering what that precious cash actually got you.
Finance education is so important. Unfortunately it barely gets taught in schools. Therefore you have got to do your own research. Read books. Visit blogs. Go to websites. Even enrol for an online course. Future Learn has some great courses that can help you get ahead with your finances. Take a look at my recommendations page for links to useful books and websites.
Money is such an important part of our lives. In order to fully understand it we need to give it the attention it deserves. Go and get educated.
Debt! Pretty much everyone I know has some sort of debt or used to. If I go back a couple of generations though, debt was far less common. My grandparents were a rarity in the fact that they bought their own property given their working class background. By my parents’ generation having a mortgage was considered normal. For my generation it seems that having debt for near enough everything is normal. But it is not healthy.
Most people get in debt at one point in their lives. Maybe when they were a student or maybe they had an emergency crop up or maybe they just gradually crept into their overdraft to pay for day to day life. If you are one of these people then you are probably finding yourself in a cycle of paying off some debt and then something else happens and you are back in debt and then you pay it off etc.
You will find that this cycle continues until you do something proactive about it. Get creative and aggressive about getting out of debt. You need to break the cycle.
Life is full of those wonderful little moments where you go “Oh great. Now this happens!” We call these emergencies or unexpected events but are they really?
What about if you tried to plan for the things that might go wrong? For example my washing machine is making a funny sound. It’s a few years old and it gets a LOT of use. Rather than waiting for that to die and then rolling my eyes and cursing, I’ve got the money for a new one waiting. Obviously I’m not going to replace it until it is definitely broken beyond repair, but when that happens I know that we are ready.
You can do this for all manner of events. What about if you find yourself out of work? How would you pay the bills? Having a good sized emergency fund means that you would have money aside to cover that eventuality. I recommend 3-6 months of expenses. Therefore if that happens you’ve got enough money to not instantly go into panic mode.
If you are looking to get out of debt then having a modest emergency fund is crucial. Find £1000 from somewhere. Pull extra shifts. Sell some of stuff. Get another job. Get that money from somewhere. If you try to pay off your debts without any emergency fund then the first time that something breaks you will be straight back into debt. Please squirrel away an emergency fund now.
When I got my first job my mum told be to save half of what I earnt, because then it was last me twice as long. Now that is cracking advice. I’m not sure 16 year old me really understood the value of that statement at the time but I listened and it served me well.
It is so easy to think about what is happening now and prioritise those things. But what about tomorrow? There are thousands if not millions of people living in this country that get paid, spend the majority in the first one or two weeks immediately after and then live off next to nothing until they get paid again. When you truly think about it that is a ridiculous way to live.
But it goes even further than that. How about retirement? People give this part of their live far too little attention. For my generation normal retirement could be 30+ years. I need to consider that a priority because I refuse to spend those years of my life living in poverty.
In the more immediate future, there’s Christmas! Christmas is the same day every year we have 364 days (sometimes 365) to prepare for it. But so many people don’t. Sitting down and deciding what you will need to spend on gift giving events and making a plan to but some money aside each month will take all the stress out of it in November.
You need a budget! You need to know what you have coming in each month and what you you have going out. You need to plan what you are going to do with anything that is leftover or you need to make plans to deal with any shortfall.
The best way to approach this is to account for every penny. With this budget you aim to have £0 leftover at the end of the month. This doesn’t mean that you don’t save anything, actually it means the exact opposite. It means budgeting for any savings right from day one. You take all the money you are going to have for that month and decide what it is going to do.
Some people do a general budget and hope that that covers them for every month. This is better than nothing but doing it every month will be better. This way you can reflect on what you spent last month, making tweaks to this month. You can increase your savings and investments if you overbudgeted and found you had some left. You can react to any increases or decreases in income or expenditure that are specific to that month. Plus making time once a month to fully review your finances is one of the best investments you can make.
“I’ve been working hard recently I deserve [insert normally expense thing here]!” “I’ve had a tough month I deserve a treat!” “Ooh! [Insert favourite retailer] have a sale on!” If you use any of these phrases then you are letting your emotions control your money.
I’ve used all of these phrases. Sometimes I still catch myself saying them and it is only through an awareness that I now stop myself (most of the time) from acting on them. You need to learn when you are using money to meet an emotional need and actually deal with the emotion. Buying more stuff is a quick fix. You’ll soon regret the decision and then you’ll have an item you don’t want and less money.
Recognising that this you do this will help you become more aware of how make decisions about money. If you catch yourself spending money and it is emotionally driven. Then stop! Wait 24 hours, a week or even a month and see if you still feel the same about making that purchase.
Or maybe you are two or more. Or even all of them. Acknowledging the fact that you are struggling is the first step. Figuring out why will help you move forward and towards financial peace of mind.
Disclaimer: Remember the information you read here does not represent financial advice. Any ideas or suggestions are just that and may not work for you. Read the full disclaimer here.
Looking After Your Pennies is an eco-friendly personal finance blog written and managed by Charlotte Jessop.
I write on a variety of topics including frugal lifestyle, eco-friendly living, money making ideas and generally how to make your money go further.