Financial Makeover

Wealthy & Wise

What comes to mind when you hear the phrase Financial Makeover? I am one person who was a walking financial disaster, making a lot of money from a young age, but not having anything to show for it. I would bring money home, only to put it in a purse with holes.  It was not until I acknowledged my overspending habits, and uncontrollable impulses that I started to enact money management skills that helped shape my financial present and future for the better.

Many people fail to reach their financial goals because they do not make adequate plans to sustain them financially throughout the year. As the adage goes, failing to plan is planning to fail and I am sure the majority of us are aware of that maxim, and yet we fail to make the effort to be diligent with our finances and have some form of security or cushion when crisis arise.  Many a time we only play defence, trying to protect the little that we might have, instead of being on both the offensive, and the defensive side.

When you are on the offensive side financially, your money is an effective weapon against debt and unseen emergencies that might crop up. Being offensively well equipped financially, allows you to defend your wealth and possessions effectively from depletion and eradication. When you are offensively well equipped, you successfully defend your purse from wealth suckers. When it comes to personal finance, being offensive is more to do with being adequately equipped to attack financial crisis when they arise, thereby defending the sweat of your brow. Being able to say no to seemingly “good” opportunities, and to unreliable friends and family constantly borrowing, is both being on the offensive and defensive side. Many relationships have been broken because of money issues, but that is another topic for another day.

Here is my list of things to consider in your planning for a better financial position:

1. Have a budget (The starting point to financial freedom)

I cannot highlight enough the importance of having one, because it has saved my finances. Because of a budget, I went from having only £2,000 saved in five years, to £40,000 saved in 24 months! What a difference tracking your spending and eliminating unnecessary items makes. Most of us when in our teens, and early twenties, we do not really care about financial wisdom or prudence. We spend money frivolously on unnecessary purchases we can do without, and stack up stuff in our wardrobes, some of which we have never won – what a waste. I commend budgeting, and sticking to one. A budget is simply a money-spending plan that allows you to allocate your money according to your monthly needs.  Here the emphasis is on needs, and not wants. It does not have to be complicated, and you can make one using spreadsheet software, no special apps needed.  The important thing is that it is simple enough for you to understand and follow through, make it personal.

2. Have an Automated Savings and Investment Plan

 They say you cannot spend money that you do not have accessible, or cannot see. I recommend that anyone who wants to be serious with this money game have an automated savings and investment plan. As soon as you get that cheque at the end of month, make sure that your savings and investments Direct Debits and Standing orders are set-up for the following day, so that as soon as the money hits your bank account, it leaves the following day into the respective accounts, that way the urge to spend it is diminished. When everything is automated on a monthly basis, the banking system does all the work for you, all you need to do is make sure there is enough money to cover transactions every month. I encourage having separate savings and investment accounts from your banking account provider. If you know that you are not well disciplined when it comes to money, you can take it a step further and put your savings in notice accounts, that way, the money is not easily accessible and there’s a wait; this might be a good discouragement for you to spend, and helps you reconsider if it’s a necessary spend. It is all about strategizing and putting precautionary measures that safeguard your wealth – remember offensive and defensive measures. Your savings and investment plan should be in keeping with your yearly goals and activities.

3. Plan for the Unexpected

 Some call it an emergency fund, but I call it a safety fund – you can call it whatever you want.  This is a fund solely for unexpected financial expenses.  Being prepared for the unexpected, guarantees security, and will protect your savings and investments from being used when crisis arise. Experts suggest a cushion of up to 3 months expenses to start with, and then as your income increases, increase that to at least 6 months worth of expenses, even the whole year. These are just guides, but you decide the amount that guarantees your security and comfort. I suggest putting the money in an interest earning account, so that it is not just idle, but it is working whilst parked in there.

4. Debt Elimination Plan

Having Debt decreases your net-worth (total assets – total liabilities = net worth). For most people, debt is a cause of stress and sleepless nights.  When in debt, you are a slave to the lender, and that is not a pleasant position to be, especially if you fail to keep up with the debt repayments (we all know what could happen). Personally, I do not buy into the whole using debt as an advantage (works when it comes to things like mortgages). I hate debt, and I avoid it at all costs; if I do not have money for something, then I go work for it and save until I have enough money for it. We live in times when people are so impatient and want things NOW to impress people they do not even like – to use the cliché.  There is nothing wrong with having a good life, and good things; I would rather have all of that, debt free, if having it is necessary.

My first car was purchased on debt, until I realised how much extra I was paying in interest, I found myself a side hustle, and payed off £4,000 worth of car payments within 8 months. Paying off the debt 16 months ahead of schedule, allowed me to save a lot of money on interest payments, and trust me, after I cleared that debt, I felt liberated! I even went on to pay off a £400 overdraft I had with the bank, and removed the facility from my account permanently because I did not want to be a slave to debt anymore.  Most of the times I was failing to keep up with the overdraft payments, and getting charged late payment fees. Now I am actually earning interest on my account; I have been debt free ever since and I am happy and satisfied!

Think of ways you could eliminate debt, starting with the smallest, going to the biggest one. Mortgages are understandable, and still payable within a few years if you commit to eliminating debt completely from your life. There are ways you could pay off your mortgage quicker and reduce those extra interest payments.

If you are struggling with debt, try debt consolidation, or just get another job to help pay off unnecessary debt. You have to come up with personal austerity measures to combat this issue and deal with it permanently.

All the best in your planning!

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