Organising your money

26 February 2018

February, week 4 in The Simple Home

This is the last week of our money month. I hope you've sorted out what needs to be done, organised a budget and thought about where you're headed, financially. Most of the activities we've addressed this month are simple exercises that will put you on track towards a healthier financial future.  The one thing that will make these things make sense and appear to be easy to set up and maintain over a long period of time is changing your attitude towards money. Many of us grow up thinking we deserve good things and that we should keep up with our brothers and sisters and the next door neighbours.  There is sometimes a feeling now that if you don't look like you have as much as everyone else you're not as good, or a failure. That's rubbish. Although we like to think that things are fair and equal, they aren't and I doubt they never will be. So get rid of those negative thoughts if you have them and just focus on what you need and what you have, everything else is irrelevant.

Work out what is enough for you and your family to thrive, and then work hard to achieve that level. If you use your time to earn what you need to pay off a home and buy what you need, and if you look after what you already own, you'll probably develop a feeling of self-reliance and you won't be bothered by what others have. Working towards your own financial independence is enriching and empowering and soon you see the results of your work and no amount of envy will move you off that path.

Organising Your Money

Bank accounts

Most of us have two types of spending: the regular bills that we pay monthly, quarterly or yearly, such as electricity, phone, internet and insurance, and the more irregular expenses such as groceries, fuel, transport, and so on. Hanno and I pay our regular bills online by direct debit, BPAY, PayPal or credit card, and use cash for the latter. If you have a computer, it’s worth the effort to sit down and organise automatic direct debits for regular payments to make your bill paying as efficient as possible. Having pre-programed payments will help you pay your bills on time so you never pay late fees. A late mortgage payment might mean a strike against you on your credit rating. Make sure that never happens. 

It’s easier to manage money if you have one account for your spending (bills, debit card and cash withdrawals) and a separate one for your savings. Leave enough money in the spending account for the bills you need to pay this month, as well as the quarterly, six-monthly and annual bills you're putting aside money for. This is the account to have your pay deposited into. You should have a set regular amount in your budget to save in each pay period so when all the bills are paid and money set aside for known bills, you can then transfer your savings to your savings account.

Cash and cash envelopes
Many people use debit or credit cards to spend their money – there is no problem with that if it works for you and you’re not incurring fees. I have always found that I have a better idea of what I’m spending if I use cash instead of cards. When I have to hand over a $50 note, I feel it, but I don’t when I hand over a card to pay the same amount. If you’re struggling with your budget or if you’re still over-spending, I encourage you to put the cards away for a while and try working with cash.

One problem with cash is that it’s a temptation when you have it in your purse. To avoid this problem, when we withdraw cash from the bank every month we put it in envelopes or zip-lock bags earmarked for particular budget categories – groceries, petrol, garden supplies and so on. My budget tells me how much to put into each bag. When I go shopping, I take money from these envelopes and then return any change to the bag.

During the month, I can see the amounts getting smaller and I know exactly how much I have left to spend. We can also take money we haven’t used from one envelope to pay for something that may have been more expensive than expected that month. Being flexible with these envelopes can be a great help sometimes. Whatever is left in the envelopes at the end of the month – and there always is some left over – is added to our savings. It will take you a few months to have this system rolling along effortlessly but when it does, it works very well. 

The Big Joyous Picture 
If you have a steady income, be it from a job, a business, investments, a pension or welfare, and can consistently live on less than your income, you’ll be doing okay. If you manage to save the extra, you’ll be doing even better. Once you’ve made the shift from spender to saver I hope you see the wisdom in what you’re doing, from financial, health and environmental perspectives, as well as from a lifestyle one. And don’t downplay the lifestyle angle: everyone wants to feel they’re living well and being productive, no matter how their income is derived.

When you see your friends in a new car, or changing with the fashions, you’ll most likely want to remind yourself that your life provides plenty of satisfaction and that even though you like the new things your friends have, you don’t want them; the cost is too high, no matter what it is. Your debt is reducing, not going up, and I hope that will give you a measure of accomplishment and joy that no amount of new clothes or travel will give. 

Be aware of how to cut your costs, stick to a budget and pay off your debts. These things take time, so enjoy everything that life offers as you live it. Don’t close yourself off to the people around you. Remain interested, take chances, learn new things, develop the person you want to be. This can be tough at times, and not everything will go according to plan. Keep your eye on where you’re heading and know that all this work, caution and forethought will pay off. Your reward won’t just be living debt-free, it will be the choices and options that will give you, as well as all the joy you find along the way.