It’s a fact, our finances are one of the things that causes us the most stress in our life. While we all need to make money to live, taking control of your financial life involves much more than just increasing your income.
Taking control of your finances involves consistently making good financial choices, changing your financial habits, and living a more deliberate lifestyle. If we are aiming for a stress-free life, then we need to address our finances and find routines that will keep the stress of money to a minimum.
One of the most stressful areas of my life was finances.
The stress of my financial situation meant that I feared even looking at my own bank account. I was worried about not being able to survive financially until my next paycheck. Something had to change.
And the solutions were so simple. Just little acts of financial self-care.
It’s the small changes that add up to the biggest results over time.
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So what did I do to turn things around?
To gain financial contentment, here are some small tips for financial self-care that I implemented:
- Make a list of all your outgoings (expenses) so you can see exactly where your money is going. By tracking where your money goes, you can easily reduce your outgoings by either reducing certain payments by finding better deals and/or cancelling subscriptions. For me, I was able to identify subscriptions and other payments that I could cancel as I didn’t need them. I eliminated all but the essential.
- Unsubscribe from mailing lists! Retailers try to hook you in with discounts and VIP sales, but don’t fall for it. It’s a targeted marketing technique to make you spend more money. You won’t miss the emails once they’re gone, I promise.
- Check and review your bank accounts monthly! By taking this step, I am able to monitor where my money is going each month.
- Try to increase your income streams. I did this by freelancing on Fiverr and I also created some cards that I sold on Thortful (feel free to check out my cards here).
- Save save save! Even if it was just as little as £50. Get into the habit of saving. Setup your standing orders and start saving on autopilot. Trust me, if you were like me you would either forget or you would be too anxious to log into your account to transfer money over into your savings. Eventually, as you start to consistently follow the points above, you will be able to increase your savings.
- As my savings increased, I started investing. I learned how I could automate my investments through the power of compound interest so I didn’t have to think about my finances as much. More on this below.
Firstly, living a meaningful life has nothing to do with how much money you make. I have always tried living within my means, and for me, earning more money just means that I can save more. That said, I know not everyone reading this is as frugal as me. And that’s fine. In fact, you’re not alone. Often, the more money we make, the more money we spend. This is often referred to as ‘lifestyle inflation.’ When we get a pay rise, we might decide to upgrade our flat, or drive a nicer car. This can often mean that even though we’re making more money, we are not able to save anything more than we previously did.
That said, we all need to pay the bills, right? Sure. But money just isn’t the primary focus of my life. Instead, I’ve got positive money habits in place and I’ve automated many areas of my finances. This means that I can focus on growth and the things that really matter to me.
How I Deal With My Finances
Let’s start with how I manage my expenses. As you can imagine, I like to keep it simple. Regardless of your income, you must spend less than you earn. It really is that simple. If not then you will only end up in a spiral of debt.
If you spend less than you earn and invest it wisely you’ll be wealthy.
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This might sound overly simplistic, however, you cannot make progress with your finances unless you master this basic skill. I used to spend more than I made. Always counting down the days till my next pay day, yet I never realised why I was unhappy. I thought that if I only earned an extra £100 a month more, I would be in a much better financial situation and happier.
The truth is, you will often find that the more money you make, the more you will intend to spend. This will never get you in a better financial situation. Never.
This all sounds like common sense, I know. But honestly, the problem these days is that people really do struggle when it comes to finances, and I don’t blame you. Honestly, the quickest way to give yourself a pay raise is to spend less money. FACT!
The quickest way to give yourself a pay raise is to spend less money.
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Bottom line: Spend less than you earn. Once you have this mentality, the opportunities to improve your financial outlook are endless. When you have calculated how much money you truly need for your basic necessities, it’s easy to see how the rest of your spending is merely wants- often, unnecessary wants.
My Expenses
Let’s talk about basic expenses, the essential expenses that you must pay to maintain your current standard of living. These are my must-haves to live my current lifestyle:
- Mortgage payments
- Utilities (such as gas and electric)
- Car Insurance (I don’t have a car payment)
- Petrol (for what little I do drive; I am currently working from home)
- Food
- Savings
- Health Insurance
- Mobile phone data plan
- That customary Netflix subscription
And that’s it. I didn’t include totals because your expenses will obviously be different to mine. So add up the numbers for yourself and see what you need to live. For me, I know I am a very simplistic person. Sure, I like to go to the cinema and eat and have the odd Wagamamas (more than the few occasions I must add!), but those things are optional. If I don’t have the money to do them, I won’t.
Savings Tip: It is important to have an emergency fund saved that you don’t touch. Personally, I would recommend saving until you have a minimum of two months, but preferably three to six months worth of expenses is recommended.
Having clear goals in mind for your savings can help you stay motivated to continue looking for ways to trim expenses. That’s why I recommend the following steps when saving:
- Set up a monthly standing order to your savings account. Ideally this would be at least 10% of your net income. If you can save more than that? Go for it.
- Set a reminder to increase your savings amount by a further 10% (or more) exactly three months from your first date of setting up your automated savings.
- Keep increasing your savings figure by 10% (or more) every three months until you have accumulated your chosen cash buffer.
Expenses I Eliminated
These are the expenses I used to have, but got rid of (over a one year period):
- New clothes every month
- Magazine subscriptions
- TV subscription service
- That second TV subscription service
- That third TV subscription service #3 (yes, I subscribed to a lot of TV subscription services which I never watched!)
The Power of Index Funds
Once you have your emergency fund set up, it’s time to start investing for your future. The truth is, wealth creation isn’t actually difficult.
Sure, building wealth doesn’t happen overnight. However, if you can spend less than you earn and regularly and consistently invest the difference wisely, you are already following the recipe for success that most millionaires swear by.
Yes, I know you may be thinking “I know nothing about investing, how can I possibly build wealth through the stock market?”
Well, pretty simply actually; and it’s actually not as hard as you may think. Enter, index fund investing and dollar cost averaging.
Investing your money can be intimidating. At first, I really didn’t understand what it was or how to even go about investing until I was in my mid-twenties. Like anything in life, I opt for simplicity and nowadays technology makes it super easy to invest and start with very little capital.
By investing in stock index funds, you can easily build wealth by tracking the performance of the market index and over time build your wealth. Rather than investing in single companies, index funds allow you to diversify your portfolio with low costs involved when compared to hedge funds.
The truth is, by investing in boring, low-cost stock index funds like the S&P 500 index, you can actually outperform most hedge fund managers. Don’t believe me? Well, that is exactly what Warren Buffett did. Warren Buffett had a million-dollar bet that an index fund would outperform a collection of hedge funds over the course of a decade. Guess who won?
Warren Buffett and the low-cost index fund.
Best of all, you don’t have to become a stock market expert to start.
Bottom line: Invest early and invest consistently. But if anything, just invest.
Personally, I regular invest into my Trading 212 account at the start of every month after my pay day into the following low-cost funds which form part of my “Regular ETF” pie on Trading 212:
- iShares Core MSCI World GBX (35% allocation)
- Invesco S&P 500 GBX (35% allocation)
- Invesco EQQQ NASDAQ-100 GBX (30% allocation)
Feel free to check out my “Regular ETF” pie and start your investment journey today by investing as little as just £1.
Disclaimer: Please note, the above is purely for investment advice only. You should carry out your own independent research before making any investment decision. Check out the full disclaimer here.
Take Control of Your Finances
It was a slow progress, but these small steps of financial self-care changed my life. My savings slowly grew and I transitioned to investing in low-cost index funds. My bills were under control and I developed a healthy relationship with my finances.
Don’t get me wrong, it didn’t happen overnight, but it did change. And I’ve been so much happier ever since.
I want this to be you. I want you to be happier financially and start running your finances on autopilot. There is more to life than money and when you start thinking less about money, you can then start living a more worry-free and meaningful life.
Good luck on your journey into freedom. You deserve to be free. What steps are you going to take in your pursuit to financial happiness? Do you regularly invest in low-cost index funds? Let me know in the comments below.
Happy Saving and Investing
Sam
