Start small

“A journey of a thousand miles begins with a single step” –¬†Lao-Tzu

Financial Independence may seem like such a hard thing to achieve, and to many it seems impossible. However, as the famous saying goes, the journey begins with a single step.

As with all challenges, you have to start somewhere, practice daily and build on your experience to eventually reach your goals. It is really easy to start and although the daily decisions may not always be easy, working towards Financial Independence can be a reality.

If the thought of Financial Independence is too daunting and you think that you cannot achieve it, start with these 4 easy steps and enjoy the journey.

Decide to be in control of your money

The first step to any financial goal is to decide to be in control of your money. Being in control of your money has nothing to do with how much your have or earn, and all to do with how you spend it and invest it. It is knowing what every cent is going towards and understanding how different spending decisions can impact your goals.

All it takes in one simple decision saying “I’m gonna take control of my money”.

Right now you don’t need to know much about finances as you can learn it all; just make that decision!

Set a realistic goal to start with

The best way to motivate yourself is set a small goal which you can achieve relatively easily. Focus on achieving it and you will see how your perspective of finances changes as you see yourself reaching the goal.

When setting a goal though be sure that it is measurable and achievable. Instead of being vague and stating that you want to save “some” money, specify the exact amount and the date by when you want to have done it.

Start off with something that won’t be too hard, goals should be motivating and not depressing or something that makes you feel guilty.

Create a budget and vague path to your goal

If you don’t yet have a personal budget, then you need to create one as a matter of urgency! There are many resources online about this but the basic concept is simple:

  • List your income (stable and reliable income)
  • List your expenses (if you’re unsure if where to start have a look at the 30-day challenge to keep track of expenses)
  • Make sure that you earn more than you spend!

Have a look at this to get you started.

Reassess often

This is a very important step and something people don’t do often enough. You need to reassess your current situation, spending pattern, budget, goals, etc on a regular basis. Circumstances change and your own experience and confidence levels change. Embrace these changes in your journey to financial independence.

Allow yourself to embrace change and keep a journal of your experiences along the way.

Simplify your financial life

One of the best strategies that I have followed in order to take control of my money is to make things as simple as possible.

I have a super light-weight and skinny wallet and in it is all I need. If it doesn’t fit in there then I clearly don’t need it. I do have a few more cards which I cannot get rid of, but I keep them aside and only carry them with me when I specifically need them.

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Simplify your financial life with these 4 easy steps:

One Credit Card

I only have 1 credit card. This was not always the case. I think I had 3 at one point.

Think about how confusing it is to know what you can spend on which card because each has a different limit and payment cycle. And then of course, it is obviously far too easy to spend too much! Having all these cards available is just so tempting!

PS: Keep the limit low

I have set my credit limit far lower than what the bank has offered me and each year when they offer to increase it I simply decline.

This gives me peace of mind that my spending is in control. If I need a lot of money quickly I have an emergency fund available, or if it is a planned expense I simply transfer extra saved money to my card.

One Loyalty Program

Most stores, banks, credit cards, etc all offer their own loyalty program. These either come with plastic cards, apps or electronic cards to add on your phone. It’s great that they offer discounts and tailored offerings; but it does add a bit of complication to life.

I have chosen a loyalty program linked to my credit card and that is the only program I have signed up for. I may be losing out on savings at some places, but lumping all your “loyalty” into one scheme means bigger benefits on that specific program.

Whatever program or scheme you choose, just keep it simple and easy to manage. If you want to have multiple programs then at least do the challenge at the end of the article.

One Bank Account

I actually have a few bank accounts but my bank offers 1 main account and 4 linked accounts all for one very low monthly fee. On my baking app the accounts are are linked so it’s super easy to manage. I use these accounts for different savings.

It may sound as though I am ignoring my own advice, but I consider my linked accounts as “one” because they are so easy to manage and they incur no additional fees or admin.

The problem with having multiple accounts at various banks is that they generally come with an ATM card, an optional cheque book, monthly statements, monthly fees, marketing emails, etc. Having multiple accounts just means that there is more to keep track of. You may have valid reasons for multiple accounts, and that of course is fine. As long as you have a plan and know why you have the extra accounts. As mentioned throughout, just keep things simple.

One Simple Budget

It’s easy to get excited about one’s budget and to add all sorts of confusing details. It’s not bad to have a detailed budget, but you also need an easy-to-remember summarized version.

I like to keep my budget really simply with no more than 10 categories and within that I know what is paid for by electronic bank transfers or debit orders, what goes on my credit card and what is cash.

Because the budget categories are so broad it is easy to remember.

I also have a “general” category on my credit card budget for all expenses that I have not catered for specifically. These vary every month but as long as I stay within my overall spend I am happy.

Bottom line is to keep things as simple as possible. Close redundant bank accounts, credit cards, debit cards, store cards, etc.

Challenge

Jot down all the bank accounts, store cards, credit cards, debit cards, ATM cards, membership cards, loyalty cards, etc that you have. Also look for the electronic ones you have.

Look at what monetary value they have added to you over the past year, and decide whether you really need it. If not, you know what to do…

 

Grocery shopping like a pro

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Want to make your money stretch?

Want to be sure that you’re getting the most for your money?

Want to spend less time in the store?

Use these 6 tips to make the best of your time and money when grocery shopping:

1 – Know your budget

The first and most important point is to have a budget! If you don’t have one yet then you may want to start by taking the 30-challenge of tracking your everyday expenses. This will give you a good idea of where and how you’re currently spending your money. This is a great way to start your budget.

If you already have a budget; well-done!

2 – Make a list

Having a shopping list will not only clear your mind and take the “I’m forgetting something” feeling away, it can also speed up your shopping. You can keep a list on your fridge or on your phone and add to whenever you find you need something. Then, before your next shop, read it through and add any extra items you need. Be like Santa and check your list twice.

If you are doing a big shopping spree then categorize your groceries by the following (or something similar that works for you):

  • Fruit & Veg (fresh fruit, vegetables, herbs)
  • Frozen goods (anything in the freezers)
  • Dairy (any dairy goods)
  • Meat (if you eat it)
  • Dry goods / Other (tins, spices, bread, juices and anything that you would store in your cupboard at home)
  • Toiletries (not really groceries but needed)
  • Cleaning products

Generally stores keep similar type items together and if you have a list of what you need from each area it saves you from walking around the store several times. You can categorize your items in whatever way makes the most sense to you, but don’t make your system too complicated as you probably won’t keep it up then.

3 – Don’t shop when you are hungry

If you’re hungry you’ll probably pick things off the shelf that you want to eat now! You’ll also over-cater for your next meal as your poor starving brain cannot deal with the sight of all the food. Another concern is that if you are really hungry and feeling that your blood sugar is low, then you will most likely rush to get through your shopping as quickly as possible. Saving money and sticking to a budget will be your lowest priority. Hangry is a real word!

Keep yourself from temptation and rather delay your shopping trip if you’re hungry.

4 – Check prices per unit

Stores change their prices often and we’re conditioned to think that the larger quantity “bulk buying” is always cheaper. Well, it isn’t! Don’t assume something is cheaper just because it’s in a bigger box or because the packaging tells you to “buy in bulk and save”. Always check the price per unit. Not all stores display the “per unit” price but that’s when you need to take out a calculator and work out which size is best to buy.

5 – Use cash

If you only take cash to the store and no credit or debit cards then you really have no option to spend too much. The embarrassment of not having enough money will surely drive even the most out of control shopper to calculate exactly what they have in their trolley. It’s amazing how good you become at shopping when you only have a set amount of cash and no more.

6 – Join the store loyalty program

Most stores have a loyalty card (points card) of some variety. The savings vary but if you shop at the same store often then it is worth joining their program and using whatever savings are offered to you.

Be aware of the marketing though and remember that they will try to entice you to spend more. So remember your budget and shopping list and don’t be tempted to veer off.

 

Set an intention

I’ve been struggling with my early morning yoga routine recently and I messaged my yoga instructor saying “Help – I can’t get myself out of bed in the morning! Need motivation”. Her response was probably something she was taught in yoga-school (some mystic place in India no doubt) because it’s so simple and yet profound.

Her answer was simply “When your alarm clock goes off, place both feet firmly on the ground and think ‘Don’t listen to your mind, do it for your body and soul’.”

Further explanation led her to say “Simply set an intention and when the time comes, follow through with it.” It’s really as simple as that.

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So even though that advice is meant to help me wake up at 5am, it’s equally true for anything; especially things that require willpower such as sticking to a budget. Simply set an intention, and then do it! No need to think about it and argue with yourself. If you were in a conscious and focussed space when you made your intention (goal, plan, decision) then there is no reason to not follow through with it. Just don’t give yourself that option.

Not much more I can say other than “Set an intention; and just do it!”

 

 

Keep Motivated

It’s easy to lose focus on your goals and to get stuck in the relentless routine of working to survive and surviving to work. The day-to-day rush of life can be exhausting and leave you with little time to sit back and think. There are however a few easy things that you can implement to help you stay focused on your financial goals.

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Remind yourself everyday

A great way to stay focused on your goal is to remind yourself of it every day! Try one of these ideas:

  • Create an image to save as your background on computer or other device.
  • Get creative and make a hand-drawn poster stating your goal. Stick it up somewhere.
  • Type it up in a word processor and print it out nice and large to display.
  • Create a business-card cut-out that you can keep in your wallet.
  • Display your goal on a small sticker on the inside of your windscreen so that you see it as you start driving.
  • Use post-it notes around the office or house.

Track it

Visually track your progress. Either with a spreadsheet or a hand-written poster. I like to track my goals by months (years or days) left until the “due” date as well as a percentage of achievement. Financial goals are generally easy to calculate progress – if you have an amount and a number of months you can quickly work out a percentage of progress. This doesn’t work for all goals, but you definitely need to be able to track your goal else you’ll never know if you achieved it!

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Here are my pay days until retirement (sticky notes stuck to my monitor) – more on this soon…

Discuss it

It’s vitally important to discuss your goals and progress with someone you trust. If you’re married this really should be your spouse as financial goals affect you both as a unit. If you are not yet married you could discuss these with a close friend or your financial advisor.

Talking about your goals make them “more real” and helps you to stay focussed as you are now accountable to someone.

Community

Find a like-minded community of people who can encourage you and keep you motivated. Real-life relationships are best, but an online community such as Twitter or Facebook can be very useful too.

 

Have an Emergency fund

It’s always a good idea to have an Emegency Fund available where you can quickly access money. You never know when something is going to happen. Think of how you would cope with a car service which costs 3-times what you expected, or if you needed to be admitted to hospital but your medical insurance requires you to pay upfront. Perhaps your washing machine suddenly stops working, or a power failure causes everything in your freezer to go bad. You could even have your credit card blocked and be in a difficult spot for a few days.

It’s just useful knowing that you have something saved for that rainy day. And, it is a great stress relief knowing that you are sorted for emergencies.

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How much do you need?

Circumstances are different for everyone so you need to make this decision yourself. Think about things that may have happened in the past where you suddenly needed extra money. Also think about things that could happen.

This is certainly not an exact science, rather just a ball-park figure which would make you feel comfortable and less stressed. Having something is better than nothing, so if you really can’t figure out how much to aim for, just set a low limit and see how it goes.

Type of account?

The three important factors about the account you use for this Emergency Fund are:

The purpose of an Emergency Fund is that you can access the money immediately. Anytime, day-or-night. Imagine needing to draw cash at at ATM at 2am – would you be able do so? Even if it involved using your online banking to transfer money between accounts; as long as it can be done quickly.

If you have a home loan from a bank, it could be very helpful to stash this extra cash in that account. Provided of course that the home loan account allows for withdrawals or transfers. Doing this would allow you to save interest on your debt, and this is often high. If you’re not sure contact your financial institution.

Have you considered keeping all your savings in one account and simply tracking the various goals in a spreadsheet? Have a look at how to use Savings Pockets to simplify your life.

How to start?

The best way to start anything is just to start! You don’t need to have enough money or know exactly what you’re doing before you start; just make the conscious decision. A few guidelines though would be:-

  1. Decide on your number. How much would you like to have saved in this fund?
  2. Decide which bank account to save it in – investigate the options but remember to keep your life (and admin) as simple as possible.
  3. Create a budget if you haven’t already.
  4. Set yourself a goal to save the necessary funds.

Once you have started you will see that circumstances may change, or you may need to use your fund sooner than expected. That is all fine, just relook at this often and be sure to be working towards this.

Is it better to Save or to Pay Off Debt?

Screen Shot 2017-06-17 at 1.51.16 PMIt’s easy to feel pressured to have a savings account or some type of investment. Is it better though to be saving or to be paying off debt?

Let’s have a look at some ways to calculate the answer…

Interest Rate

Generally speaking (and almost always) the interest that you earn on savings is far less than what you would pay on debt. Let’s look at an example…

You bank account may give you 4 – 6% (as an example) and fixed-term savings accounts may give you a bit more. Unit Trusts or other investments will probably be even more although they vary each month but you can get a general idea of the growth by looking at an investment summary sheet.

Debt – whether on store accounts or credit card is often charged a much higher interest rate. Add to that “fees” and penalties and all sorts of made up costs. Store accounts are designed to trick you because they often offer 3 or 6 months interest free debt, but remember that they charge you other fees each month (club fees or Special Member fees). And, if your debt is not paid within the interest-free period, they hit you with very high rates.

Thus; find out the interest that you would earn if you save your money and find the interest that you are charged (look for your account where you are charged the highest interest). That should give you your answer. Most of the time it is better to pay off debt!

Tip: If you have a home loan that you can access (pay extra into and withdraw when you need it) then you can save money by paying off your loan. If you pay extra into your loan account you will earn interest at the rate of your loan (currently in South Africa home loans are offered at around 12% interest). This is a good way to save for emergencies but at the same time you are paying off debt.

The Cost of Debt

Let’s look at a simple example of how much debt can cost you. If you have 1000 and you put in in a savings account for 1 month with an interest rate of 4.5% you would earn 3.75 interest. If you owe 1000 on a loan and the monthly interest rate is 20% you would pay 16.66 in interest.

Thus, if you “save” your 1000 for the month it is actually costing you money! You will have to pay 16.66 interest on your loan and yet you only earn 3.75 on your savings. You have to pay 12.92.

In this example, if you choose to save the extra money, it is actually costing you money and not saving at al!

Risk

Did you know that is most cases (if not all) the creditor (person or company you owe money to) can call up your debt at any time and insist that you pay it immediately. This is especially true for banks who can call up your home loan. This would put you in a terrible situation and could be disastrous to you and your family.

Debt always comes with a risk and therefore it is better to pay your debt as quickly as possible! Being in charge of your money means that you minimize risk by knowing and understanding the consequences of what you do.

Peace of Mind

Having debt causes stress. It’s not nice knowing that you owe someone money and especially if you are struggling to pay it. The consequence of not paying your debt can be dire and this all adds to your stress levels.

If you have the choice of saving 500 in your bank or paying debt off you should consider the peace of mind that you could “buy” yourself. Having no debt would be a wonderful feeling so if you can get to that state by slowly planning, budgeting and working towards being debt-free this would bring great relief to life.

Summary

It is probably a good idea to have a small amount of savings that can be used for emergencies; but generally speaking it is far better to pay off debt rather than save. If you have any spare money at the end of the month work towards paying off your debt!

Have a look at this article on paying off your store cards and apply that principle to any forms of debt that you may have.