I’m pretty big into finances these days. I love trying to save more, investing and paying down debts. Yep, you could say I’m a bit of a finance geek.
For the longest time, people have always complained to me how they wish they had more money. Always living from emergency to emergency having to use pay later schemes to fix a car or replace a broken appliance.
The funny thing is, these people always tell the same story… I don’t earn enough to save. Yet they also tell another story… I went and look at a new car to buy. Eating takeaway and $5 coffee drinks multiple times a week.
The problem though isn’t to do with earning too little to save. The problem is spending too much. We live in a society of consumerism. The current household debt to income ratio for Australia is nearly 200% – up from approximately 100% two decades ago and continuing to grow year on year.
There are so many ways to buy things these days without requiring any savings or upfront monetary commitment it’s no wonder we are in a debt crisis.
Another common scenario I see is the love for schemes like ZipMoney, AfterPay and what not. How useful they are and how great they are – no fee’s, it doesn’t cost anything.
Unfortunately, it does cost something. It costs your life. If you don’t have the willpower to save before buying something you “need” (read: in most cases “want”) then these schemes are just re-enforcing the point that you don’t need to save.
If however, you do want to take control of your finances and start to save I highly recommend awareness as the very first step. You can’t control what you don’t measure so knowing where your money is going is not only important, it can also be highly enlightening and sometimes shocking.
For this purpose, PocketSmith is my favourite application, however, there are others too such as Pocketbook. Some applications allow you to upload bank CSV exports however I prefer the past to least resistance and find PocketSmith to have excellent support for connecting to a myriad of banks.
Once connected, simply login every week or so and categorise your transactions. McDonald’s becomes “Fast Food”. Target becomes “Clothing”, etc etc. There is no strict formula – just do what works for you. The important part is consistency.
After a few weeks to a month, take a look at the cash flow screen and look closely at the categories your money is going to. It can be quite an enlightening experience.
Only once you know where your money is going can you begin to take control of it. Then be honest with yourself. Can you really not save, is every single dollar going on an absolute necessity, or are you simply choosing to spend too much?