For most of us, talking about money is about as appealing as sunburn. But unless you're Elon Musk, you're eventually going to have to work out how to balance your lifestyle and your income. That is, how to spend less and save more.
The longer you wait to sort out your money woes, the bigger the problem becomes and before you can say 'bankrupt' you realise that constant money stress sucks way harder than learning how to budget. Taking control of your finances doesn't have to hurt to work.
Don't let your issues around money cause money issues
Start by taking money out of the mental equation. It might seem counter-intuitive, but it's the quickest way to bypass the deep-seated issues that can hold us back from taking a frank and fearless approach to our finances, especially those twin demons: embarrassment and denial. The smart money tips often reference taking a behavioural approach to budgeting – using a combo of practical thinking, your natural skills, creating goals and stressing the importance of learning how to make good choices. Framing financial decisions around facts, rather than emotions, takes shame and blame right out of it.
Focus on financial wellbeing
If you've ever had to give up your gym membership, choose the cheapest food option over the healthiest or skip dinner with friends because you're broke, then you've experienced financial distress. Financial distress has a huge impact on your physical, mental and emotional wellbeing. It saps your brainpower, forces you to trade down, to go without the things that help you live a better life. Financial wellbeing is a complex subject but behavioural scientists have identified the key behaviours that, with regular practise, can turn red into black.
Five behaviours for financial wellbeing
Step 1: Engage with your finances. Open your bank app, open your bills and open your eyes. You need to get real familiar with your spending habits. Turn on notifications for all your finance-related apps. Check your outgoings and balance at the end of every day. Consider this a form of financial mindfulness, an antidote to those thoughtless purchases that add up so fast.
Step 2: Spend less than you earn. Yes, it's almost too obvious for words, yet so few of us manage to do it. This is where step one comes into its own. Now that you've taken stock, it's time to KonMari your spending habits. Subscriptions you never use? Cancel them. Too many monthly donations? Perhaps reconsider.
Step 3: Manage debt responsibly. Debt is not your enemy, but you need to be able to identify bad debt. Avoid short term, high interest, high cost, elastic debt that comes with extra charges attached. Yep, we're talking credit cards, overdrafts, deferred payment schemes. Pay it down, chip away at it. Every dollar repaid makes a big difference long-term.
Step 4: Build an emergency fund. Maybe you're starting to feel like this whole budgeting thing is actually doable. Then your car breaks down. Or you need a root canal. It only takes one financial emergency to throw the average household back into financial distress. So build a buffer. Look over the past 12-24 months and identify your biggest unexpected expense, the one that really screwed you. That's your target amount for an emergency fund. Build it, slowly and steadily, and if you need to use it, refill it.
Step 5: Visualise your future. Close your eyes, relax and picture who and where you want to be in a year's time. Now imagine the kind of life you want in ten year's time. Whatever your dreams are, paint them in colour and use them as your motivation, your deciding factor, your path to considered consumption. Make each purchase a deliberate choice, will it be that cute handbag or your cottage core fantasy future? It's up to you.
To really get to grips with the behavioural approach to spending less and living better, read Good Money: Understand Your Choices. Boost Your Financial Wellbeing by Nathalie Spencer, a behavioural scientist who specialises in money matters.
There's an app for that
Money management apps can turn your phone into your best budgeting tool, but approach with caution. Look for highly rated apps with a verifiable track-record to minimise the risks of identity or actual fraud.
MoneyBrilliant aggregates all of your accounts in one place, letting you see the whole picture at a glance.
Pocketbook takes the pain out of tracking your spending and is compatible with most of the bigger Australian banks.
Splitwise takes the stress out of tracking shared expenses, and helps you make sure that everyone's paying their fair share.
Wiselist helps you cut your grocery costs, reduce food waste and track your bills. Currently limited to Coles and Woolies.
Your Bank App should be your number one app and your nightly bedtime reading until you know your spending habits inside and out.
Note: The information in this article should not be taken as constituting professional advice from us. Obviously, MTV is not a financial adviser, and we suggest you seek independent legal, financial, taxation or other advice before making big financial decisions.