This following article was written by Thomas Fairbank, host of the excellent MoneyEd podcast. Thomas is on a quest to help young adults become more astute and confident with their personal finances. In this piece, he focuses mostly on how we can manage our money in a more proficient manner, giving a few useful tips for those who are rather useless on that front. This is an essential topic for people to educate themselves on, as competently managed personal finances can create greater flexibility and, in turn, make for a less stressful life. You can catch Thomas on Instagram: @moneyedpodcast. LW
Money, personal finance, wealth, whatever you like to call it, is the key to achieving many things in life, and no matter how humble you are, it’s important to realise that you will not be able to survive without it. I often like to compare money to food because it has a lot of similarities… on a basic level that is. You need money and food for survival; if you don’t have enough of it, you can struggle; likewise if you have too much of it, it can be harmful! So why then, are we more focused on managing our food then we are our money? The reason is because we know a lot about food, we know what is good for us and what is bad for us. We’ve been taught throughout our lives that if we manage food in such a way, we will remain healthy, but if we don’t, we will suffer. Simply put, we have an education around food. Sadly, the same cannot be said for our money…
Now, I could go on about how education has failed us when it comes to learning about money. However, you and me both already know there is a fundamental lack of financial education in our country – you only have to look at the nations bank accounts to realise that. Instead, I want to ask you a simple question: Do you actively manage your money? By this, I don’t mean checking your bank account once a day to make sure the number isn’t negative; I mean actively making decisions in your day-to-day life in order to improve your financial situation.
I imagine at this point you are in one of three camps: some of you are nodding in agreement. Some of you are probably being truthful to yourself and saying that you could do more, while the rest of you probably stopped reading once you realised this blog was all about money! Regardless of which camp you are in, eventually we all have to come to the realisation that money, in all its forms, needs to be managed one way or another. Now, I’m not going to try and sell you my famous 40 point strategy, or convince you to come on a 1:1 coaching course for £200, because these strategies you often see advertised online are not necessary. I’m also not going to try and convince you that you can solve all your financial issues after reading this blog, because (as much as I would like to do that) it isn’t possible. However, if you will just give me two more minutes of your time, I will help you realise that managing your money is so simple, that even my dog could do it (and he’s really stupid).
Managing your personal finances doesn’t require a lot of knowledge. I truly believe you only need to four broad pillars to effectively manage you money:
While you may think it takes time to understand money, it really only requires about 20-30 minutes of your week.. nothing more, nothing less. And if you have these four things, then I believe you will be able to better manage your money than 90% of current young adults.
Firstly, educate yourself. I know we’ve been let down by teachers and family who haven’t taught us about money up to now, but the present is the best time to take action! I don’t mean sign up to courses which charge you for information you could find for free, I mean really educate yourself. Take time to read, watch and listen to the things you care about, or want to learn more about. Don’t know what an ISA (Individual Savings account) is? Watch a YouTube video on it! Don’t understand investing? Read a beginner’s guide to investing. Want to hear people rant about the struggles of saving? Listen to a podcast! There is honestly so much free information out there. The only thing stopping you from educating yourself on these topics is yourself.
Secondly, be consistent. If you are managing your money, you need to maintain consistency in what you do. Trying to save? Well make sure you stick to that saving plan every week or month. Trying to cut your non-essential outgoings? Then make sure you stop getting takeaways! Most importantly, whatever you do, ensure that you keep it up, otherwise you will find you are back where you started. Consistency is often one of the hardest ones. It’s said it can take human anywhere from 2 weeks to 6 months to turn something into a habit, so as long as you stick to it, then eventually it will just be another part of your life.
Thirdly, be patient! Your finances are not going to turn themselves around in one week; think back to the food comparison. Much like improving your diet, you are not going to see your body suddenly transform into Chris Hemsworth’s after a week of eating healthily (if any of you can do this, hit me up). It takes time. You need to be willing to wait it out before you see an improvement. If you save £5 a day, after the first couple of weeks it will not look like anything, in fact it will be less than £100. But if you came back to that amount 50 weeks later, you would have over £1,800! A tasty sum right? And think about it, £5 a day really is nothing.
Finally, goals. ‘Without goals, and plans to reach them, you are like a ship that has set sail with no destination’. Setting goals really is the bread and butter of personal finance, and more generally in life. Up to now, you’ve probably set goals for menial tasks like completing your assignments; losing weight; saving for a holiday. What goals do is they give you a destination, something to aim for. Setting goals for your money is no different. You will find that if you set effective goals, managing your money will be SO much easier and a lot more effective. My latest goal is to save up for a rental deposit; not a large sum of money but knowing that I’m saving my money for something makes me much more likely to save and much more likely to act to reach that goal. If you haven’t set proper financial goals, try it out. I know it will help you moving forward!
That’s it, pretty simple eh? And it didn’t require you to spend £15 on a ‘special money guide’. If you put some effort into the points listed above, I know you will see a massive improvement in your financial situation! If you don’t, well then, I give your permission to tweet mean things to me.
Managing your money does not have to be difficult. If you still think that you will be able to improve your financial situation tomorrow after reading this, then I’m afraid to say you have missed the point. Personal finance, and the required education that comes with it, takes time, much like it takes time understanding what foods are right for you and which are not. The only difference is that we have dealt with food all our lives, whereas only now are we having to manage our money. But that shouldn’t scare you, there are many people and resources that can help you… including myself! If you have any questions, any worries about money, or just want to continue the discussion, drop me an email at firstname.lastname@example.org I’m sure I’ll be able to help you out, or point you in the direction of someone who can!