Are you feeling a little stuck? Uncertain of your next move?

This lockdown has had different impacts on everybody (particularly around work and money), and whilst it doesn’t feel like there’s much that can be done about anything right now, there is one thing you CAN do for your money during lockdown.

Whatever your situation is, you can do a spring clean on your finances.

And no, that doesn’t sound like much fun, but it is the basis of wealth. It’s also a good money habit that will ensure that you are on track and conscious of your spending.

In this episode, I take you through the steps of HOW to spring clean your finances - how to categorise your spending; how to budget. After all, you spend all that time working, why not take a little bit of time to manage your money?

Show notes

• [01.55] Spring cleaning your finances.

  • Whilst it's the one thing you can do for your money right now, it is also an exercise that you could do twice a year to make sure you are on track and conscious of your spending.

• [03.05] Categorising your spending.

  • Tracking your expenses is central to the management of good finances.  Everything comes off how much you spend.

• [05.18] The Five Steps of tracking your expenses.

• [06.25]  How to do a budget.

  • TOP TIP: you also need to make sure that you spend according to your budget!

So when you have a little time on your hands, do this one thing you can do. Living your best life and being financially free are worth it!

For those of you who want to begin learning more, sign up to my 6 day money sprint and begin your journey to financial freedom.

Quotes

"We spend so much time, and work so hard for our money, this little bit of time to work out where it’s going is crucial." - Lisa Linfield

"It always amazes me how stuff creeps into our expenses." - Lisa Linfield

"But a bit like doing push ups or the plank – we don’t do it because it’s fun… we do it because it’s the corner stone of financial discipline." - Lisa Linfield

"Mindfulness around where you spend your money enables you to know what choices you’re making." - Lisa Linfield

"Until you change the way you think about your money, you’ll never change your behaviour." - Lisa Linfield

"A budget is something that most of us have heard about but very few of us do." - Lisa Linfield

Transcript

Hello everybody and welcome to today’s episode of Working Women’s Wealth.

Thank you to all those who signed up for our Facebook Group called Brave to be Free with Lisa Linfield.  I have so enjoyed getting to know you, and am so looking forward to interacting with you there.  If you haven’t already, please do go to Facebook and search Brave to be Free or you can find it off the Working Women’s Wealth page.

I know that this lock down has had different impacts on people and their work and money.

For some, your income has suddenly dried up, and it’s a hugely stressful time for you.  Some have lost their jobs and others have been forced to take a pay cut.  I really recommend that you take the time to listen to last week’s episode on Your income has suddenly dried up… now what?

For others, this is a fantastic time – you are still getting paid, but you actually can’t do work, so it’s an enforced period of rest.  Or, you are still working, but without all those meetings you had to go to, you can get your work done in a fraction of the time and so are working at a nice, steady pace.

And then there may be those like me who are flat out busy with not enough hours in the day.  Or, one of those amazing health care workers or hospital support staff who are at the front line of fighting this pandemic.  For all of you, I want to just pause and say how grateful I am that you are doing such an amazing job.  Thank you.

Spring cleaning your finances:

Whatever your situation is at the moment, there’s something that all of us can do – a spring clean on our finances.

This weekend, John and I did a spring clean.  We downloaded three months of bank statements and went through every single expense item, categorizing it and working out what our average expenses were from January to March. 

I always find it a difficult discussion as John asking a simple question to help categorize the money for me feels like an accusation of spending… because right now all the money I make gets invested back into my business so I’m not contributing to the family’s expenses.  So the defensiveness is more my own issue of feeling I’m not pulling my weight than John accusing me of spending – he’s amazing in never questioning what I do.

We do this exercise twice a year to make sure we are on track and conscious of our spending.  It always amazes me how stuff creeps into our expenses. 

Categorizing your spending:

There are amazing apps like 22Seven in South Africa and Mint in the US that help you to categorize your spend.  What’s great about them is you can pull in the details from different bank accounts and investment accounts into one place.  I used to use this and bring in all John’s accounts and mine.

However, for us personally we both prefer doing it in excel ourselves.  By sorting and classifying the transactions it really forces you to go through each and everything you spend your money on.  And that’s part of the discipline… reflection.  Do we really need this?  We just download the transactions from the internet banking site into excel and work from there.

Now, if this sounds worse than getting a filling done… you’d be correct.  Tracking your money isn’t in the same league as watching a great movie.  But a bit like doing push ups or the plank – we don’t do it because it’s fun… we do it because it’s the corner stone of financial discipline.

You see, a bit like a strong core is central to your physical strength, tracking your expenses is central to the management of good finances.  Everything comes off how much you spend.

• Want to know how much you need for retirement?  It depends on how much you spend.

• Want to save for an overseas holiday?  You’ll need to know where you can cut your expenses.

• Want to know how much you’ll save when the kids leave home?  It’s there on your category called ‘Kids’.

And mindfulness around where you spend your money enables you to know what choices you’re making.  Do I want to buy these new jeans or do I want to go overseas?

Because that’s the challenge of money – it’s an either / or decision… Either you spend it right now, or you save it for something in the future.

So let’s go through the Five Steps of tracking your expenses:

1. So now, when you’re home with a little more time on your hands… set aside an hour and download your expenses from your bank and credit card statement into a spreadsheet.

2. Then, go through them and make a general category for each type of spend – home, groceries and entertainment, kids, banking and insurance, health, etc.

3. Then itemise the sub categories – such as extra murial activities for the kids, gifts, school fees

4. And then add those together per category

5. Lastly, as always, take the time to journal and reflect.  What was your biggest insight?  Where can you cut?  Why do you think that that expense is really worth it?

Until you change the way about thinking about your money, you’ll never change your behaviour.  And that’s what you want to start happening – that good money habits become sub conscious.

Now you’re ready to do a budget:

A budget is something most of us have heard about but very few of us do.  The biggest reason is that most people don’t want to go through the process of understanding their expenses.

But once you’ve got your expenses down, it becomes easier to know how to budget.

1. Take the expenses by category averaged over the last 3 months, and start with them as the baseline of your budget

2. Then take expenses that don’t happen every month, and that you should be saving for in advance into your savings account each month.  This would be stuff like ‘back to school’ needs for the kids, your annual vacations, Christmas presents, family presents and car and house maintenance.  Take the yearly figure and divide that by 12 so that you get a monthly amount to budget for… and then immediately set up an automatic transfer each month for that to go into your savings account

3. Make sure you have a line item in called ‘Saving for Retirement’.  That needs to be a MINIMUM of 20% of your before tax income.  But for most people is closer to 30% or more.  Even if you’re not currently able to save for retirement, keep that line in and commit to saving something – even if it’s R500 or $50.  Again – create an automatic debit order to your investment account for that now.

4. Then review your average monthly expenses against your income.  Is there enough to get by and save for retirement?  If not, you have two choices – find ways to increase your income, or find ways to reduce expenses.

Lastly, you need to make sure you spend according to your budget:

I personally use a short cut that I described in episode 91 – The human way to manage your monthly expenses.  But others, like my mum, track the money they spend daily.

Friends, this spring cleaning is the basis of wealth.  You have to do this.  And isn’t living your best life and being Financially Free worth it?  So like the plank and push ups… grit your teeth and do it!

And for those of you who want to begin learning more, sign up for my free 6 Day Money Sprint.  It’s a daily video of 15 minutes or less that enables you to begin your journey to financial freedom on the Working Women’s Wealth website or go to https://www.6daysprint.com/signupnow

I’m Lisa Linfield, and this is Working Women’s Wealth.

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