5 Home Truths about Your Finances
I don’t mean to be rude, but the way you’re spending and saving your money is all wrong.
It’s not just you though; most of us are unconsciously spending our money in counter-productive ways and failing to financially prepare for the future.
Whilst I’m sure there will be many reading this thinking: ‘Hold on, who is this English idiot? And why is he lecturing me?’ the truth is that, for most of us, a mixture of routine, complacency and pre-conceptions are leading us to make mistakes with our money.
I hate to be the one to point these out to you, but here are five home truths about the way we (myself included) manage our finances.
1. You don’t have enough money in savings.
I’m sure many of you have some cash stashed away for a rainy day, or for emergency purposes, but it’s probably not enough to see you through difficult financial times.
Some pundits say that you should have a savings pot equivalent to three months’ salary. Think about that for a second – take what you earn in a month, and multiply it by three. Do you have that much in savings? I daresay most of us don’t.
Others advise taking 10 per cent of your monthly earnings and putting that into savings. I don’t know about you, but I feel like I can’t afford to sacrifice that much for savings each month.
On the other hand, I can’t really afford not to put that much money in savings. If you were to be let go from your current job tomorrow (whether you are fired or made redundant) how would you manage to pay the bills?
It might not be your job, it could be an increase in mortgage payments, or an extended period of illness or injury, but you’ll wish you’d saved more money to see you through if it happens.
2. The things you want to buy are stupid.
I recently moved home and found myself having to move many years’ worth of pointless purchases with me. It really brought home to me the amount of things I bought unnecessarily and the amount I must have spent on them.
DVD’s bore the brunt of my rage and dismay, as I carted out box after box of films I would, in all likelihood, never watch again. My point is, you might think you need to buy something, but once you’ve scratched the consumerist itch, you quickly realize it was unnecessary.
3. Convenience is costing you, dearly.
It’s Friday evening, and after the week’s work has ground you down the last thing you want to do is forage for food and then cook something, before collapsing in a pre-weekend coma. So you order take-out. Nasty, greasy and often over-priced take-out food.
Similarly, after a long day’s work, you generally don’t want to be thinking about tomorrow’s working day, let alone preparing lunch for it. So you go to work and buy something convenient for lunch, and it’s usually something over-priced and unhealthy.
4. You are too easily swayed by social convention.
Ever felt socially obligated to go out for a friend’s birthday meal or night out on the town even though you couldn’t afford it? I have, and I bet I’m not the only one.
Of course better planning and management of your money prevents this kind of thing from happening (see point one) but if you can’t afford to take part, then you shouldn’t allow yourself to feel pressured into spending money you don’t have.
Of course, we’re only human, and so we feel guilt – but a true friend will understand your absence, and appreciate that you will make up for it when you are able to.
5. You are not doing your homework.
We live in an age saturated with information, available at the flick of a switch or the clicking of a mouse, and yet we continue to make uninformed choices which cost us money.
The web has liberated us: we can get advice, reviews, compare prices and services and make informed decisions on the things we spend our money on.
I once had a rear brake light smashed on my car, and – determined not to have to pay over the odds for repairs, I bought a new light online for less than £10 ($16) and fitted it myself in around an hour.
Had I taken my car to a garage, I could have expected to pay more for the part (to pay the garage owner’s overheads) and for an hour’s labour.
There are tools online which can compare prices for any number of products and services, and yet – in a pinch – we continue to buy things in stores for the sake of saving time.
If these things don’t apply to you:
If none of these home truths apply to you (and I doubt any of us can say we’re not guilty of at least one of them) then I’d love to hear some of your tips for managing money in the comments.
As for everyone else, I’m not preaching – as most of these things apply to me, too. I hope that the five home truths will make you think about the way you spend and save your money, and if it can be handled more efficiently and productively.
Mark Hooson writes for Moneysupermarket.com about credit cards, savings accounts and debt.
Post image from Flickr by epSos.de
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