Sometimes finance can feel like a sinking ship. As soon as money has come in, it’s being paid out somewhere. Your bank account feels like a transient bus station. No matter how friendly you might be towards your money, it’s mere days or weeks before it’s boarding a bus and waving goodbye, off to a new destination: someone else’s bank account.
Understanding the Problem
Financial problems are usually indicative of deeper problems elsewhere in a person’s life. Now, I’m not pitching to become your therapist, but I am suggesting that if you want to turn your financial situation around, a thorough and honest appraisal of where you’re at today is the best place to start.
The first step is to observe what’s happening now. You’re not changing anything yet because you don’t know what needs to be changed and what doesn’t.
For the next three months you’re going to log each and every purchase and financial transaction you make. You’re either going to write it in a notebook or log the data in an app. And you’re not going to cheat by missing purchases out.
[Elle: Or you can use Mint to manage your budget and to grab all that data for you in about 15-20 minutes. It’s free and easy to use!]
What this does is tell you exactly where you are spending your money. You might be spending too much on entertainment, or credit card interest. You might be spending only on what you need, but you just don’t earn enough in the first place. Wherever the problem lies, the process of logging purchases will show you what needs fixing and what’s working fine.
Now you know where the problem lies, it’s time to do something about it. If it’s a larger salary, or smaller outgoings that are needed, this is where you take action. This is where you make the decisions necessary to make money work for you and not against you.
Having observed the flow of money in your life, you’ll be aware of how much you need to make your life function properly. This is where hobbies, passions and other skills you’ve acquired through life can play their part.
Using your time to make money doing things you enjoy is not just good for your bank account; it’s good for your spirit.
The Money Drug
Currency is the grease of society. Money gets things done. Getting things done makes us feel good. In turn money makes us feel good. It can make us feel powerful, sexy, or secure. But for some people, money is the crazy-maker in their lives, painting them into corners and leaving just enough room on chase their tails. For others it can makes them forget themselves as they focus solely on money and not how money can help them do our best in the world.
Regardless of whether we’re rich, poor, or somewhere in between, it’s important to separate our identities from our bank accounts, our assets and the contents of our wallets.
Make Saving a Priority
I used to live in Great Britain, where lottery winners would stand in front of TV cameras holding champagne flutes and talking about how their newly acquired fortunes would change everything. They still do.
A couple of years ago I moved to Germany. One night over dinner with friends, the question was asked “What would you do if you won the lottery?”
All the Germans in the room said the same thing: “I’d save it.” I found the idea that they wouldn’t sink it all into huge houses, fast cars and the luxury lifestyle fascinating.
The conversation made me think again about the nature of the relationships we have with money and maybe it was time to put a plug on those spending leaks.
Guest post contributed by Sally Shaws who writes about issues related to personal finance and financial freedom. She also writes about volunteering for clinical trials as an alternative income stream and a means to boost finances. You can visit volunteers.gsk for more on paid clinical trials.
Photo Credit: Plumbing Repair