10 Quick Financial Wins

Personal finances.  When someone mentions these words, you may feel a shiver down your spine.  You know it’s important, but it seems complicated and intangible. 

Spend less, save more, invest.  Sounds ok, but where to start?

In this piece, I’m going to show you how the basics are actually quite straightforward, and share 10 simple steps that will help you do better with money.

1.     Ask the £100k questions

Too many people think small when it comes to money.  They ask ‘how can I save £3/month on my energy bill?’ or ‘can I save £1 by walking rather than taking the bus?’.  But most of the time they don’t ask ‘how can I make an extra £100k by investing?'. 

One good or bad big decision is worth 10x, 20x or even 100x a small decision.  So focus on the big decisions first.  Whether or not you invest will have a much larger impact on your financial wellbeing than whether you walk or take the bus.  It’s also a decision you only need to make ONCE, and which won’t affect your general mood - as you won’t arrive at work soaked from a 40-minute walk through the rain.

2.     Create a proper budget

I can see your eyes rolling from here.  Obviously, you should create a budget.  Everyone knows that.  But how many actually do?  Fewer than 20% of us create a proper budget which we revisit multiple times a year, and which we stick to.

So if you DO create a budget and stick to it, you’re ahead of 80% of the population in one move.  Not bad!

A proper budget means working out your total income net of tax, your cost of accommodation, bills, food, transport, clothes, subscriptions, gym memberships, meals out etc.  And making sure your savings are AT LEAST 20% of your net of tax income. 

There’s so much more to say here, BUT – these are quick wins!

3.     Automate your bills

Damn, I forgot to pay the gas bill.  Ever get that feeling and hate it?  Easy fix – automate your bills.  Set up a direct debit so that the money automatically transfers from your current account to your bill provider. 

That means you’ll be debt-free and hassle-free forever.

4.     Pay off your credit card debts

Do you have any debts today with an interest rate higher than 10%?  If so, pause your reading and go and pay them off.  Now.  If not, well done!  High interest rates compound against you fast, so your debt grows and grows, creating a bigger burden.  Sounds scary?  It is.  Don’t get to that position.  Spend less than you earn, and pay off your credit card debts.  If you automate your bills and spend less than you earn, you won’t get into debt.  Except a mortgage or student loan – but we’ll tackle those another time.

5.     Find an accountability partner

Perhaps it’s a partner, sibling or friend.  Find someone else who can help you to stick to your financial plan.  We open up to our social circle about all sorts of things – so why not with money?  It’s hardly a surprise that more financially successful people speak are more likely to speak with others about their money.   

6.     Spend on things that add the most value.  Cut on things that don’t

If you’re honest with yourself, do you spend your money on the things that add the most value?  Or are you spending on something because you always have, because someone else expects you to, or because you’re addicted? 

If you answer that question truthfully, I’m sure you’ll work out a few areas where you’re spending more than you should, and other areas where you want to be spending more.  It’s a common misconception that having a budget is about spending less.  It’s actually about spending better.  More on what adds value and less on what doesn’t. 

7.     Open an investing account and contribute £1,000 to it

Should I buy UK stocks, US stocks, Chinese bonds, or Italian cars?  The daydreaming can inhibit one important step.  Just get started.  It’s not difficult to set up an investing account.  If you’re young and long-term minded – which you should be if you’re young – you can probably accept more risk and a mostly or fully stock-based portfolio.

That doesn’t mean you have to pick stocks.  It just means that you set up an account which invests in low-cost, diversified portfolios of stocks, so you can ‘fire and forget’. 

This takes the hassle out of investing and avoids you making stupid mistakes which 95% of retail traders make.  Contribute £1,000 and at least £100/month (automated) and don’t check it more than once a month.  You’ll get used to the volatility, see that the long-term trend is up, and realise that this is the best thing since sliced bread.

8.     Get paid well for something you at least don’t hate

My friend put this quite well.  In simple terms, you can like or dislike your job, and you can get paid well or badly for it.  If you like it and are paid well, that’s the dream – happy days.  If you dislike it and aren’t paid well, then why haven’t you found another job yet?  Life’s too short to neither be compensated in money or fulfilment.  If you like it and aren’t paid well, that’s fine if you’re aware of the financial consequences.  Your fun time is in your job, at the expense of what you could do outside your job.  But it’s better than being miserable.  And if you dislike your job but are paid well, that’s also fine if you know you’re working for the money and can find fun outside work.

The reality is that most of us receive ok-ish pay for something we can kind of tolerate.  The challenge is to get closer to the pay/like quadrant – you’ll be healthier and wealthier for it.  If you’re not close enough to it, don’t settle.

You can only cut your costs so far, but there’s no limit to how much you can earn.

9.     Work out your value / time trade-off

How much do you earn per hour?  Take your monthly net income after tax, divide it by four to get weekly salary, and divide it again by the number of hours you work each week.  So if you earn £2,400 per month after tax, that’s £600/week (approximately) and £15/hour after tax.

Think about this for a second.  You’re trading an hour of your time to receive £15.  So it makes sense to say that you should spend £15 of your money to save one hour of your time.

So next time you look at saving £1 on the bus fare when the walk would take you an extra 30 mins, ask yourself whether it’s worth it.  That’s a rate of £2 per hour.  You could spend the £2 to save the hour, work that extra hour for £15, and bank the £13 difference. 

Knowing where to spend money to save time is crucial to making sure you have time to earn more money and enjoy your life.

10.  Write down where you are, how you got here, and where you’re going

Everyone gets frustrated at times, especially with money.  It’s also easy to lose sight of why you are where you are, and of your plans for the future.  So write it all down.  That way, your financial decisions will feel less like a straitjacket and more like a plan.

Follow these 10 quick wins, and you'll be well on your way.