by Dannielle Cresp on November 11, 2010
The money we have can be allocated into different sections.
We could really break them down into 3 or 4. They are:
- Living expenses – what you need so you can eat, have a roof over your head, all the essentials that have to be paid
- Savings – if you’ve read about my thoughts on mindful living and budgeting for it you’ll know what I’m talking about
- Fun Money – the money you can spend on a whim, or on doing something that is non essential but worthwhile
- Debt – not everyone will have this but it is a reality for some
What happens when you’re unable to allocate for all these sections?
Different people put different priorities on what needs to be paid first. But for me, and I can only assume for others it’s the ‘fun money’ that gets left out of the equation. The most sensible choice really, isn’t it?! That may be so, but it makes things tough. Without an allocation for fun money there are no dinners out with friends, no impulsive trips to the movies and no ‘toys’ like iPads and Wii’s. And with that, especially where you work for your self, there is no time off your job.
If you don’t have any money to do anything but work, then all you can do is work. It is something that is troubling me at the moment. It was a choice for me to go into business for myself, even if the unemployment market made me feel it was the only option. It was a choice for me to say no to credit card offers and to keep my savings. But choices have consequences, like everything does. And for me it’s time to start re-evaluating what is important, and changing the way I do things.
I need to learn to not feel guilty for the occasional consumer purchase, and that while handmade is a great option, sometimes having a video game to play is OK.
I am learning that everything is about priorities and what comes first. When I was saving to travel to all the places I have been, I gave up most of my fun money in return for having that fun later. It was totally worth it. If you’re saving for a goal, that might be the case too.
Now that the end of the year is upon us, it’s time to think about what I want for next year and how I make it a reality. I want 25 to be amazing. I want to make bold decisions and to feel safe in those decisions.
It’s time to shake things up and to find some fun money so that ‘fun’ is part of the equation again.
Do you feel that fun money is important? Is it high on your priority list? Have you let it slip for other goals? I’d love to know your thoughts, tell me in the comments.
by Dannielle Cresp on October 12, 2010
Ways to make living within your means possible
A couple of weeks ago on the blog I spoke about living within your means and what that means for me. Today I’m going to continue along those lines, after the lovely Kimberley suggested in the comments that I talk about how I live within a budget and save.
I’m lucky in a way that saving money comes easily to me. It’s rarely something I struggle with – although I have had to re-evaluate how and when I save now that I am own a tiny business that still needs a lot of love and care. But the basic principle behind being able to save for me is some advice I was given before I started my first part time high school job: put 10% of everything you earn (after tax) into a separate account for saving. And that is exactly what I did. If it was $2, I put 20c away; if it was $300 I put $30 away and so on.
That for me is a great starting point. But there are three things that you need to do/have for this to really work:
1. A separate account (preferably linked, & with a higher savings interest if possible)
2. You have to transfer the money as soon as you get paid, before any other bills or fun money is spent
and most importantly
3. You have to treat that account like it doesn’t exist – you can’t be taking money out of it when your fun money runs out, it’s not there you can’t touch it.
This is how your little 20 cents will grow into larger and larger amounts of money. This savings technique has funded a trip to the USA when I was 18; a trip to France and the UK at 20; a MacBook; and 6 months abroad on a University exchange program. Mostly from the 10% rule.
When I say ‘mostly’ above, that is because when I got my first full time job at 20 years old, I was earning more money than I had ever seen in my life and instead of the 10% rule I actually saved 50% of everything I earned. That 50% alone paid for the France and UK trip and the MacBook in 9 months.
Obviously, 50% is an enormous amount to be saving and I have not been able to do that in any other job since, but it was something that I achieved. I paid for memories and a computer that I am still using almost 5 years later and they were worth saving for.
I called this fund ‘my running away fund’ and to me that helped me keep the funds there. I knew how beneficial it would be to have a little fund there if suddenly something went really wrong and I needed a financial way out. It’s actually something that makes me a more mindful spender as I can see when the fund gets lower that that money isn’t going to be there when I need it, and that thought makes me scared. A good bit of fear I guess.
So, if you’re thinking about trying this, I have some suggestions:
- get a separate linked account with a high interest rate for leaving the savings and not withdrawing – in Australia most banks have at least one of these on offer and there is usually a bonus amount for adding more than a certain amount each month – make sure it doesn’t come with a withdrawal card so you can’t be tempted at the shops;
- treat the money like it doesn’t exist – like you never had it; and
- don’t be too hard on yourself if you fall off the wagon and miss a payment, just dust yourself off and add it next time
I would like to add that I am not rich, nor have I ever been but I have learned over time to treat money with respect because one day it just might not be there.
Good luck if you decide to give this a go, I am no expert, this is just what’s worked for me.
Do you do something like this? Is there something you’d like to add? Tell me in the comments.