Small things = BIG money
Financial advice from a baby girls perspective
Happy New Year my friends. I hope you’ve started off the new year with kindness to yourself and not just a long list of lofty goals to be achieved.
I’d like to say a special thank you to all the people who shared + downloaded (and hopefully filled out) their copy of YearCompass. I have to admit that I am still in the process of filling mine out, but getting messages about it made me smile big. If you missed it, it’s not late to get started.
I don’t have too many goals on my list this year, but one thing I have decided to do is understand money better. To be honest, the original plan was to understand cryptocurrency because I too would like to be going to the moon but not without some foundational knowledge especially seeing as I don’t have the type of money that can just go missing. So, this year, the plan is to actually understand what cryptocurrency is about, before I decide if it aligns with me.
The main goal however is to come up with a realistic plan that will facilitate a very comfortable and even lavish early retirement i.e, I really have to get my money up.
Shortly after I moved to the United Kingdom, I started thinking about how to grow my money/make my money work for me and so on. I read many things that suggested things like - upskilling to get promotions, changing jobs for better pay, creating multiple streams of income, profitable hobbies (I was going to start selling arm knit blankets), and so on. It didn’t take long to realise that my unique circumstances could not accommodate any of these suggestions.
So I reached out to a wealth manager to discuss what investment options were open to me. Let’s just say the conversation ended when she mentioned the minimum amount I’d need to even start a portfolio with her.
Three years later, my money is still not complete, but I have managed to stay afloat, out of debt and maintain an excellent credit history while still spoiling myself occasionally. So I thought I’d share some of the small things that have helped me thus far.
Tracking my spending: This is something I’ve been doing for a few years. Thankfully my current bank does this automatically for me so I can see what I have spent in different categories nicely summarised at the end of each month. There’s nothing quite like seeing a pie chart of your monthly damage. This practice will help you realise when your little Uber eats habit is becoming a problem and maybe even keep you from giving Tk.Maxx your rent money.
Create a budget (and stick to it!): After a few months of tracking your spending, you should have a decent idea how much you really need to run your life every month. I always advice starting out with a generous monthly budget and to gradually reduce the amount as you develop more discipline. This prevents the disappointment and discouragement that comes from setting lofty goals and then falling short. If you’re able to stick to a generous budget that you have created, that’s a win. Your win encourages you to keep going. Gradually, as you build your discipline muscle, you might even be able to set a tighter budget that will get you to your goals more quickly.
Open multiple bank accounts: I have too many bank accounts for the amount of money that they collectively hold, but they all have their uses. I always have a main account where my salary is paid into. This is also my personal savings account. After I get paid by my employers, I pay my monthly allowance into a different bank account that’s strictly for day to day expenses. Whatever amount is left after settling my monthly bills stays in my personal saving account which I generally Do. Not. Touch. I also have an account that is aptly named “baby girl trust fund”. This is where any “bonus” money goes, i.e any paid job outside of my primary employment and also proceeds from selling items on ebay. This is the “no worry about my future” account. No budget, just pure vibes.
Utilize commitment devices - My friend Toyin introduced me to Moneybox a couple of years ago. I opened a lifetime ISA account with them. A small amount is paid into this account via direct debit every week. The terms of this account are such that I can only touch this money when I’m ready to buy my first home or retire. If I decide to withdraw for any other reason, I have to pay a 25% penalty fee. And if I save up to a certain amount, I get a bonus. That’s one example of a commitment device that you can use to keep yourself from accidentally dipping into your savings at all. You can call your bank to find out if they offer any such products that may be helpful.
Automate as much as you can: I recently had to pay a penalty fee of £12 for a missed credit card payment. That’s £12 that would still be in my account if I had set up a direct debit for my credit card repayments. Automation will save you not just money, but time and effort. I also pay all my bills by direct debit so I never default and don’t have to think about them too much.
Take advantage of social media: I follow a bunch of financial advice accounts on Instagram. Some of my faves include- @the.moneyfox, @gofundyourself, @moneymedics, @rainchq, @boldfinancialhabit, @thebreaksocial. You’d be surprised how seeing random polls and bright graphics about money matters can get you thinking differently about your own finances.
Be careful with credit: Having grown up in a very cash based society, I probably don’t know enough to give informed advice about credit facilities. Also, I’m wary of credit. However, I understand the importance of credit history, so I have a couple of credit cards. What I do not do however, is spend money I do not have. I always spend way less than my allowance and make my repayments on time.
This is getting longer than I’d expected so I’ll stop here. Hopefully this is helpful. Remember to avoid overwhelming yourself by making drastic changes. Slow and consistent is how healthy habits are established and as with most things, turns out your habits are really the main key.
Two books about money I read last year:
You Are a Badass at Making Money: Master the Mindset of Wealth: My friend Dami recommended this one and I read it just before I started this newsletter. This was very much a self help book, written by a self help coach, which is to say not my jam usually, but, I quite enjoyed it. It highlighted the more psychosocial aspects of money that many people don’t acknowledge.
The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness: I stole this one from a boyfriends bookshelf. Great read. This book reminded me that good habits are important in all aspects of life, including the financial.
One of the reasons I’ve started the year with money on my mind is the fact that I am still house hunting and it is not going anywhere. Rent prices are ridiculous and I still do not have a glucose guardian so I really need to find ways to optimise my finances for premium enjoyment.
I’m starting to get weary, soo please join me in praying I find THE PLACE this week. Amen.
Here’s wishing you a stress free week.
Chioma.