Posts Tagged ‘budgets’
I have a confession for you: for the last couple of months, I have been having a real struggle to make both my company current account and my own personal account balance. At the end of both March and April, I have really come close to running out of money. For instance in April, I only had £12 left over in my personal account from the start of the month to the receipt of the April pay cheque.
But you know what…. I love it. These two months have caused worry, caused stress, and at times it has caused panic. But it has been really useful.
Broke By Choice
The reason I have been really stretched over the last two months is because I made a choice to stretch my finances. My company income is the same as it always was (good), my pay (from my company to myself) has been the same, and I have not had to deal with any massive unexpected bills. Yet still I made a choice to be broke.
You see, over time, I have found that money has become surreal. I happily pay bills on behalf of my business which would make me flinch if I were paying them personally. And with my own personal money, I have spent more this year on big ticket items (holidays, electronics, etc) than any previous year. My own view of money has become warped. Money is a tool, and its value (to me) has reduced over time.
How and why I made myself broke
First, let me say that I didn’t really make myself or my company broke. I didn’t just wake up and give my money away to strangers on the street corner or start burning notes. Instead, at the start of March, I changed a number of standing orders to investments to be a lot higher than I could really afford. When I say I could not afford these overpayments, that would be putting it mildly.
I paid a lot more into my pension, transferred a lot more into my various savings pots, transferred more company cash into bond accounts and generally took a lot more out than was going in. But because they were all transfers into investments, I wasn’t really throwing it away – I was just investing a lot more.
But the effect was the same; I was making the amount of cash ‘available’ a lot less than the previous 12 months. And of course that meant that I didn’t have enough to pay my bills. Which was the point of the exercise.
It forced me to take a long hard look at all the money coming out of my personal and company bank accounts, for bills and salaries and frivolous activities, and forced me to really weigh up the value of the spending. Without the money available, there was no soft decisions – if it wasn’t paying its way, the payments HAD to be cancelled.
A great exercise for added value, and working out Real Value
I guess I could have just gone through an exercise (as I do now and again) and reviewed my outgoings, but that would have been too easy. I could have looked at my various magazines subscriptions and decided, that yes, I did enjoy them and they would have stayed. But with the money gone, a hard decision was needed. Four out of my five different magazine subscriptions were cancelled to help with the balancing.
Services my company subscribed to were looked at in cold terms. If I really could not live without them, they stayed (some reduced in payment terms through haggling) whilst a lot more were cut. It was a busy review period, but now my payments are a lot leaner because of it.
I am going to keep my overpayments to my investments at the new inflated rate for the next couple of months, and will then reduce them slightly (to bring back 1 or 2 items that I miss). But the exercise has been really useful.
By taking away the money I need to pay for the frivolous, superfluous and ‘wanted’ (rather than ‘needed’) things, I have saved myself around 25% extra over the last two months. Plus, my money management is back on track and I have weeded out a lot of padding.
It has been a useful money exercise that I would recommend to anyone.