In a previous post I highlighted why looking after your overall financial security is more important than looking after your income.
Just looking after your income just doesn’t cut it any more.
Here I go into a few basic principles which go into creating financial security.
Step 1. Get clear about how you use money.
You need to keep track of it. Be honest. You need to know all your monthly income and expenses.
Keep a note of them, use a spreadsheet — I am sure there are great apps out there. Know it by month, by quarter, by year.
I go by my total money in and money out which is displayed on my main account — that is a nice clear number which I can’t hide from.
Data is gold. You can work with data. You just need to know your baseline.
If there is anything leftover each month, you have a positive cash flow — you spend less than you earn. You will then able to use the difference to put towards your savings or pay extra towards your debt.
If you have negative cash flow and are spending more than you earn, you are living beyond your means.
Top tip: Find ways to reduce your expenses.
Step 2. Live within your means.
Do I need to explain this? Don’t spend more than you earn — even if it means adopting a more frugal approach to maintaining your standards of living.
There are so many blogs out there on this, so many resources for this nailing step. Go wild on Pinterest — we live in such incredible times.
I am truly inspired by stories of entrepreneurs who lived on sandwiches for an indefinite amount of time until they made it — and so aware of the ones who stayed broke trying to maintain some kind of illusion of a high flying lifestyle and having to keep up with the Jones’.
That stuff is toxic.
There is no dignity quite so impressive, and no one independence quite so important, as living within your means.” — Calvin Coolidge