David's Story: How I realised earning more wasn't the solution!
David grew up on a small farm in central Queensland, he trained and entered Secondary School Teaching and for 20 years taught at various State Schools in South East Queensland.
By the late 1980s David had three small children and a stay-at-home wife. Sadly, he had hit the top of his pay scale and there were no more pay rises to look forward to. Then the Wrights signed up to build a bigger house – which meant a bigger mortgage!
David had always been careful with money and was a diligent record keeper, however, he found all this record keeping was not equating to an easy financial journey.
It got harder and harder to make ends meet and he would sit up late at night stressing about the bills and being frustrated by his biggest headache – the monthly bank statement.
Back then he had to wait 30 days for the statement, and then it would tell him where they were financially, but it didn’t tell him whether they had some spare money for little extras like plants for the garden or trips to the movies. And it certainly did not tell him whether they were heading for trouble either.
David found himself regretting a lot of his decisions to spend money, or even not to spend money.
And every month there was the huge mortgage payment… his finances had his stomach tied in knots.
How the solution came about…
David was scared stiff.
Looking for a solution, he started with the mortgage and set up a bank account just for the payments. Then he worked out the fortnightly payment as he was paid fortnightly.
As a simple example say his payments were $12,000 per year (David was paid every two weeks) so his payment was $12,000/26 for each pay = $462. He thought if he put away $462 per pay he could meet his mortgage payment however he found that there was a problem. In his first month he would have to put away a total of $924 leaving him $76 short for the 1st payment.
It didn't work:
He marked all his paydays and mortgage due days for the next year on a calendar and that’s when he found out there were lots of payments he would be unable to make, including the very next payment. He found the biggest negative number and realised that was how much he should have in the bank at the start as a positive number.
That was David’s aha moment. He realised that if he put all the bills and other predictable stuff onto the calendar with their timings, he could run the numbers for everything and find out where they needed to be every day of the year.
He now had map of the future before it happened! Everything came into clear view.