Last week we looked at 5 common habits that are often easy to substitute. You can review them here.
(Not the “give up the smashed avo” garb I hear over and over… yes!!)
Saving money by changing your habits isn’t particularly useful by itself.
We can change all the habits in the world, but if we don’t do Part 2, then we’re just wasting our time.
Today we’re talking Part 2… we’re talking redirection.
Now I’m it may come as no surprise, that when the average Australian has a pay rise, that their financial stress levels stay much the same.
Does that surprise you? It certainly surprised me...
Income alone, whether from a pay increase or spending more frugally, won’t achieve a less stressful financial life.
You’ve probably noticed that we don’t talk about ways to increase your income here at My Income Organiser.
We also don’t talk about eating rice and beans for days.
Believe it or not, that won’t give you financial freedom without Redirection.
It’s time to make a couple of big decisions for yourself.
We all have goals in our life. We have things that we see others do and think “I want to go on that holiday too…” or “why do I have to put up with an unreliable tv while others don’t?”
This isn’t the same as SMART Goals… this is Redirection.
Step one, prioritisation.
I want you to list your top 3 aims of things you want to achieve with your money in the next 3 years.
Write them down in any order.
Now take out a red pen or highlighter, and highlight the ONE that is strongest in your heart right now.
This is a great tip if you’re struggling to choose just one….
Close your eyes for a moment, imagine your life in 3 years time. Imagine how you will feel if you HAVE NOT achieved each of these aims. Go through them one by one, assessing how you feel about each one.
Which one gave you the strongest reaction?
That’s The One.
Step two, create a place.
When you save money (as little as a few dollars here and there, stemming right up to major savings), you need a place for it.
It’s best if it’s separate from your regular flexi account so you don’t accidentally dip into it.
If history has taught me anything, is that it’s too easy to dip into savings if they’re kept together.
Is it going to be a bank account, a ceramic piggy bank, a separate coin pouch in your bag…. What is it going to be?
You can also do a combination.
Each day when you get home, put your coins into a ceramic piggy bank. Then once a fortnight or so, deposit the total of that piggy bank into your savings account.
SEE your progress in your bank balance. Is the difference between your savings and your aim getting smaller? Don't have an aim?? It's time for Step three...
Step three, shoot for an actual number.
It’s great to think “I’ll save as much as possible”, but sadly you’re setting yourself up for failure.
If you’ve created a place in Step 2, it can be tempting to see the balance grow and think “I’ll just take a little out now, and I’ll replace it later”.
If you don’t have a figure in mind, you don’t really have a strong reason to replace the money you took out.
Does that make sense?
I ask because it took me a while to understand when I was first learning this, but it’s absolutely true.
When my daughter was born, I started an education fund for her.
I thought “who knows how tertiary funding will be legislated in a couple of decades, we’d better plan to pay the whole thing up front and out-of-pocket just in case” (this was back when Joe Hockey was Treasurer...)
But was I aiming to save $30k? $100k?
Without a figure in mind, there was no feeling of pain when I skipped a deposit every so often. Because I’m still on track.
But am I on track?
In order to make this successful, you have to set a figure.
If you honestly don’t know what you’re aiming for, like my education fund, then pluck a figure out of the air. I settled on $70k. It’s not based on anything concrete, but it’s the absolute best way to make sure our household doesn’t mess the whole thing up.
I want the same for you too.
I don’t want to see your savings simply be absorbed somewhere else in your life, and you miss out on saving for the ONE thing that truly affects you.
Step four, remember the feeling.
Close your eyes again now, feel that feeling again. The feeling you had in Step 2 when you imagined life without your goal.
As best as you can, try to commit that feeling to memory.
Anytime you’re feeling like you’re getting off track, close your eyes and feel it again. That should help solidify why you’re doing this and how important it is to you.
Director | Head Income Organiser
My Income Organiser