Rachel Williams
Are you in financial difficulty and can’t break the cycle


Photo by Fabian Blank on Unsplash

I don’t know about you, but having an income coming in safely at the end of the month for most of my working life has left me totally unprepared for the tough times.

I always had some form of savings, until, that is, I came across the latest collection at my favourite clothes boutiques, or discovered a sale at a beautiful interiors shop… so essentially that meant that I never had any savings.

It was only when I was saving up for something specific did I put any effort into saving (or paying back my credit cards with more than the minimum amount required). You’d think that having worked in the finance sector would have made me a little more savvy in the saving world; au contraire, working in credit made me more aware of how much easier it is to borrow than it is to save.

A popular way of splitting finances is 50/30/20 rule. US senator Elizabeth Warren, now running for President (and a Harvard bankruptcy expert in her own right), coined the term together with her daughter, Amelia Warren Tyagi in a book they co-authored in 2005 called ‘All Your Worth: The Ultimate Lifetime Money Plan.’

This entails splitting your disposable income (that is, your remaining income after all tax and social security amounts are deducted) into Needs (50%), Wants (30%), Savings and Debt Repayment (20%). Here is where it gets a little tricky, because if you decide to use this form of budgeting, sometimes your Debt Repayment might take you over the 20% without taking into account the Savings bit. Needs and Wants can also be something of a challenge; too many times we take our Wants and transfer them into the Need niche.

Now, this is all very well, you might say. But what to do if you’re already in debt?

This first thing is to cut out the frills. It’s no use saying that you deserve to dine out once a week, if you can’t afford it. Forget it. Shove a frozen pizza in the oven — or make it yourself. The time will come when you can enjoy this little pleasure without feeling guilty about it. Forget holidays — explore your hometown, go for long walks, whatever you need to do to chill without breaking the bank. Check your mobile plan — can you make do with cheaper? Do you really need to go premium on Spotify? There’s the free version. Netflix? I love it, but I can (somewhat) happily live without it. If you’re in a comfortable financial position, then be my guest. If you’re struggling to find coins down the back of the sofa a week before payday, you might want to consider otherwise.

Try to earn more, if at all possible. Side hustles and freelancing may not immediately reap huge rewards, but as in all things, consistency is key.

Be realistic about your debt. Try to pay off what is costing you the most. Another way of dealing with it is to pay off the smallest bills first, which will help you make inroads, eventually, to the larger debt.

And most importantly of all — don’t go back into debt.

Clothes. Ah, lovely clothes. Work clothes, sports clothes, leisure wear, outdoor wear. Shoes and scarves. Accessories. If you wear a uniform for work, then you can afford to spend a little more on other stuff, but if you don’t, and you need to dress up for work, then that isn’t so much of a want as a need. On the other hand, besides sales, it could be better to buy more quality clothes than something that is so ultra fashionable that you wouldn’t be seen dead in it after this season. I have a friend who has always been amazingly dressed without following any particular fashion trends (although we did have fun with backcombed hair in the 80’s), and without spending massive amounts of money. Despite a decades-long friendship, I still haven’t quite picked up how she does it. If I find out her secret, I’ll let you know.

Sales are a minefield. Unless you’ve desisted from shopping in anticipation of a cheaper deal, then simply ignore those enticing red tags proclaiming a once-in-a-lifetime discount. On the other hand, it might be a great occasion to pick up some gifts without seeming cheap (do remember to take off the price tag!). In other words — don’t spend money on things you don’t need. Spending a hundred dollars on a jacket which originally had an eye watering price tag doesn’t mean you’ve saved anything — it means you’ve spent one hundred dollars you didn’t have to (and if you’re anything like me, couldn’t afford).

Groceries are another easy way to break the bank. Make lists (and take them with you; they’re of no help laying on the kitchen counter). Stick to them. Don’t be enticed by special offers if it means buying something you don’t need, or isn’t on your list. You’re only spending more money on more calories. Lose-lose. Oh, and don’t go shopping when you’re hungry.

Some of us might find the 50/30/20 a little too stringent. An easier version of this is the 80/20 rule. Basically, this means deducting 20% of your disposable income and channeling it straight into a savings account. This can be done automatically, and then just look hard at your 80% and decide (barring mortgages, credit cards and other consumer credit) just how you’re going to spend your pennies.

Some may suggest putting the 20% towards retirement. That is something you have to decide, depending on your personal circumstances. Depending on age and income, I might suggest that the 20% is further split into 10% going towards savings for emergencies, and the other 10% used for a retirement nest.

I would also recommend that the 20% be increased if possible, from time to time. Inflation exists; it is on a relentless mission to eat slowly and inescapably into your hard earned money, and I’m sure you can do without more things than you thought possible. I have discovered that forgoing my monthly nail and eyelash extensions gives me an extra USD 85, which have sometimes been a lifesaver. I treat myself to the occasional manicure; I also relish the time gained through relinquishment of these appointments .

Now I’m not saying that everyone should take this attitude. For me, giving up part of my beauty regime means that I can ensure that my fast-growing white hairs are subdued and tamed into submission on a regular basis, and that is more important to me than sporting long, perfectly shaped nails. I’ve also stopped sponsoring my gym and started running again. It’s cheaper.

Moral of the story is — the more you save, the more you can put away for a rainy day (or five), a wonderful holiday, a better retirement, financial flexibility, or take a career risk. That’s a great reward in itself. And the great thing is that the earlier you take care of it, the better it is, but if you’re.. ahem.. a little older… well, you can do it too. Maturity goes a long way in choosing priorities.

I don’t want to push people into financial boredom here. Have the occasional splurge. Enjoy an impromptu shopping trip. Just know your limits.

Robert Kiyosaki says, in the book he co-authored with Sharon Lechter ‘Rich Dad, Poor Dad’, that it’s not about how much money you make; it’s about how much money you keep. Rich people invest in assets; middle income and poor people invest in liabilities which take their money — mortgages, consumer credit (car loans, credit cards, etc). Now I’m not saying don’t have a mortgage to buy your home — just don’t stretch yourself to the limit. A few years down the line and you’ll end up sick and tired of the huge chunk of money going regularly out of your pocket just to provide a place to shower, eat and sleep every day when you’re not at work, a place you drive to (in a car bought on credit) so that you can pay for the car and home where you, well, shower, eat and sleep in anticipation of the next day’s work.

I’ve learnt this the hard way, believe me.

I’m sure you’ve heard about Warren Buffet — he’s the third richest man in the world, according to Forbes 400 list (March 2019). He may be a little extreme for some — for example, he hasn’t changed his car in decades — but a lot of what he says makes sense. Here’s a few examples:

“Don’t save what is left after spending; spend what is left after saving.” Remember the Needs and Wants categories? This works well with the 80/20 rule described above. If you honestly can’t save anything at all, then there’s something wrong in the equation.

“Save for the unexpected.” If you can’t pay your car insurance and, instead, take it out of your credit card, then you’re paying back at one of the highest rates of consumer interest, while at the same time limiting your personal cash flow and hence, your saving power.

“I’ve seen more people fail because of liquor and leverage — leverage being borrowed money. You really don’t need leverage in this world much. If you’re smart, you’re going to make a lot of money without borrowing,” here he was referring to lending for investment purposes, but the same principal works for us here. Try to limit borrowing as much as possible. You’re just making money for someone else. A home is a liability, not an asset, if you’re never going to make money out of it. I’m not saying don’t buy a home — just don’t drown in debt doing it.

Invest in yourself — that’s the best advice ever. Education, skills, anything that you can use for yourself to make your life better, and that might even, in the long term, create more financial liberty. Pay your bills on time; stop impulse buying and charging it to your credit card.

So many times we’ve heard how important it is to take care of yourself, and hey, I, for one, am in total agreement. But will those Jimmy Choos really make your life better rather than having something extra in the bank? Weigh the situation. I’m sure we all know that financial issues are one of the things that mostly rob us of our peace of mind.

Your — and my — relationship with money is also an emotional one, as is food with some of us. Try to leave emotion out when making financial decisions. You deserve to be happy — but do you deserve to be broke?

Elior Moskowitz, in her 2017 article on Huffpost, ‘3 Steps to Financial Peace of Mind’ says: ‘Happiness is often defined in terms of getting more of what we want: “If only I had a big house, a new phone, or more savings in the bank…” But this drive has diminishing returns: The more we get, the more we want. This force is known as the Wanting Mind. It insists that something needs to change in order for us to be happy, and it keeps us from feeling financial peace.

‘The problem? We are wired to want. All beings in nature have a biological imperative to survive, and it is this drive that is at the very core of the Wanting Mind.’’

In a nutshell, we equate happiness with possessions — ‘That new phone will make me happy!’ — dig deeper to see why. Is it to impress our friends? Why do we feel the need to impress them? We need to be aware that this happiness will be fleeting, momentary. Just like before devouring the last cookie in the jar, give yourself some time between the initial thought and the action, and ask yourself honestly the same question a little later. If you decide to forgo that purchase, you will go on to realise that removing the need is what is fulfilling rather than the purchase itself. I was over the moon at getting my first Iphone, but the euphoria dissolved quite quickly. However, obtaining a degree at massive financial sacrifice still gives me a thrill of pride to this day. Not comparable, one might say, and one would be right. But it’s there, and I’m glad I did it. The investment in myself has paid itself a thousand times over and the Return on Investment is massively bigger on so many levels, monetary and not.

So getting into hock or depleting your savings merely to buy something isn’t the answer. You’ll be paying for it long after the thrill is over.

I’ve said this before, and I’ll say it again: I’m learning this lesson the hard way. I’ve already made massive changes to my lifestyle to spend as little as possible. The next step is to get myself out of debt, and in less time than I originally planned. I am determined to do that. It’s not worth the price, the sleepless nights and the constant worrying.

One way of making life better is not allowing it to be dictated by financial needs. Make your money work for you.

After all, you don’t need to be making thousands on a monthly basis to be happy.



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