Minted or skinted?

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It’s a myth that minimalists don’t have stuff. Of course we do.

Some proponents of simple living really do exist with just a handful of belongings. But, for most of us, that’s not how we do it. Rather, we don’t buy things we don’t need; we can be ruthless when it comes to letting go of excess; and we may also be quite frugal when it comes to spending money.

Naturally, minimalists buy consumables like everyone else. What I’m interested in is getting more bang for my buck. Is is possible to find high-performing products that don’t require high-end prices? I think it is…

Fragrance

Minted?

Diptique Philosykos perfume is a gorgeous, woody fragrance, reminiscent of warm Greek evenings. It retails at £115, so is a very exclusive perfume, sold at a price likely to exceed most families’ weekly grocery budget.

Skinted!

Di Palomo’s Fig eau de parfum is a great alternative to the ‘minted’ version. Transporting you to southern European climes, this value-for-money fragrance is a lovely option. Plus, I bought a bottle recently on eBay (it cost me £14.99).

Skin care

Minted?

Dermalogica’s skin care range is world-renowned but – if I’m honest – shockingly expensive. Its Daily Microfoliant looks fabulous but it comes at a whopping £49.50. Who can afford that kind of luxury – even if it does make your skin zing and glow?

Skinted!

Here’s where St Ives Blemish Control Scrub comes in. At just £3 from my supermarket, here’s a high performing product – paraben free and 100% natural – that makes you wonder why you’d ever spend more.

Make-up

Minted?

Years ago, I suffered a great deal with my skin. A beauty therapist I visited for facials recommended Clarins’ Extra Firming Foundation. Although presented as an anti-ageing product, she actually used it on brides, as it always delivered a lovely, radiant complexion. It’s fairly pricey at £34, so I haven’t bought it for quite a while.

Skinted!

Maybelline is available everywhere on the high street at around a quarter of the price of its high-end cousin. Its Dream Satin Liquid foundation is very impressive, providing just the right amount of coverage with a range of natural shades. Currently on offer at Fabled, you begin to wonder why you’d ever buy a prestige brand again.

The maths

Of course, there are reasons why we select prestige brands. You might enjoy the customer experience of buying consumables like this in a pleasant retail environment. There’s the lovely lighting, the helpful assistants, possibly some ‘freebie’ samples, the (unnecessary but oh-so-stylish) packaging and the cute little gift bag to carry as a symbol of your purchase.

But the enjoyment can only ever be short-lived when the dopamine hit has dissolved and you’re left with an empty bank account.

Take these little examples. If I bought each of the ‘minted’ items, I’d have spent a whopping £198.50 altogether.

Even at full price (which I rarely pay) my ‘skinted’ alternatives come in at £35.99.

= Total ‘skinted’ saving £162.51.

Apply this to the rest of your consumer spending

Apply this logic to the rest of your consumer spending and you could really make some savings in your budget.

For example, swapping a supermarket’s own product for a branded one can save you quite a lot off a weekly shop. As you substitute one for the other, you’ll see the cost of your weekly shop come down quite a bit.

If you’ve been reading this blog for a while, you’ll know that we shop online for our weekly groceries. It’s very easy to compare prices if you’re shopping from the comfort of your own home. Once you’ve got added of your items from your shopping list into the basket, take a closer look. You can definitely shave off a few pounds if you make a switch. Plus, the value lines offer perfectly good products at a fraction of the cost.

Of course, it’s only a bargain if you were going to buy it anyway. But being intentional with your purchases will really make a difference, especially if you have a savings goal in mind or you’re looking to get out debt.

Shopping the ‘skinted’ way will make a real difference: all of a sudden, it feels like you’ve got a pay rise.

What sort of substitutions have you found at a skinted price for consumables? Do please let us know by replying to this post, below!


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Things I would tell my 18 year old self about money

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Earlier this week, GirlGuiding UK announced that the organisation would be introducing a new Guides’ badge, aimed at improving the financial literacy of teenagers. You can read about the badge (and other new ones) here.

Since I am not aware of any aspect of the Personal Social and Health Education (PSHE) curriculum* in school that covers personal finance, I applaud the Guides for taking the initiative.

What would I tell my 18 year old self about money?

The Guides’ news got me thinking about what I’d tell my teenage self about money. I am actually 48 years old now. So, I’m 18+30, not ‘Club 18-30’. Ha!

30 years on from my coming of age, here are a few things I would tell my 18 year old self about money. I only wish I had taught myself these lessons earlier.

Always live on less than you own (and save the rest)

The 80:20 rule probably applies here. If you paid yourself 20% of your income as soon as your salary hit your bank account (and did this consistently from age 18), compound interest would do the rest.

When I spent a year in Switzerland, a fellow au-pair (Michelle) always sent cash back home for her pension. Her fantastic example was definitely one to follow. Michelle, I know you were destined to spend the rest of your life in Canada. If you’re reading this, I’d love to hear from you!

Get a rainy day fund

Grandma wasn’t wrong on this one. We all need an emergency fund and I’ve previously written about this to explain why. If you have debt and you haven’t got a ‘starter emergency fund’ then £1k is what you need while you’re paying down your debt.

If you’re debt free, then 3-6 months of expenses, stashed away in a rainy day fund, should cover most unexpected emergencies. Dear 18 year old self, if you don’t have an emergency fund, then Murphy’s Law will apply: what can go wrong will go wrong.

Yesterday, my mum told me that the source of a mysterious water leak in the parental home has finally been found. You can imagine how mum and dad felt when the kitchen floor had to come up. They’d have felt even worse if they didn’t have an Emergency Fund.

Know the power of compound interest

Interest rates move up and down over time. In my teens, interest rates were incredibly high (trebling at one point to a rate that almost crippled my parents when it came to their mortgage). Having had historically low rates in the UK for many years, borrowers have benefited over savers. Nonetheless, money invested wisely will grow and you’ll benefit from compound interest if you stick with it.

When you get the urge to splurge, distract yourself

Wait to buy whatever it is you think you need. Lie down until the feeling goes away (which it probably will). Control your impulses.

If you shop when you’re Hungry, Angry, Lonely or Tired, then HALT! Run a bath, take a nap, call someone on the phone. Go for a walk.

Know your triggers and if you need an accountability partner, find a friend who’ll help you stick to your goals.

In case of emergency, break glass

Make it harder to buy whatever it is you want by making your money a little less accessible. I don’t mean putting your money behind glass (although I have read that some people do this with their starter emergency fund!). I just mean putting it a little more ‘out of reach’.

If cash burns a hole in your pocket, don’t carry cash. Also beware of “wave and pay” – it’s all too easy to flourish that card and up to £30 is gone in an instant.

Be intentional with your purchases

These days, if I do need to buy something, I usually agonise over it (especially when it’s something new and not second-hand). I have to say, I bore my family as I pore over the various options before deciding on whatever it is I need.

My husband has a trick for when you do need to choose something: 1) Find something suitable. 2) Find something equally suitable. 3) Buy the second item you found. Job done!

Oh, and never pay full price. Especially for things like clothes.

Be prepared to walk away

I’m going to make a sweeping generalisation here, but I’d suggest that we Brits don’t care for negotiation when it comes to making significant purchases. We find the idea of haggling terribly awkward, even embarrassing. So, we avoid it.

That said, there have been a few times in my life when I have haggled successfully. One such time was the purchase of a new bed. I had a fixed amount to spend and I could not (and would not) go over this.

We found exactly what we wanted; an oak bed frame and memory foam mattress. The price of the two items together exceeded my budget by just under £50. So, I offered the salesman what I had. He wasn’t prepared accept my offer, so with my (then) little girl at my knee, we thanked him and headed for the exit. Just as I was pulling the door open to leave, the salesman was at my side. And we had a deal.

Second-hand is infinitely preferable

Some things must be bought new. Mattresses (see above); car seats (unless you know where they’ve come from); bicycle helmets; and riding hats (to give you a few examples) should really be bought new. However, so much of what we need can be bought second-hand. I’ve written about this extensively, so I won’t labour the point, but I really mean it.

Let go of your sense of entitlement

Just because X has Y doesn’t mean that Y is right for you. You may not be able to afford Y and that’s 100% OK.

In her book, The Overspent American: Why We Want What We Don’t Need, Juliet Schor exhorts us to “Beware prosperous referents.”

It may be that your girlfriends are remodelling their kitchens, having extensions built or are driving round in fabulous cars. Good for them. Chances are, they’ve put the home improvements on the mortgage and are paying over the odds for their vehicles through expensive car loans. Suddenly, being like them doesn’t seem such a good idea after all.

Get on a written budget

If you want to manage anything effectively, you can’t just wing it. Imagine you’re managing a project involving myriad stakeholders and various work streams. Chances are you’ll use a Gantt chart or project management tool to help you. So, why wouldn’t you do the same for your money?

My preferred ‘modus operandii’ is my dual account budget spreadsheet. I have tried apps (see My First Month with EveryDollar), but time and time again, I revert to my trusty spreadsheet. I like to see everything in one place and my Excel sheet does this just fine. Let me know if you want a copy of it!

Credit is like sex

Replying to my question on Twitter, “What would you tell your 18 year old self about money?” Tarra Jackson replied: Credit is Like Sex. Just because you can, doesn’t mean you should. And if you do, use protection (a budget).

Great answer, Tarra!

Better still, perform plastic surgery on your credit card. Cheaper than botox, you’ll look a whole lot healthier (financially) if you do this. This way, you can also tell your cash, “You can stay money.”

Don’t move up in house before you’ve decluttered the one you already own

One of the reasons excuses we all give when talking about moving house is that ‘we’ve outgrown our current house.’

Is it that our actual family has grown (so, we really do need more bedrooms)? Or is it that we’ve accumulated so much stuff that we need to take stock, purge and reset for the life we now live?

Only recently did we finally donate a collection of children’s books that might not otherwise have seen the light of day for some considerable time. Apply this logic to a whole house and you might save yourself a significant amount of money by not moving.

A minimalist mindset can help you win with money

Recently, I’ve been working on a short eBook on this theme: I do believe that adopting a minimalist mindset can help you with personal finance. When you stop going after things you don’t need (and let go of anything that no longer adds value), you’ll change your spending habits. And that’s something I’d love to have told my 18 year old self.

One final thing I’d definitely tell my 18 year old self is this: If you didn’t get your Girl Guide Savers badge, join as a helper and help someone else achieve hers.

*Teachers, if I’m wrong, then please do tell me. I really don’t think our 16 year old has had any such education at school, but I’m open to learning that I am mistaken.


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My first month with EveryDollar

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I’ve written before that we follow a ‘dual account budgeting‘ approach when it comes to personal finance. This simply means running two current accounts in parallel.

One account is for all regular payments (e.g. our household standing orders and direct debits). The other is for all other “discretionary spending” for other items in the budget that will vary, so which require a higher degree of control.

Simplify your finances

By running two accounts, managing our monthly budget becomes much simpler. The first account is topped up on pay day, then it pretty much runs itself.

This leaves only the second account to manage whose spending categories are reduced to a small sub-set of headings, as follows:

  • Food/groceries
  • Transportation
  • Mobile phones (I’m on a pay-and-go arrangement, not a contract)
  • Lifestyle (costs associated with hobbies, pet care, hairdressing, clothing etc.)

So far, I’ve normally used a spreadsheet to manage our finances. However, as a regular listener to Dave Ramsey’s podcast, I was curious as to whether or not the EveryDollar app would work for us.

What’s different about EveryDollar?

EveryDollar is designed around a zero-based budget. That is, every month you decide (in advance) how you’re going to allocate money to each of your particular spending categories.

The name stems from Dave Ramsey’s approach to budgeting: if you give every dollar a name and tell your cash where to go, you’ll win with money.

In my case, I need an app called ‘EveryPound’ but that doesn’t quite have the same ring to it! So, EveryDollar it is!

Creating your budget

When creating your budget, the idea is that you input your income, then allocate your expenditure by category so that the latter totals the former. It’s a bit like a contemporary take on double-entry book keeping: both income and expenditure have to balance.

This allows you to:

  • Pay down debt
  • Allocate money for savings, including a sinking fund
  • Plan for upcoming monthly spending
  • Stick to your budget

I was already creating a zero-based budget with my own spreadsheet, but the EveryDollar app has a simple and visually-appealing user interface, so I decided to run both systems in parallel throughout March/April to see which one I preferred.

What’s a sinking fund?

One option you can select when setting your budget in the app is to establish a sinking fund. This is essentially a mini savings “pot”  for things you know you’ll be paying for at some point in the year. It’s like a virtual piggy bank.

In our case, that’s £125 per month towards the annual service for our family car (plus anything else car-related)/, as well as a fund for Christmas. I trust that £1500 in total will be more than enough for both vehicle and Santa, but we’ll see!

By establishing a sinking fund, you don’t have to raid your emergency fund if, for example, you suddenly need a complete new set of tyres. You can also budget throughout the year for bills such as a your annual travel insurance policy or car insurance (cheaper than paying monthly).

With EveryDollar, I wasn’t sure if I needed to account for the £125 as a transaction (in which case, would this be “income” or an “expense”?). So, I experimented and found that the app just accounted for the £125 going into the ‘fund’; I didn’t have to record it as a transaction at all.

A slice of the cake

Another feature of EveryDollar is that it shows you what proportion of the whole a particular budget heading represents.

So, if you’re nerdy like me and you want to check what percentage of your total budget you’re devoting to a particular category, you can check. The app tells you what proportion of the ‘cake’ you’ve planned to spend, as well as how much you have remaining. That’s esimportant if you’re paying down debt and are intentionally on a tight budget.

By splitting my expenditure across two accounts, it makes it a little more tricky to work out what I’m spending as a proportion of the whole on each category.

I had a mini moment of panic when I saw the percentage apportioned to food and groceries, but when I did the maths (across the two accounts), I was relieved to see that what I’d allocated was less than 10% of the whole.

If you’re curious what Ramsey recommends, you can find a guide on the EveryDollar website.

Linking up your accounts

One thing I can’t do is link up the EveryDollar app’ to our bank account. To do this, you need to pay for EveryDollarPlus (and I don’t believe this would work across the Pond).

Instead, I track my spending by recording a transaction every time one hits my account. This way, I can keep a close eye on that particular category and check what I’ve got left.

A new month

As the new month rolled around, you’d expect me to have done the budget for April. However, I’m waiting until pay day (the third week of the month) to prepare my budget for April/May.

I know that some EveryDollar users are comfortable running their budget to align with the calendar month, but my ‘fiscal month’ is 24th to 23rd. This means my monthly headings are going to lag behind; until 24 April, we’ll still be in “March”. Maybe that’s a good thing. It still feels like winter!

Setting an intention

Of course, one of the aims of the app is modify users’ spending habits. Right now, the jury’s out. So, I’m going to carry on with my comparison of app versus spreadsheet. Let’s see, as the rest of April unfolds.

Do you have a favourite way of managing your budget? Perhaps you use an app like EveryDollar or have tried my dual account budgeting approach. Let me know by replying to the post, below!


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Why I’m performing plastic surgery on my credit card

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Many years ago, I applied for a credit card that offered 2% cash back on all purchases. That was pretty generous, so you can tell how long ago that was!

Every month, we would use the card for all of our discretionary spending (that is, anything we bought on a week-by-week basis such a food, fuel and so on). We’d pay off the card every month in full. Then, once or twice a year, we’d get a decent cheque in the post with our cash back amount.

As we always paid off the balance in full, the credit card company actually made little money from us directly.

When I’ve used a credit card

I still have a credit card but I don’t use it for everyday purchases. Instead, I have used it for that one-off, occasional or unusual purchase such as our daughter’s prom dress.

However, because of the ease with which one can use a credit card in this way, there’s always a nagging thought in the back of my mind. Every time I do this (even for a relatively modest single item of expenditure), I‘m borrowing against next month’s income.

In effect, I’m creating a shopping hangover.

A change of heart

So, I’ve had a change of heart. The fact of the matter is this. If we’re going to win with money in the long term, this is what I’m going to do.

I’m going to perform plastic surgery on my credit card. Yes, I’m going to cut it into little pieces and throw it away.

Now, some of you still use your credit card in the way I used to. You tell me that you find it easier to track your spending this way (although, for me, I can’t understand this).

For me, it’s crunch time and here’s why.

What the research shows

Research shows that credit cards are ‘friction free.’ That is, handing over a card is less painful psychologically than handing over actual cash. In an article for Psychology Today, Scott Rick explains that people tend to spend more when they use a card than they do when handing over actual cash: “Experimental research….suggests that credit cards can stimulate overspending: People are often willing to pay more for the same product when using credit than when using cash.”

Indeed, Rick cites a range of psychological factors, which compel consumers to use a card over cash.

Even though I don’t put a lot on my card, I know that when I previously experimented by cutting up my card, I definitely spent less money overall.

Business Travel

“But what about business travel?” I hear you ask?

I once attended a work conference, which across the pond in Anaheim, California. I took my credit card for ’emergencies’ and actually ended up having to use it when I found my employer had failed to pre-pay my bill.

At my hotel’s reception desk, ready to check out, but fully expecting my account to have been settled, I learned that the transaction hadn’t gone through. Worse, the time difference between California and England meant that there was no-one in the office back at home to sort it out. I’ll admit that this was a time when I was glad I had my personal credit card.

However, this does not deter me from my plastic surgery. What I’d do in the future is request a corporate card, rather than rely on my own personal card, which required me to claim this expense on my return. No corporate card? No travel!

But a credit card’s for emergencies!

In my last post, I wrote about why I believe we all need an emergency fund.

In fact, a fully funded emergency fund should contain 3-6 months of expenses. So, if we have a fully funded emergency fund, we shouldn’t need to use the ‘shopping hangover’ method to cover unexpected bills.

The post-Christmas hangover

As the nation anticipates its post-Christmas credit card statements, I decided to do some research on card spending. What I learned really shocked me.

The UK’s spending habits

In October 2017, an article in The Independent warned that credit card lending was on the increase, in spite of warnings about the high levels of UK household debt. In the article, journalist Ben Chu cites regulators’ concerns about the extent to which households are turning to credit to finance their consumption.

Indeed, in the previous month, we saw headlines suggesting the UK was experiencing a ‘debt crisis’, as household debt had increased by 7% in the preceding 5 years.

Going slightly further back in time, the sheer volume of annual card sales is revealed in the UK Cards Association’s report of April 2017. I was staggered to read that, in the month of April 2017 alone, 315 million purchases were made on a credit card (up on the previous year’s figures by 41 million transactions). The overall total of money spent on a credit card that month was £16.8 billion (versus £15 billion the previous year).

What the hell were we all buying?

The report shows we’re using credit cards for a whole range of goods and services from food to fuel, with a marked increase in the use of cards (both debit and credit) over cash in these categories.

What if you have to use a card?

If you listen to Joshua Fields Millburn and Ryan Nicodemus’ podcast, you’ll have heard them say quite clearly: “If you have to use a card, you can’t afford it.”

In my case, if I decide to use a credit card, I’m swapping convenience for a shopping hangover. And I no longer want to do that.


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Why we all need an emergency fund

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Happy New Year 2018!

January’s blog post theme

During the month of January, I’m going to be thinking about money, as we have set some specific financial goals for our family in 2018.

It follows that my blog posts may follow a bit of a financial theme in this first month of the new year.

Holiday listening

In particular, I’ve been listening to Dave Ramsey’s podcast over the holidays. Ramsey’s consistent, straight-talking and sound advice has benefited thousands of people worldwide and his simple series of Baby Steps has helped his readers, listeners and YouTube watchers get a grip on their finances and – in Ramsey’s words – “Change their family tree.”

Baby Steps

The Baby Steps help break down Ramsey’s plan into manageable chunks and build momentum. Indeed, the small wins that can be achieved early on in the programme through these Baby Steps help psychologically with motivation.

Baby Step 1

The very first of the Baby Steps is to start an emergency fund of $1000 (or, in the case of us Brits, £1000).

This should be done as fast as you can.

If you’re already a seasoned declutterer, you may find this easier than you think. A good rummage through your garage, wardrobe or loft may yield some excess stuff you no longer need, so you may soon be able to pull together the funds to get started.

If, like me, you’ve already learned to let go of stuff, freeing up unwanted items to contribute to this initial £1k may not be too much of a challenge. It may take only the effort of cleaning them up, photographing them, then listing them online on sites such as ‘Things for Sale in Kenilworth’ (our local community site on Facebook) or eBay.

Why Baby Step 1?

Ramsey’s approach is to establish this beginner’s emergency fund so that if you have a genuine and unforeseen expense, you won’t have to go into debt to pay for it. In a later Baby Step (#3), a fully-funded emergency fund of 3-6 months worth of expenses is put in place, but this starter fund is where we begin.

When you need an emergency fund

Between Christmas and New Year, we had a sudden and unwelcome fall of slushy, grey snow. We came down for breakfast the morning after Boxing Day and noticed something was odd about the hedge that usually sits against the wall by the side of our kitchen window. The supports to the hedge had given way in the wind and snow, so the prickly shrub had lowered itself forward over the border, covering all of the smaller plants and herbaceous perennials beneath.

Thankfully, with some significant effort (and 6 hours’ commitment), my lovely husband managed to shore up the woody stems, drill new supports into the wall, and push the hedge back into place.

However, this unexpected job reminded me that we weren’t quite as lucky when the fence blew down.

When the fence blew down

On the other side of the garden, we share a boundary with our next door neighbours.

One very stormy night two or three years ago, our shared fence decided it was no longer fit for purpose, leading to an unexpected but essential replacement. This cost about £375 per family, which our emergency fund was able to cover easily.

The point of this is that, whilst you’re taking steps to get your finances into good shape, the last thing you need is a mini-emergency to set you back.

In 2016, research by the charity Shelter found that 37% of working families in England could not cover housing costs for more than a month in event of job loss. Ramsey’s approach is designed to mitigate against this and putting an emergency fund in place is a first step in the right direction.

Do you have your emergency fund in place?

If you haven’t done so already, I’d encourage you to get your emergency fund in place.

So, when the metaphorical fence blows down, you’ll have the financial resources to deal with it. Plus, there’ll be no call on your emotional reserves either, as you won’t be stressed about how you’re going to pay for it.


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Budgets and teens: controlling impulses

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As responsible parents, we are not only ‘mum and dad’, we are educators. We may directly – or indirectly – set an example to our young people that informs their approach on a variety of things: how to cooperate with others; how to handle difficult situations; or how to weigh up choices they have to make in life.

Personal, Social and Health Education

Life skills discussions at school are delivered on a variety of topics, many of which are also on the school curriculum. These include philosophical/ethical discussions or practical advice on issues such as staying safe online. These lessons spark follow-on conversations at home and form a useful part of every teenager’s personal development.

What about money management?

However, none (so far) has dealt with the matter of personal finance. As parents, how do we set an example to our teens on how they can manage their finances? Where do we begin in showing our young people how to manage their hard-earned money?

How to manage money becomes more pressing when our teens start making a little pocket money of their own, either through a part-time job or perhaps by earning a bit of commission on tasks they might do to help at home (Dave Ramsey’s preferred approach).

Lots of parents I know also provide a monthly allowance, so that their teenagers can make decisions on how to spend their own cash. This begins to instil some self-discipline; our own daughter commented that having a pot of money for which she was responsible helped control her ‘impulses’.

Under 19’s account

We found that opening a bank account was a great first step towards our teen developing financial literacy. There are some great accounts around, such as TSB’s under 19’s account. Opening a ‘proper’ bank account (as opposed to a savings account over which a ‘controlling adult’ still has full oversight) was a key milestone. A meeting with the bank manager was necessary and the formality surrounding the account-opening event signalled a step-change in the financial life of our teen.

Do apps help?

As well as the online banking app provided, I suggested that an app like Spending would be useful. By using the app, our daughter could immediately record transactions she had done. She soon realised that a transaction could take a few days to show on her actual account, so being able to keep a record that was bang up to date was incredibly useful. Now that she is more accustomed to checking her own bank’s app, she has let go of the need to do this cross-check but it can be useful at first.

Controlling those impulses

Amy from More Time than Money wrote a really good post on impulse buying, which links really well with these thoughts. As adults who care about sticking to a budget, we already know it’s important to be super-intentional with our spending.

It’s no different for teens: they soon begin to appreciate the value of things when they have to pay for it themselves. The cost of eating out, for example, (something our girl’s group enjoys), can be expensive. Choosing to go out to eat might mean passing up another opportunity or deciding not to purchase something new for a party.

So, when I think about teens and spending, there are a number of things I’d say:

  • Keep some for a rainy day
  • Be intentional with your cash
  • Know that buying X may preclude you from buying Y
  • Just because everyone else is buying one doesn’t mean you have to
  • Do you really need it?
  • How useful will it be?
  • Would you buy it at full price, if it wasn’t on offer now?
  • Would a lower-priced item do just as well?
  • Can you get it at a lower price second hand?
  • Can you borrow one?
  • Do you already have one that would do just as well?

Hmm. Maybe this is good advice for all of us – for kids of all ages – as we enter the ‘season of acquisition’.

What advice would you give your teenage self on money matters? Do let me know by replying to this post, below.


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Minimalism and the dual account budget

I’ve written before that I’m going to be conducting a ‘Life Energy Experiment’ in November. For everything I buy, I’m going to ask if the value and fulfillment derived from that purchase are worth the ‘life energy’ (time, work effort) spent. Say I earned £10 per hour, it would take a whole hour of my ‘life energy’ to earn the money to pay for a £10 item. That’s going to make me think a whole lot more about what I buy. Follow my experiment using the hashtag #LifeEnergyExperiment and feel free to join in!

Different approaches to money management

I have been thinking (and reading) about money for a few months now. There are some great ideas and minimalist approaches to managing money that are well worth a read. Check out caitflanders.com, daveramsey.com and posts such as this from The Minimalists.

Set up two accounts

One thing that definitely works for me is something I haven’t seen anyone write about in the books or blog posts I’ve read. You may have come across it or even tried it yourself.

Instead of trying to manage all of your bills and monthly outgoings from a single account, set up two accounts. The first account is the one we use to pay our regular bills (via direct debit and standing orders). We never have to worry about remembering to make these payments, as they happen automatically. Each payday, we transfer the required amount of money into that account and let the technology do the work. We monitor the account, but we don’t have to watch our spending, as we anticipate the bills that are to come and make sure there’s enough money in there to cover them (plus a bit more).

The second account is where the money we’ll need throughout the month sits. This money is for our actual spending e.g. our weekly shopping, groceries, fuel etc. For this account, I establish a flexible, monthly budget in anticipation of the expenditure we’ll have during that period.

Concern yourself with your discretionary spends

Because the household bills are dealt with in the first account, we only have to concern ourselves with the spending we control during the month. That makes budgeting and tracking our spending so much more straightforward and simple. The amounts and categories are up to you, but the principle is always the same.
Throughout the month, we keep a track of what’s in the account and what’s due to go out.
That way, we always know what we *really* have left! We also track expenditure against our pre-established budget.

Keep on top of your finances

Managing our finances this way really helps to track our spending during the month and ensures we keep on top of our finances, rather than our finances getting on top of us.

Ask me for a copy of the dual account budget spreadsheet

If you’d like a working copy of the spreadsheet we use, just drop me a line via my contact form and I’ll send it to you. You can paste your own amounts into the relevant cells and set up your budget for the month. Add in new columns to expand your categories, but make sure the totals all add up. There are lots of ways to manage your finances and some great apps, if you prefer to work that way. If you’re new to budgeting, however, maybe this ‘dual account’ approach will be of use.