Teaching secondary school kids about personal finance is like teaching a monkey to ride a bicycle. You could probably pull it off with lots of berating, but it’s not really achieving anything.
Most 16-year-olds are more concerned about texting their pals, ending climate change or wrecking Trump rallies. They couldn’t give one shiiite about stuff that won’t be relevant to them for a good 10 years.
Wouldn’t it be better if all 20-somethings, fresh out of college, had to enrol in a financial planning course? Enforced learning, the best kind!
While financial planning sounds like something only the rich do, there’s a lot to be said for it. And I know it all sounds desperately dull. Still, proper financial planning = being able to spend your money without freaking out about whether you can afford to.
Unless you’re an anorak whose fave hobby is balancing a spreadsheet, you’re probably not going to get any joy out of making a financial plan. But you could sort out your cash flow, deal with any debts, and start building a future.
And sure that’s still not wildly exciting, but there’s serious potential there.
You can sit down and make up a financial plan on the fly. Or you can take a more structured approach and follow a plan. That, friend, is why it’s called a financial plan and not financial improv. Financial whimsy. Financial mess.
That last one hits hard.
So how do you go about making a financial plan? It’s going to be different for everyone, but some core components should be the same.
This is the big one. I don’t know your life or your story or where you’ve wandered in from. You might want to cut back on spending or set up a pension or save like mad for a deposit. Whatever your reasoning behind making a financial plan, you’ll need a goal as your anchor.
It’s your raison d ‘être, to use a fancy French term. As we all know, fancy French words make everything sound more legit. Just look at crème eggs, the most extravagant of all le chocolat.
An abundance of notions, some might say.
If it’s relevant, split your goals into short, medium, and long term. There’s an old chestnut in the business world called ‘SMART’ – it stands for Specific, Measurable, Achievable, Relevant, and Timely. It’s a great way to weigh up the goal you’re going to set.
There’s no point going into financial planning with ambitions of clearing thousands of euros of debt out of nowhere or suddenly having the savings of an oil tycoon.
Pick something for the short term that you know you can achieve so that you’re not doomed to outright fail – and then build from there.
Again: I never said this was fun. If yer ma was anything like mine, there’s a high chance she had a plastic bag full of receipts in a drawer in her bedroom.
To her mind, that was organising her financials. Thankfully we’re now in the modern age, and most bank accounts come with the ability to roughly track your spending. If you really want to do a deep dive, you can consider an app like Revolut that’ll follow all your splurges on your card.
It’s lemon squeezy to tap away only to log into your bank account three weeks into the month and realise you’ll be living a breatharian lifestyle until payday. Which is to say: living on air and energy and any other woo-woo you can pull out of nothing.
If you’re more analogue, you can write it all down. Whatever method you choose, your outcome is to get a handle on what you’re actually spending and not just what you think you’re spending.
Or whatever time frame makes sense.
Yes, an actual budget.
You’re in for a wild couple of days.
Open Excel. Set it monthly or weekly and draw up how much you intend to spend every month.
And then track everything.
Categories to track include rent/mortgage, bills, debts, household expenses, transport, leisure, entertainment, kids (an absolute gaping hell hole in every budget), leisure, whatever.
An oft used guideline for budgeting is the 50/30/20 Rule.
It’s pretty straightforward: 50 per cent of your after-tax income (your take-home pay) should go on needs, 30 per cent on wants, and 20 per cent into savings. You can edit the %’s depending on where you’re at and your goals, though 50:30:20 is a solid baseline that still leaves room for actually having a life.
And at the end of the month, you’re going to see if your budget balances. You’d be surprised how quickly all the ‘ah I’ll just get Deliveroo for me lunch’ one-offs rapidly add up. Again, depending on whether you’re more analogue or digital, there are a host of apps that can make this more comfortable for you. Money Manager, Wallet, Goodbudget – the list goes on.
Mabs.ie has some decent resources for income and outgoing tracking too.
You can also give the lion.ie budget planner a whirl.
It’s a cinch: fill in your income and your fixed expenses and it will work out how much you can spend each day. In the linked template, our couple have €47.74 per day to spend frivolously. As they go through the month, they update the planner and it tells them whether they’re in “the green” meaning they’re within budget so can splash the cash or in “the red” – whoa there cowboy, bring your own lunch today.
H/T to the good folks at Reddit, who sired it.
In our example, these guys are saving €800 per month (fair play!) so they seem quite savvy but they are spending €100 repaying their credit card. BIG MISTAKE. The interest on the credit card will be multiple times the interest they are getting on savings. Pay off the credit card in full….then start saving. It’s little things like this that you need to keep an eye on.
So go ahead, download some of those apps, give them a try and see what syncs best with your lifestyle. The trick is to make it easy to keep up. Laissez-faire, the French might say.
Look, there’s no point curtailing all your spending only to give up after a couple of months because you’re miserable.
You’re probably doing that already, but a little extra work can go a long way. I’m not about to tell you to ditch your takeaway coffee or to pack your lunch every day. You’re a fully grown adult, and you don’t need stupid budgeting advice.
Instead, it’s a case of really coming to grips with your spending. Do you fully understand the terms of your accounts or credit cards or loans or anything like that? Is there a cheaper package available for internet/gas/electricity/phone? Is your insurance actually right for you or did you just buy a bundle because it was easy?
The more you know about all these topics, the better you’ll be at actually nailing down a good deal.
Some resources to get you started:
For full disclosure, those are my articles based on information I have gathered over my many years as an insurance broker. If you’ve got an insurance policy, it’s worth your time to dig into it. Especially if you went with your bank for Mortgage Protection, you could be paying through your nose for something that, to be frank, could be shit.
For more general advice on saving, have a look here:
The hard part. It’s a doddle to be really good at this kind of thing for a couple of months only to dramatically fall off the wagon. It’s a little bit like a diet: it won’t work long term if it’s all about restriction.
Instead, you need to find a balance so that it becomes a habit and eventually a lifestyle. That was very earnest and zen of me. Namaste
Still my fave episode of Curb Your Enthusiasm.
So, in case you missed it, jump right into the Free Lion.ie Simple Financial Planner 2021 Google Sheets Template – make yourself a copy (and a coffee, while you’re at it) and start keeping better tabs on your finances today!
Rope your other half in, or your best friend, or even your ma. Get yourself an accountability buddy. Celebrate the small wins.
Mostly, be gentle with yourself. It can’t be all or nothing because if you slip up, you’ll pack it in. Instead, be realistic and reasonable about your financial plan.
Check-in every couple of weeks and assess how it’s really working. Like, saving money is great but you do still have to live.
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Finally, if you know someone who’s always skint, be a pal and share this article with them. That budget calculator could be a lifesaver!
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