budgeting

I distinctly remember the day I decided I was going to get a credit card. I must have been about 16, sat in a Higher Administration class listening to our teacher, Mr McGowan, going off on one of his tangents. He was that kind of teacher. He'd go off on huge tangents that could consume entire lessons and yet it was never wasted time. We would always learn something from them. This one was about financial emergencies and how to cover them. In his example, he spoke about how either he or his son had missed a flight and needed to book onto another one. As is often the way with air travel, the rest of the flights that day were booked out, and so he also needed to book into a hotel across the street from the airport. Last minute bookings are tricky, they can either be very cheap or very expensive. Plus you pay a premium for convenience, an overnight stay just walking-distance from the terminal building is attractive to businesspeople. So it's fair to say it can cost a lot.

Looking at London Heathrow as an example, today you're talking (believe it or not) between £120 and £350 for a next day flight back to Glasgow, plus somewhere in the region of £80 to £125 for one night in a hotel near the terminal - and that's before you feed yourself. So the cost of being just a few minutes late could be up to £475, plus any pressures and stresses that last-minute changes of plan can cause - or worse still, loss of earnings. Missing a flight, while it can happen to anyone, is not something anyone budgets for and yet still needs to be paid for nonetheless. Luckily, either McGowan or his son (again I can't remember who the story was about!) had a credit card handy. Taking the hit on the credit card, he could worry about finding the money to cover it once he's home. It's an example of how a pre-approved line of credit can (when used correctly) be a life-saving tool.

Up until that moment, sat in his classroom in Building C, I believed credit cards to be the enemy. All the stories I'd ever heard about them were bad ones, tales of stress and anxiety, of how on earth my mum and dad would manage the repayment. And they were savvy and snappy shoppers, so I worried for how easily it could happen to anyone. I figured the best way to avoid all that trouble was to never get one in the first place. However I had now came to realise that the credit card itself is not the enemy.

Fast-forward just four years and I find myself in exactly the position I promised myself I would avoid. As I mentioned on my post starting point, I was throwing hundreds per month into my credit card and having nothing to show for it, so I knew a lifestyle change was in order. Having watched a documentary on the benefits minimalism can bring to your life, I identified with the values of minimalism. It really hit home to me that the credit card isn't inherently the problem. 

I was working full time and earning good money, but I was still living with my parents and so my whole life was "stuffocated" into a single room. Old tech I had been meaning to trade-in, but hadn't. Old bed linens for a single mattress that I didn't even own anymore. Old toys from my childhood, relics which sat unused in my modern, partially-doorless open-style wardrobe, show-pieces to my inability to let go. This wardrobe was massive, spanning the entirety of the room's long back wall, with clothes rails and more shelfs hiding behind huge sliding, mirrored doors which concealed more clothes and shoes, underwear and socks than I could ever wear. It was after watching this documentary that I could put my general discontent into words. I had gotten myself entangled, ravenously addicted to the mindless pursuit of more. So over the course of just a couple weekends, I purged many of my material possessions from my life until the wardrobe was sparse compared with its former self. Post-purge, most of my belongings fit easily inside it with room to spare. In fact, such a large wardrobe for so little stuff looked almost ridiculous. But in a way, it's having such excess of space which coerces you to fill it. I was coming to realise that just because you can afford it isn't reason enough to have it.

No longer surrounded by the very materialism I was trying to combat, the very habit I needed to break, was a big step. After all, it's not the drugs that make the addict. It was a toe in the water, but I already felt better for it. The next step for me was making a budget. Again I grew up with a pretty money-savvy mother, so I actually already knew the importance of creating and sticking to a budget. At least in principal anyway, it was the latter part I needed help with. Enter TFD - The Financial Diet. Chelsea and Lauren sparked a real change in my finances. Stumbling across their YouTube channel, I started with their very first video and literally made my way through every single one. With just that little bit of help and guidance, giving me an idea of the things I should be doing, I slowly but surely started getting my priorities in order and was able to refine my budget accordingly. That meant cutting out my expensive mode of commute in favour of public transport, taking a home-made and wholesome packed lunch to work rather than buying one each day and restricting myself only to the occasional morning coffee as a treat - preferably from an independent coffee house that really takes pride in their craft. Then came the cutting down on nights out, resisting the temptation for shopping splurges and so on. It took a while, but eventually I was able to re-frame the way I think about money, generally becoming more frugal and deliberate. But that's not to say I was depriving myself.

The key to a good budget is identifying what you truly value in your life and removing anything which doesn't fit into that. The truth of the matter is that I never actually missed the stuff I removed from my life or my budget. Not once it was gone. A budget isn't intended to cause unnecessary suffering, quite the opposite in fact. It's a system you put in place for your own long-term benefit. Your budget should (if possible) allow sensible room for treating yourself without it turning into a problem. For me, that means (today) I allow myself £200 per month to use however I want without needing to account for where every penny is going. For me this is enough to enjoy myself during the month without spending too much on lifestyle and not enough on savings. Regardless of what wiggle room you allow yourself in your budget, if you are able to have one at all it's something to be grateful for, as not everybody can afford themselves the luxury. Once that £200 pot dries up, I can still get myself to work and back, pay my bills, feed myself and contribute to my savings goals. It's a happy medium that I'm grateful to have found, but it took some work to reach it.

Identifying and acknowledging there is a problem is quite possibly the hardest step. People live in denial of their problems with money for years. It can be a source of discomfort and so people avoid the subject, many reluctant to even think about it. But when you start making your money work for you, rather than against you, the changes it can make to your life are staggering. Once I had a basic budget in place, I was able to save my three-month emergency fund (which is vital), pay off my credit card and my car loan debt. Let me tell you, feeling that weight lifting from my shoulders made me wonder how I ever managed to bear it!

To make sure your budget is working for you, make sure to review it every year. As my circumstances and my income have changed over the past six years, so too has my budget. I have since added a sort of tier system to my budget that I call Need, Want and Like. This system gives me greater clarity over what I actually need to survive versus the extras I allow myself. Plus it gives me a go-to emergency budget that I can flip over to at the drop of a hat, should I ever loose my job.

Since my very first budget, I have for sure seen several bonuses, over-time cheques and pay rises. I also found myself having to move out of my family home around a year earlier than would have been ideal. I'm always reluctant to use the word "forced" but if I were to put it bluntly, it's the word I would use. But despite that, I was still able to buy my first flat with 5% down, move in, furnish the place, replace the boiler and take a month-long break to travel across Europe - all without going into debt. That all came from the financial savvy I learned from the very best. But I won't pretend to be one of those experts, really I'm just a success story. If you are eager for more, head on over to The Financial Diet on YouTube! And for an in-depth nosey at my Needs, Wants and Likes, click the button below.

~ Aedan.