Disclaimer: Before you read this blog, PLEASE NOTE that I am not a financial professional! Everything written below is based on my own research and experience. I cannot be held liable for any actions you take, as a result of anything you read in this post.
First, let me set the scene: I arrive at a friend’s house to collect my boys. I am not stopping for long, so I just stop at the entrance of the car park, whilst I run and grab the children. Back in the car with the boys, ready to go my car had other plans. Unfortunately, my handbrake would not release, so we were going nowhere. The frustration I felt by this whole situation was so overwhelming, that I even shed a tear. After an emergency meditation session, I was able to step back and make peace with my situation. On reflecting, it struck me that not once did I worry about the cost of fixing the car. I never worried about where I was going to get the money or would this put me into debt.
The reason why? My emergency fund. Have you got one? An emergency fund is defined by Investopedia as money stashed away, that people can use in times of financial distress. I see this fund as sh*t happens, which is an inconvenience rather than stress or creating a debt. I have always been frugal and love a bargain. I take immense joy walking around a car boot sale and haggling for a bargain or rummaging through a jumble sale. I have a Shelter charity shop less than 5 minutes from my house and popped in when they reopened, purchasing two pairs of new Ugg sandals for less than £10. In my early 30s, I fell in love (or what I thought was love anyway) with someone who ended up getting me into 18K of debt. It was during this period that I had the most financial growth. He left but I had a mortgage to maintain, bills to pay and debt that required attention. I devoured information from the Moneysaving Expert site, reviewing plans from Dave Ramsey and the Barefoot investor. I was able to amalgamate everything and devise a plan that took me from debt to free to build wealth.
I knew that once my debts were gone, I wanted to be in a position that whatever my income was, my spending would be 70%; investing – 10%; family/ other savings – 10%; emergency fund (short and long term) – 10%.
1 Saved £1000 emergency fund – Despite my debt, it was important for me not to create any more debt. I sold items, did additional casual work and built my fund. During this period, I paid the minimum on my debts.
2. Paid off debts – I cleared the lowest debt first to motivate myself and then used the avalanche approach. During this time, I still took some holidays but earned the money to fund these, so as to not impact my plan.
The next two steps I am working on concurrently
3. Develop a long-term emergency fund, begin investing and build passive income streams – I think it’s important to have at least 3 months’ worth of expenses saved in case of job loss or other circumstances. My ideal is 12 months but it is a process. I began share club; open a lifetime investment ISA (if you’re under 40 and do not have one- get on it as the government tops up what you save, giving you free money), opened junior investment ISAs for my boys and starting building my open stocks and shares portfolio (Yes, I have a small bitcoin wallet). There are some amazing people on YouTube and Instagram such as blackgirlfinance, rainchq and mamafurfur who have made investment information accessible for all, so that fears can be combated with knowledge and understanding.
4. Start using sinking funds – my starling account has allowed me to create different spaces where I can set money aside for events or needs that I know always occur. Therefore, saving for the amount before required. I have also done this for decades with my annual car service, MOT, home and car insurance. I now include this in all aspects of my life. I have sinking funds for Christmas; holidays; my entertainment; kids entertainment; birthdays; looking after the cat; house maintenance. I place set amounts each month and when I need the money it’s already there.
The next steps I am working towards
5. Reduce spending areas in my budget and to begin over paying my mortgage.
6. Create more passive incomes and continue wealth building
Throughout the whole process, I have a budget which I review each month and ensure that I allocate how I am spending my income. Sometimes I will do a zero budget, where every penny is accounted for, but most of the time I pay myself first.
I see money as a vehicle for some choices in life, but not the main focus or all-consuming of my thoughts. There are so many experiences that I have had in life, where money has not impacted or been the driving factor. I use my plan so that my time can be focused on the areas that I feel are important in my life.
Do you budget? Do you think budgeting provides freedom? Do you have steps or a plan you are following?
Please comment below.
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