Living comfortably? I know I am
Few things have happened in the past days that made the writing and posting of this piece inevitable. From seeing people living life haphazardly seemingly with no care for their peace of mind and comfort, to listening to people give ill-informed advice on how those people need to manage their finances. This post is going to be real and personal so grab a hot cuppa and get ready to dive into your feelings.
Let’s talk about bills baby…
We can’t stand them, and we cannot live without them. Or can we? A large portion of bills these days are those resulting from wants rather than needs. I have met people who decide to compromise on the needs and direct their funds towards the wants, to each his own. A reasonable person should not have bills greater than 40-45% of their monthly income, and this number is based on a formula that has worked for me. If you decide to choose your wants over your needs that is your cup of tea, but challenge yourself to spend less than 45% of your income on bills (and this is including rent or mortgage). This also forces you to prioritize and cut costs where possible, for instance by downgrading your phone plan, taking the time to shop around for car insurance coverage, etc.
Don’t even think about keeping up with the Joneses!
Unfortunately, you have to live according to your income. The mandate here is not just to live within your means but to live below your means. The best advice I can give is that you set up automatic transfers from your chequing account to your savings and/or investment accounts set to occur on the day your pay comes in. No matter how low your income is you must learn to live like you earn just a portion of it, say 85% for those of us still struggling to climb up that steep economic ladder. It is normal for economic agents, that is you and I, to want to satisfy the present self first as we find it difficult to think about our future self, we all like good things and we want them now. But there is absolutely no reason for you to spend all your income on monthly expenses and food. While in uni I myself fell a victim to wanting to live larger than I should have, so that by the time I was done paying rent for my fancy 1 bedroom apartment in the choice neighbourhood it was located, and paying my phone, internet and hydro bill, and going grocery shopping, all I was left with was a meagre sum for those unavoidable unexpected expenses. I was completely wiped by the end of the month. That is no way to live, believe me.
The occasional splurge
Yes it is allowed. I personally would be incredibly miserable if after all my hard work making and saving money, I don’t get to enjoy any part of it. First thing to remember is, the occasional splurge should not be a greater percentage of your income than what you save on a monthly basis. Second thing is the occasional splurge must be occasional. Once every month you can treat yourself to dinner at a fancy restaurant, a few times a month you can take yourself out to the movies. The frequency should be scaled to the cost, all the while making sure that you don’t spend more than 10% of your income. Consider saving separately for the more expensive splurges that occur less frequently (the occasional shopping trip, spa day, trip abroad). I usually advice people to have more than one savings account, making sure that the regular (15%) savings isn’t affected by the other expenses they are saving for. These treats are a healthy way for you to relax and break away from the cumbersome repetitive schedule that becomes life. All work and no play makes Jack a dull and miserable boy.
Never stop looking for ways to earn more
Hey guys, ever heard of side hustle? A side hustle to me is a necessity and there are so many ways to get a paying side hustle. I must tell you though, in my own experience a side hustle doesn’t necessarily need to generate money in the present. I have taken on so many side hustles in the past that I did not get paid for, and that was for the sake of gaining expertise or experience in a field I thought I had potential in. However the side hustles, both paid and unpaid that I have undertaken in the past all paid out eventually in more ways than one. Enrolling in the CPA program as an accounting major believe it or not is a side hustle, so is taking a makeup class in order to eventually work as a make up artist.You always have to be looking for ways to increase your future earnings, and it’s not just as an economic stepping stone, but to grow your career so can you can be more fulfilled in your endeavours.
Have you been doing the math? I advised you to save 15%, allocate 45% to bills, allocate 15% to the occasional splurge (plus other necessary expenses like personal care). What’s left would go to necessary and unplanned expenses, and of course groceries. Personally, I always have more money left over which I eventually move into my savings account. My income is not so high and yet I live very comfortably, do you?