I track every penny that I spend. I don't Buy coffee. I cut my own hair. I go to the supermarket that has the lowest price for berries, and I spent our searching for a 20 P deal for a 10 pound purchase. You'll notice that the computer behind me is turned off because I have been trying to save pennies on my energy bills.
Wow. I got through that with a straight face. Only two out of those are true. And I'll tell you which two at the end of this post and why.
But before that, here are four personal finance hacks that I use to approach my finances in the most minimalistic way, which means that I don't end up spending a ton of my time looking at spreadsheets or comparison shopping.
I spend time where it matters, and that to me is true financial minimalism.
1. The first hack that I use is to automate paying bills.
The moment my salary hits my account, the first thing that happens is my bills get paid. So if my salary is in my account on the 30th, by the first or the second of the next month, all my bills will be paid. I have set up my billing system in a way so that it coincides with when my salary hits my account.
For example, my credit card bill will be debited on the first of the month. All my other memberships, like the gym or the nursery bills and whatever else, basically is debited from my account on the first or the second of the month, every month without fail.
This is a fantastic way of keeping yourself especially out of credit card debt, but actually any debt. More importantly this is one of the easiest ways to improve your credit score
2. The second hack is to automate your savings and investments.
This is connected to the first one in the sense that you are automating your bill payments or you are automating certain payments. But this is almost taking it a step further. So there are two parts to it.
The first part is that you pay yourself first.
So even before you are getting paid your salary, you are setting aside a certain percentage of your salary into your pension or your Roth IRA, 401k. Whatever it is that your savings instrument is, and in my case today, I save about 20% of my salary even before it hits my account.
Obviously this was not always 20%. When I was younger, it was more like 3%, 5%, whatever percentage you can put away for your retirement, you are putting away upfront, and then you pay your bills.
Simultaneously, I am assuming that, you also have other savings targets. Say for example, one of mine could be a new camera for the YouTube channel or going on a vacation or something with a longer investment horizon, like setting aside a pot of money for my child's education fund.
So on the first or the second of every month, all of those savings accounts will also be credited from my current account automatically without me lifting a finger. That is how I have set up my personal finance system to be.
A couple of you have asked me before how I invest, and I have to tell you that I'm not a financial advisor, so very likely your financial objectives are different to mine. I can tell you about how I invest, but that's not necessarily how you should invest.
So if you are looking for financial advice, please speak to a financial advisor.
However, if you ask me how I invest, I personally invest in index funds and retirement funds, which typically follow an index or have a risk profiling based on the retirement date that you choose. I use Vanguard as my platform for investing. You can look at other competitors like Fidelity and I'm sure there are others in your country.
Look at what other investment options are there within your country, speak to a financial advisor if you need to. And yeah, that's how I automate my savings and investments.
3. The third hack that I use is to negotiate on the big ticket items of my life.
For example, if I'm buying a house or if I'm looking for rent, I would negotiate on the price of the house or the rent that I'm paying. If I'm looking for a new job, I'd negotiate on the salary. If I'm looking to buy a car, I would negotiate on the price of that car.
You get the gist of it. This is not about negotiating on your $10 purchases. This is about negotiating on the $200, $300, $400,000 purchases. Because, when you buy something like a house and you take up a huge mortgage, you want to make sure that your numbers tie up and you are not actually paying more money than you think you are paying.
So, negotiating on the big purchases like your housing decision is far more effective and frankly, less time consuming than obsessing on the 20 p's that you save on your flat whites or your blueberries, whether you should go to M&S versus ALDI.
4. The fourth one is really using the abundance psyche.
So, for example, if you had that new handbag that you have been wanting to get, how would that make you feel. How would you feel if you bought that new pair of sneakers, when you have 10 others in your cupboard already. How would that significantly improve the quality of your life?
When you want to go on that holiday, what gets you most excited about it? Is it the people that you get to spend time with? Is it the downtime? Is it that particular location? Or is it something else?
When you feel like your happiness or the quality of your life is significantly improved by buying that new thing, put a plan into action of how you can get it. Sometimes it could just be, oh, okay, I just need to swipe my credit card whereas in other cases, it could mean that you need to save up $3000, $4,000, $5,000 to go on that vacation or buy that handbag.
So, to give you a small example of how this worked in my life, there was a time when I used to be obsessed about becoming partner in my big four consulting firm. One day I imagined myself as a big four partner in my firm doing AI solutions, and I considered whether the state of my happiness was increased or decreased. When I tuned into that feeling, I realized that my happiness was exactly the same as it was today. That is when I realized that I don't need to become a big four partner to be happy.
Which is why I encourage you to think like this, because sometimes we consider that the new handbag will give us happiness or a new pair of sneakers will give us happiness. Whereas most of the times it's just that journey to getting that that brings us the happiness.
And if it's the journey, the experience, then what are the other journeys, other experiences that you can have in your life that money can actually buy? Or what money can't buy, for example, spending quality time with your family, playing in the sand while the sun is shining, which is what I want to do right now.
For those of you who are wondering, what are the two habits that I do use out of the five that I mentioned while starting this blog? Well, actually sometimes I do cut my own hair. Not because I want to save money by cutting my hair, but because I have in 10 years not been able to find a good hairstylist for me in London. So, if you are in London, and if you are reading this, please suggest a good hair stylist for me.
The second one is that I tend to not buy coffee. It's not to save money, but it's to save the environment. Sometimes, I actually travel with my travel mug and I buy coffee in that, but most times I even say no to free coffees because it has an environmental impact.
So, yeah, some things are really beyond money.
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