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How to balance financial development and financial anxiety

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In last week’s personal development anxiety article, I briefly discussed my anxiety surrounding financial development. My biggest anxiety comes from being able to balance increasing my wealth with living a regular “normal” financial life.

99 per cent of financial development anxiety can be eradicated by creating a budget that you can actually stick to. In Alfie Cornwall’s guest post he talks about a technique called budgeting to zero. This means that you allocate all the funds you’ll receive to different areas until you’ve got no more cash to allocate.

When we say no more cash to allocate, we mean it. Figure out everything that you’re going to want in the future and set up your budget to include that. This includes; holidays, tech upgrades, and home renovations. If you plan to spend money on anything in the future make sure that you’ve got the funds ready for it at any time.

This technique helps you maximise savings as you don’t feel like you’ve got money “left over” to waste on whatever. Also, by reviewing your budget and spending, you can see if you’re overspending in any areas.

However, one of my biggest gripes with budgets is that I’m conflicted! The reality of life is that money isn’t everything and there have been times when I’ve forced myself to spend more money than I wanted to, because of once in a lifetime experiences or just so I could feel like I was living life a bit more normally.

Today, we’re going to look at how to balance your financial development with the realities of living in a world based on money.

Two questions that eliminate frivolous purchases

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When it comes to everyday purchases, I ask myself:

  • How much joy will this bring me?
  • How long into the future will this affect me?

Today I was so absorbed with writing and exercising that I forgot to eat breakfast and leave time to make lunch. So, on my way to work I bought a foot-long from Subway, which cost me £5. I consider that a bad purchase, because it only bought me a small amount of joy (I could’ve easily avoided the cost), and next week I’ll probably have forgotten all about it.

With that said, a few weeks ago some good friends came to visit my girlfriend and I. They spent 16 hours on a flight from England to Korea, just to spend the weekend with us! I had the chance to buy them a few beers from the local convenience store which cost me about the same as the sandwich. This I considered a good purchase, because it bought me an immense amount of joy, and we’ll always remember the time that we sat in my small Korean apartment drinking beers and watching bad films.

To use a bigger example, my girlfriend really wanted to go to Japan during a five-day holiday. I wanted to go too, but the flights, hotel, and overall cost of the adventure were so high that I resigned myself to the fact that I’d have to go to Japan another time.

But the thought of going to Japan wouldn’t leave me (although that could’ve been due to my girlfriend constantly asking me if I was sure that we couldn’t go). So I asked myself my two questions, the amount of joy in going to Japan would be huge and I’d never forget the adventure. So I moved some money around, edited my budgets, and away we flew!

Treat. Yo’. Self.

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A habit is a mental or physical routine that is so ingrained in you that you do it automatically. Occasionally treating yourself to a fancy coffee, snack, or fancy thing isn’t something to worry about. It’s only when you unconsciously or compulsively buy things that there is a problem that needs to be solved.

If you’re feeling bad about treating yourself, make sure that you include “treats” in your budget. This “treat” money has specifically been allocated to impulsive purchases. Mentally tell yourself that if you don’t spend all of it then you have to give the remainder at the end of the month to charity.

This is a great technique to avoid becoming a scrooge. For a few weeks last year, I got my cost of living down to Buddhist monk level, and I hated it. It’s actually dangerous to your mindset to not spend money on luxuries, because it teaches you to think that there isn’t an abundance of money in the world. This will affect how many opportunities that you go forward with, and ultimately slow your growth to financial freedom.

By occasionally splashing out you understand that any money spent can be earned back, and reinforce the truth that money is simply a tool that helps you do things faster. Remember to budget for treats, and to recognise that you are giving yourself a treat because you’ve earned it. We are talking about financial freedom after all!

When due diligence is not due

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The majority of purchases you really don’t need to spend too much time thinking about. It pays to buy cheaper off-brand food stuffs, and everyday things (like cleaning supplies), but you don’t need to think that much about the purchase.

I used to waste so much time looking at all my baked bean options at the supermarket; do I buy Heinz, Branston’s, or Tesco Value? In truth, it doesn’t really matter. Most everyday purchases have roughly the same quality. Once you find the brand that works for you, stick with it. With that said, the brands that have adverts on TV pass on that cost to the consumer without increasing the quality compared to its competitors.

Save your due diligence time for researching things that you’ll still be using three months from now.

On the topic of due diligence, I’m a research twice, buy once kind of guy. Unfortunately, this often translates into me wanting the best-of-the-best, which is generally the most expensive. I’ve been caught in this trap a number of times, and it’s only recently that I’ve managed to escape. When you are making a big purchase, learn to be more logical about it and you’ll save a lot. Here’s how to make more logical big ticket purchases:

  • Learn what the specifications of a product mean and do. You can probably find a lesser-known brand with the same specifications for a lower price
  • Think about how long you’re going to want to use the product for e.g. I look to upgrade laptops every three to four years. If you upgrade your stuff yearly, it may not be worth buying the best of the best
  • If, like me, you want the most powerful/fastest/durable product, you need to be able to justify why you need it. My friend is thinking about buying the best mountain bike in the world, what will he mostly use it for? Cycling to work. The purchase is pure luxury and unnecessary
  • Look at how much owning the product will cost you. For example, if you’re thinking of buying a spiffy new leather jacket, think about the costs of; regular leather treatment, specialist dry cleaning, and a correct storage space.

When making a significant purchase make sure that you’ve also thought about the impact that the product or thing will have on your life. Buying a new BMW may seem to make logical sense, but if you can’t afford the upkeep you may as well not bother.

Don’t leave these out of your budget

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Before we end this article, I want to help you up your budget game so that you’ve always got money to buy the things you want to buy. Here are a few things that people often leave out of their budget, funds for:

  • Laptop/Phone/Gadget upgrade
  • House decoration/refurbishment
  • Emergency repairs
  • Holidays
  • Anniversary/Birthday/Just-because gifts (for others)
  • Charity

The budget-to-zero philosophy requires that you think about everything that you’re going to want to do and put some money aside for it. If you budget properly then you’ll always have money for the things that you want to purchase.

For example, it’s unlikely that you’ll want to buy a new laptop each year. Due to the progression of technologies, your laptop will begin to feel sluggish after three to five years. Budgeting £20 a month for a laptop upgrade means that in three years, you’ll have £720 to splash out on a shiny new piece of hardware.

Speeding up the journey to wealth

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The truth is that, in this instance, you can’t have your cake and eat it. The math doesn’t work out. If you’re looking to become truly wealthy, you will need to sacrifice some things in your life to make that dream happen.

Ultimately one of the hardest lessons for me to learn is that, for a time, I can’t have a “normal” financial life. Everywhere around me are people buying amazingly cool things because they just got a raise or a promotion. Similarly, credit cards make it a breeze to buy something you can’t afford and face the consequences later.

You’ve probably noticed by now that the advice I have for you in this article isn’t so much about saving or making money. The advice in this article is about how to be wise with your cash, and helping you figure out If a purchase is worth your hard-earned quids.

In the same way that you need to lose weight in order to speed up a race car, you need to take off parts of your life that slow down your financial progress (if you want to go fast). You’ll hit speed bumps, you’ll run into maintenance issues, and your fuel will run low, but as long as you keep your hands on the wheel and your eyes on the finish line, you’ll reach your goal.

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