| Real Life Strategies for Building Wealth

Do you spend hours pouring over your budget just to end up the month broke and disappointed?

Yes, I used to do this as well.

I’d spend my time and energy deciding what I’m allowed to spend on different items just to find that I’d forgotten something important.

At the end of the month, I’d sum up all my spending to find that my budget was too short for my lengthy list of bills. Frustrating, right?

Miscalculation, and ignorance of what we really need to spend, was only one of the reasons why my budget was a complete failure. There was also the ‘trinket lust’. You know, I knew that I have the ‘trinket lust’ when I bought my 8th fountain pen or the 15th top to clutter my already stuffed to bursting wardrobe.

You bet I felt disappointed, miserable and frustrated. I didn’t get very far with my personal finance goals either – I was stuck in a purgatory of making budgets, braking them and blaming myself for that.

You see, I understand you feeling stuck, frustrated and impotent in your attempt to make your money go further. Many future money ninjas feel like this early on their way to money mastery.

While finding yourself in a cycle of creating budgets and not being able to stick to them (and the feelings that go with that) is natural, and happens often and to many of us, you don’t have to stay there. Quite the reverse.

Everyone committed to learning to control their money and achieving money mastery ought to break this negative cycle.

You should also leave behind the futility and disappointment of making and breaking your budget. After all, you want to achieve financial health, don’t you? You can’t be financially healthy while your budget is about as useful as a chest of gold on an uninhabited island.

Now, you probably expect me to tell you how to improve your budget; after all, this is what most personal finance gurus would do.

Guess what?

I’m no guru.

What I’ll tell you is that you don’t need a budget.

What I’ll teach you is how to take charge of your money and never think of making another budget again.

I’ll tell you my story. Here it goes.

How I stopped wanting things

When I was a child, lusting after things was normal. Not because we had too much but because we didn’t get everything we want.

There wasn’t much to have either: the market was restricted to basic needs in the former ‘socialist’ countries of Eastern Europe. Even toilet paper was considered a luxury at times (Secretly, I suspect that the lack of toilet paper was a technique to divert from asking more important questions of freedom and meaning; I still spent a lot of time procuring toilet paper in the late 1980s.)

Arriving in Manchester all these time ago was a great consumerist shock to me. The shelves in the shops were over-flowing. Shop windows called to people, and me, like water to a thirsty man.

I didn’t fall for it. Or no more than the average person.

I still wanted this stuff. I just didn’t succumb. Or this is what I thought.

One day, seven years ago, I looked around me and didn’t like what I saw.

I had forty-two pairs of shoes and wore only three.

I had fifteen fountain pens and used one.

I had five computers and…

Okay. You get where I’m going with this one. I hadn’t yielded to consumerism completely, but I wasn’t immune to it either.

I still wanted too much and, from time to time, was not able to resist.

This is how I decided that discipline, or wanting and resisting, is not the way to go. I had to teach myself how to stop wanting.

After some research and thinking, I developed an exercise to stop wanting.

First, I discovered that great part of wanting things, of lusting after things, is about feeling that we cannot have these things. Prohibition makes the prohibited so much more desirable, isn’t it?

Next, I figured out that my ‘wants’ had different strength. For example, I wanted pens more than I wanted designer frocks; or I wanted shoes more than I wanted handbags. Because my ‘wants’ were not in order, I wanted everything and denied myself continuously. No wonder that my will broke on occasion.

Hence, the exercise that helped me stop wanting things achieved two things:

  • Rank my ‘wants’ in order of importance to me; and
  • Help me give myself permission to have my top wants.

It is simple and takes between 5 and 8 minutes to complete.

Are you ready? You need pen and paper for this one.

Imagine you are told to leave your house and you can’t ever come back. You have thirty minutes to pack the things you will take with you. What are these things?

(Please make a list of all that you’ll take. Don’t overthink it; just brainstorm.)

Now that you have the list of everything you’ll take with you, shorten it to the top five things.

(You may need to think a bit more carefully about this one. Don’t try to be practical and think what you’ll need. Think about what you’ll miss mots.)

Congratulations! Assuming you did this correctly, you have just figured out the five ‘wants’ that are most important to you. Allow yourself to have them.

Soon you’ll notice that the compulsion is gone.

I did this exercise seven years ago.

I have not wanted anything irrationally since then and I have not bought a single thing compulsively. This exercise helped me rain in my ‘wants’ and made turned me into a mindful shopper.

How I started to budget like a boss

Do you know what is the difference between ‘having a budget’ and ‘budgeting like a boss’?

When you have a budget, you are setting the limits of your spending.

When you budget (as a verb) you have the knowledge and skills to control your spending and optimise it (in other words, get the most value for your money).

Making your money go further doesn’t need a budget; still, you need to learn some budgeting skills.

We got into a very serious money trouble when I didn’t have budgeting skills.

We threw away loads of food.

We wasted money on sub-optimal insurance.

We paid for things we had not used for years.

One day I had an epiphany. I looked through our spending, I compared payments and use, I researched cheaper prices and I showed no mercy when it came to cutting spending and switching providers.

Do you know what happened?

By the time I finished with all that I had cut our bill by approximately 30%. Yes, you heard me right; and you can do this as well.

To make it easier for others to learn to budget like a boss I developed the ERR system for money management.

What is it about?

The ERR system for money management is about three things:

  • Eliminate (waste);
  • Replace (what you do and how you pay for it); and
  • Reduce (consumption).

To use the ERR system to its full capacity, you need high quality spending records but these are not hard to get today. If you use online banking you can get your spending from there.

Analyse your spending in light of identifying the items on which you waste money. Than get creative and start thinking about whether you can change the way you do things; e.g. you may decide to shop for food elsewhere, buy food for planned meals and change your holiday plans.

Lastly, start looking for over-consumption in your spending. This may be anything from this pair of shoes you don’t wear to eating too many sweets.

Are you finished?

Now is the time to act on the knowledge you have of your spending habits.

Pick up the phone and change your house insurance; you can save hundreds of pounds.

Do you really want to stay in an all-inclusive hotel on your holiday? Maybe, self-catered Airbnb will be cheaper and more fun.

Do you really want this gadget? You already have enough.

There are other money management systems you can try. For instance, the Balanced Money Formula will give you a rough guide of how to divide your money between spending categories; however, this doesn’t help you develop more finely grained, healthy spending habits.

As I said, the first time I applied the ERR system for money management to our accounts, we cut our monthly spending by approximately 30%. This is one third!

You can have anything your heart desires, get the best value for your money and make your money go further.

Are you ready to start budgeting like a boss?

Why I don’t need a budget

Generally, for the last eight years or so, I’ve been very responsible with my money. You can say that I’ve changed from a ‘money laggard’ with £100,000 of consumer debt to a ‘money master’ with close to £360,000 in new investments.

I never had a budget.

(Okay, I made a budget in the early days of our debt. It felt like a straight jacket and, as it is to be expected, I did all possible to break free. My budget was complete flop never to be attempted again.)

Instead:

This is all.

Having said that, my Joseph at PeerFinance101 swear by his budget: after all he’s paid a large amount of debt using it and it helps him eliminate money stress. Live and let live, I say.

Finally…

The way I see it, your choice is simple. You could either:

Continue to exist in a cycle of creating budgets, failing to stick to them and feeling like a complete failure in all things money;

or

Stop wanting things, learn to budget like a boss and never have a budget again.

Your call, your life, your money.

Only one of these choices leads to financial health, well-being and confidence.

What is it going to be?

photo credit: JayUny Tesla Model X 90D via photopin (license)