The (long) road to financial freedom: Week one
“When you understand that your self-worth is not determined by your net-worth, then you’ll have financial freedom.”
It’s the first week of taking charge of my financial situation and that means taking my head out of the sand and facing up to the reality of the situation.
As I said in the previous post, it’s partly the mental/mood piece and partly the actual money. This week is mostly about the money. Mood is really important and understanding where my money goes, the triggers for spending and how I’ve got myself in this chaotic mess again are vital to explore and understand. But right now, I need to get on top of things before I’m completely broke! I have another month’s income from my role at the school so a bit of a buffer before my income radically drops. I need to tackle the expenditure now, not when it’s already an issue. If you’re reading this and do have the option to look into the mood aspect first then I’d definitely recommend it!
To be honest this is something that I should have already done. It would have been better to sit down and review my income and expenditure and make a plan. Possibly I would have decided that I couldn’t afford to leave the school. But I couldn’t afford to stay. Not financially but emotionally. I can handle cutting back financially (I think!) and the financial debt, but I’m becoming emotionally bankrupt and the consequences for that are much more extreme. So I had to leave. And now I need to deal with the financial consequences.
So, what am I doing to try to get back in control? The first step, and possibly the hardest, is owning up to reality. I’ve gone through around 5 months of bank statements to look at where my money is actually going and how much my life actually costs. I printed off the statements and then went through them line by line with a pen categorising each item. Why? There’s something about writing out the same category over and over again to really make you face up to your spending. It’s the opposite of ignoring it and hoping it goes away. If I want to regain control of my finances I need to understand them. So what did I find out?
I spend a lot more on essentials such as fuel and food that I thought I did
I have a lot of spending on material things (e.g. clothes, books etc.) when I already have a LOT of all of these (although you can never have too many books….)
I have spent a lot on junk food, eating out etc. which definitely ties in to the stress/low mood
I’ve used this review to identify where I need to amend my budget so it is realistic. Yes I need to make changes and cut down on spending. But it also needs to be realistic. If I am realistically spending that much on fuel then I need to put that figure in my budget. Then there are the areas where I’ve been spending a lot, like the eating out, social things, which I won’t be able to do to the same extent with less income.
“All human unhappiness comes from not facing reality squarely, exactly as it is”
I’ve then created a more realistic budget based on what things actually cost, reflecting the cut backs. However, this has then left me with a couple of big things to tackle. Because as it stands I cannot afford everything. I had a minus figure left at the end of the month. So big changes are needed.
1 – my debt repayments. I can’t afford to maintain these at the same level at the moment. So I need to take a deep breathe and contact them about this. This taps in to one of my big anxieties – having to talk to people! Particularly about struggling with something. I sent them an email and they’ve reopened the annual review for me to update my budget, which I’ve done. As with most things, the thought of doing it was worse than actually doing it. It’s a big drop in my payment so my debts will take longer to clear but it should be manageable which is the main thing. Hopefully this is only a temporary step backwards as business will hopefully pick up and I’ll be able to increase repayments again. I’ll still be working towards paying everything off, just more slowly.
2 – Uni fees. I’ve gone back to studying to try to finish off my masters degree – all I have left is the dissertation. I had taken a leave of absence before because I stopped receiving a postgraduate loan and couldn’t afford the fees. Then I had a year off because of my mental health. I really want to finish the dissertation and get it done, but at £405 per month in fees it’s just beyond my means at the moment. I’m not sure what solution there is to this but I’ve reached out to the uni to explain that I can’t afford the fees at present. So it’s just a case of waiting to see what my options are. Denial was my default position and owning up to reality is tricky but ultimately necessary. So I’m just swallowing my pride and doing it. I might have to take a leave of absence again until I can afford the fees.
3 – mobile phone. My contract (both personal and business) are quite expensive and I’m not sure I can afford to pay them. I’m going to reach out to the provider to see if there is anything they can do. I’m not sure if there is but I won’t know unless I reach out.
“I believe that through knowledge and discipline, financial peace is is possible for all of us.”
I’m hoping that this is just a temporary situation of reigning in my spending, facing up to the fact that I’m struggling and reaching a point where I can afford to repay a little towards debts and to live, but obviously within my much smaller means. One of the reasons for leaving the school, as well as for my mental health, is to develop Psykhe further and start earning from the business. Hopefully that happens fairly quickly so that I can start to pay things off quicker and get back on track.
I want to get back in control of my finances, to clear my debts and rebuild my credit. Ultimately I’d like to be able to afford a house. It’s a long way off at the moment but I feel like I’m taking small steps in the right direction. In some ways this feels like a backwards step as I’ll be repaying debts more slowly, but I’m being proactive and facing up to the reality of my financial situation. So that’s progress right?
Are you wanting to get back in control of your financial situation?
Here are the steps I’ve taken so far:
Print off several months of bank statements (3-6 is good) – this is so you can see patterns in your spending
Go through each item and categorise it. I like pen and paper as it really sinks in writing out ‘clothes’ over and over again
Add into a budget tracker to summarise spending over time (I’ve made a template which I’ll share soon)
Identify patterns, areas where you could cut back, are some areas much higher than you thought? This is really about facing up to the reality of your spending
Highlight areas where you can make savings
Identify bills/commitments that you’re going to struggle to pay and contact your creditors. This can be tough but it really is necessary.
I recommend using clearscore or citizens advice for support on financial matters if you are struggling.
Stay tuned for more updates next week!
“You must gain control over your money or the lack of it will forever control you.”
