Day 12 / 31 Stop Lifestyle Inflation

October 12, 2017September 20, 2017 ~ Inge Natalie Hol ~ Leave a comment

Have you ever noticed when you get a pay rise that even only a few months later you have no idea where that extra money is actually going? While at first you might have fantasized about all the great things you would be able to do with that increase in monthly income, the reality is this money often seems to magically disappear in just a short time and get absorbed into your regular budget.

This phenomenon is commonly known as lifestyle inflation and it means that every time you get more money, you also generally increase your minimum required lifestyle standard. Where at first you were happy with a second-hand car, that later needs to become a brand new car. And that brand new car needs to be handed in for a SUV just a few years later… Similarly your level of luxury on holidays, fancy clothes, expensive meals out etc. all increases, and likely any extra income is simply used for these purchases. Continue reading “Day 12 / 31 Stop Lifestyle Inflation” →

Day 11 / 31 Start a Coins Jar

October 11, 2017September 19, 2017 ~ Inge Natalie Hol ~ Leave a comment

A fun and effective way to speed up your savings efforts, whether that is for your emergency fund, to pay off debt or for your 3 months living fund, is by starting a coins jar.

Whilst you are unlikely to save up your entire 3 months living fund by just adding some loose change to a jar, every little bit helps and what is more important, each time you contribute something to your jar, you not only reinforce your goal and the fact that you can be in control of your money, it also works as a visual representation of your financial progress. It is always fun to see your money grow and what better way than having a coins jar that fills up a little more each time you add in another coin? Continue reading “Day 11 / 31 Start a Coins Jar” →

Day 10 / 31 Build a 3 Months Living Fund

October 10, 2017September 18, 2017 ~ Inge Natalie Hol ~ Leave a comment

Little by little you are improving the financially weak areas in your life: with an emergency fund building up you are taking away the risk of having to go into debt when an emergency expense comes up and by paying off your debts you are regaining control over your finances and reducing the amount of interest you are paying in the long run.

There is another very powerful safety net you can create for yourself: a 3 months living fund. Such a fund would have 3 months’ worth of expenses saved up in case you are without an income for a while. There can be many reasons you might find yourself without an income for an amount of time such as loss of a job, taking an upaid sabbatical to look after an elderly parent, or taking time off for yourself to name just a few. Continue reading “Day 10 / 31 Build a 3 Months Living Fund” →

Day 9 / 31 Start paying off your debts

October 9, 2017September 17, 2017 ~ Inge Natalie Hol ~ Leave a comment

Today’s challenge is to put in a plan of action to start paying off your debts. Now that you have seen how much a debt costs you and how much extra you are paying in interest in yesterday’s challenge, this is probably the best moment to kick those wretched loans to the curb as soon as possible.

Once you start paying of your debts you are beginning to regain control over your financial life, little by little lifting the strain of monthly payments and the psychological burden of being indebted to somebody else. Continue reading “Day 9 / 31 Start paying off your debts” →

Day 8 / 31 Learn about Compound Interest

October 8, 2017September 16, 2017 ~ Inge Natalie Hol ~ Leave a comment

The thing with compound interest is simple: it can either make or break your financial future. That might sound like an exaggeration but it really is that powerful. Today’s challenge is to learn (or refresh your knowledge) about compound interest and see where you have compounding interest affecting your finances positively or negatively.

Compound interest is nothing more than interest over interest over interest. When this happens over any savings or investments you have, this is generally a good thing as it means your capital is growing more each year. Instead of receiving interest over your original amount, you also get interest over any interest you have generated in past years. In this way if you have an investment account with an 8% annual return and an initial starting amount of $10,000 that amount will be worth $46,000 after 20 years. Continue reading “Day 8 / 31 Learn about Compound Interest” →

Day 7 / 31 Start a Weekly Money Moment

October 7, 2017September 14, 2017 ~ Inge Natalie Hol ~ Leave a comment

The more steps you make towards Financial Excellence, the more important it becomes to build in some time on a regular basis to check how you are doing and start looking at longer term goals and plans.

Today’s task is to set a regular appointment with yourself, during which you can dedicate some time to updating the state of your finances. Ideally you would find a set moment a week that you can nearly always dedicate to this new habit, such as every Sunday evening, Saturday morning or Wednesday at 12:00. In this way you are less likely to forget and more likely to stick to this new routine.

This is the perfect time to tidy up some loose ends, track your progress on some of the challenges and set new targets. Continue reading “Day 7 / 31 Start a Weekly Money Moment” →

Day 6 / 31 – Automate your payments

October 6, 2017September 13, 2017 ~ Inge Natalie Hol ~ Leave a comment

Every year people spend hours paying their bills, time that can easily be saved if these were paid automatically. If you are worried about not having a control over how much is taken out of your account, remember that since you are now tracking your expenses (see Day 1’s Challenge), this payment will sooner or later appear in your expense log anyway which will still give you an opportunity to check for errors.

Another strong argument to automate your payments is that it can potentially save you a substantial amount of money over the long run. Every time you are late paying a bill, you are charged a late payment fee and whilst you might have the intention to always pay your bills on time, the reality is that life happens and at one point or another you either forget, don’t have time or have much more pressing issues to deal with. Continue reading “Day 6 / 31 – Automate your payments” →

Day 5 / 31 – Start an emergency Fund

October 5, 2017September 13, 2017 ~ Inge Natalie Hol ~ Leave a comment

Have you ever had to go into debt or eat into your savings because of an emergency expense coming up that couldn’t wait? Maybe your washing machine broke down and you needed to replace it? Or your car had to get a repair that you hadn’t counted on? Did you ever have a plumbing issues that really had to be fixed as soon as possible?

In most of these cases you often can’t NOT pay for the expense as that would only create more problems, damage or costs. But if you don’t have any money set aside that you can call upon for when these types of unexpected expenses come up, it can be almost impossible to find the money to deal with the problem in the moment without either taking on more debt or using money from your savings that was potentially already earmarked for something else.

The fifth challenge of our 31 Challenges this month is to therefore start putting together an emergency fund. In that way you will always have some money set aside to deal with emergencies such as described above. Aiming for roughly $1,000 is usually a good guideline, but of course adjust this as needed. Continue reading “Day 5 / 31 – Start an emergency Fund” →

Day 4 / 31 – Limit one Expense

October 4, 2017September 13, 2017 ~ Inge Natalie Hol ~ Leave a comment

Now that you have created a budget (Day 3) and started tracking your expenses (Day 1), I am sure that you are becoming aware of some expenses that you currently have that seem way bigger than you thought they would be.

Day 4’s challenge is to have a quick and stern look at your expenses and then pick one (and only 1!) that you are going to limit for the rest of the month.

Look at the budget you made yesterday as well as your expenses up to now, and pick one expense to reduce. Make a rough estimation of how much you might be spending on it each month, then set yourself a goal of how much you can save during the next 4 weeks. Remind yourself of this goal every day, as at first I am sure you will get tempted to go back to your old habit! Continue reading “Day 4 / 31 – Limit one Expense” →

Day 3 / 31 – Start a Budget

October 3, 2017September 13, 2017 ~ Inge Natalie Hol ~ Leave a comment

The challenge for day 3 is to start a budget and plan on how you are going to spend your money this month. A budget not only ensures that you have enough money assigned for all of your expenses (and avoid running out of money at the end of the month), it also guarantees that you plan ahead and start setting aside some money to pay down debt or to add to your savings. Without putting in a plan, these long-term goals are unlikely to get prioritized and are therefore often forgotten about.

As you start your budget, think about the various expense categories that you have (such as utilities, car payments) and the individual expenses you have within each category (electricity, gas, water) that are likely to come up this month, both ones that are relatively predictable each month (such as rent / mortgage, groceries, utilities) as well as any less regular expenses such as birthday presents, clothes or meals out in restaurants.

Once you have a list of all expenses you expect to have, look at your expected income for the month and start assigning your money to each category, being careful not to budget any more than you have coming in. You can do this again on paper, in a digital spreadsheet or in a budgeting app or online program. Continue reading “Day 3 / 31 – Start a Budget” →