Ever heard the old saying, ‘A shoemaker’s children go barefoot’?
Perhaps a more modern comparison is the builder whose family lives in a half-finished house, or the chef whose kids eat chicken nuggets for dinner.
A scenario that’s less of a cliché, but probably just as common, is the accountant whose personal finances are less than ship-shape. As a chartered accountant myself, I can totally identify with this situation - and I’ve seen it with with plenty of my enableMe clients and accountant friends.
I really do get it: You spend all day on the month end reports at work, and by the time you get home, the last thing you want to do is think about your own personal finances. If this sounds like you, trust me; you are not alone.
When was the last time you and your partner sat down and discussed your financial goals and assessed how you’re tracking financially? You’re working hard, but are you getting ahead as fast as you’d like?
If you don’t want to wake up in five years’ time in much the same financial situation as you’re in now (or worse), take these steps:
Spend less than you earn
You’re likely earning more than you ever have before, but is this translating to financial progress? Often as we earn more, we tend to just spend more – without actually getting ahead. You might even be falling behind, as you take on more and more debt.
If you haven’t got a personal budget in place, start by sitting down with your partner and working one out.
Ask yourself, how much do I want to spend on discretionary expenditure items?
There is almost always an element of “fritter” in most people’s personal finances. Frittered money is small amounts, spent often, that do not contribute to your lasting happiness. If you can identify this fritter and put it to work for you – either by repaying debt faster or investing - this will translate into financial progress.
And just like you tell your clients; for any budget to be meaningful, you need to regularly track your actual income and outgoings against it.
Pay with cash wherever possible
Although credit cards are a convenient payment method, if they’re not repaid quickly they can easily become a drag on your income, eroding your cash flow and costing you in extra interest.
Studies have shown that less transparent payment forms tend to be treated like play money and are hence more easily spent. And remember; being able to pay your credit card in full each month doesn’t mean that you couldn’t spend less.
Often credit card spending hides lots of unnecessary fritter. You need to take control back into your spending and structure your accounts and credit card to make this happen.
Car loans and hire purchases have their place if you have legitimate cash flow issues, but if you can’t pay for a car or big ticket item now, then chances are you can’t afford it. Worse still, as this ‘asset’ depreciates, you’re paying premium interest on your loan.
Get interest working for you, not against you
For most of us, this means paying off our home mortgage as soon as possible.
Your mortgage needs to be structured to balance out interest rate risk, certainty and the ability to pay it off as soon as possible.
Consider getting some outside help
As an accountant, much of this advice probably isn’t news to you – in theory, anyway. But the question is, can you honestly say you’re putting your knowledge into action?
Our lives are increasingly busy. It can be hard to find the time to work out a financial plan, and even harder to stick to it.
But just like using a personal trainer is one of the best ways to achieve your health and fitness goals, getting outside help is a great way to help you to structure your finances and hold yourself accountable. Yes, even if you’re an accountant!
Commit to getting your financial house in order now. Your future self will thank you for it.