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In Debt? You’re Still Allowed to Enjoy Your Money · Fun Money, Smart Wealth

• 0:01
  SPEAKER_00: Remember how exciting money felt before it became a list of things that you should be doing.
• 0:08
  SPEAKER_00: When I was about eight years old, I'd spent the morning washing my uncle's car, helping my granny around the house, and just as we left to go on holiday, she handed me this five pound note.
• 0:19
  SPEAKER_00: Now I looked at this paper money and my eyes opened.
• 0:25
  SPEAKER_00: It was not something I'd ever thought about before.
• 0:28
  SPEAKER_00: Some pocket money, but back in those days you got a handful of coins and you went to the sweet shop and you got a few bits and pieces, but this was more money than I had ever seen in my entire life, and suddenly I felt like the world was my oyster.
• 0:41
  SPEAKER_00: I put it in my pocket with that little smile and we headed off on holiday.
• 0:46
  SPEAKER_00: Now I did spend the fibre at the airport, and I'll tell you more about that another day.
• 0:51
  SPEAKER_00: But the thing is, when you first have that level of excitement around money, it just means that you feel like anything is possible.
• 0:59
  SPEAKER_00: And that's the feeling that I want to bring back.
• 1:01
  SPEAKER_00: Because money can make life more fun now and give you choices later.
• 1:06
  SPEAKER_00: I'm Claire Sweet and this is Fun Money Serious Wealth.
• 1:10
  SPEAKER_00: Each week we'll take one money question, make sense of the numbers, and find something useful that you can actually do to bring the fun feeling back whilst building wealth.
• 1:20
  SPEAKER_00: Welcome back to Fun Money Smart Wealth.
• 1:23
  SPEAKER_00: Hope you've had a great week.
• 1:26
  SPEAKER_00: There are lots of us here in the wealth space, and whether that's podcasts you you're listening to, books you bought, or whatever, and we've all got a slightly different take on things, and in a lot of ways, mine is really quite unconventional.
• 1:39
  SPEAKER_00: And I think one of the things that I find is that there are other people who have got bigger followings, uh, who I follow a lot of what they do because I'm really interested in other perspectives as to how you can do things and what they might look like.
• 1:56
  SPEAKER_00: And sometimes it really highlights the differences when you look at things that seem really, really obvious, which is something that I want to talk to you about today.
• 2:07
  SPEAKER_00: So one of the quotes that pops up every so often, and it's something I've commented on before, um, is something that's been said by Dave Ramsey, who is an amazing chap, has got a very popular podcast, has sold books and training courses, built an empire, and does amazing things.
• 2:26
  SPEAKER_00: But there's a couple of quotes that he pops out every so often, one of which I really don't agree with, which is the comment that if you are in debt, the only time you should be in a restaurant is if you are working in it.
• 2:39
  SPEAKER_00: Oh my god.
• 2:41
  SPEAKER_00: Now, the reason it makes me laugh is just because I've heard so many people say this and go down this route, and it's something I think really needs addressing, which is going back to talking about that past, present, and future thing with your surplus, what you're going to be spending your money on.
• 2:59
  SPEAKER_00: And if you haven't heard that episode, go back and listen to that one.
• 3:02
  SPEAKER_00: It's a really important task for you to do, really, and to get your head round.
• 3:08
  SPEAKER_00: Now, when you're in debt, that is money that you owe someone.
• 3:12
  SPEAKER_00: That's money from your past, it's your spending.
• 3:14
  SPEAKER_00: It might represent decisions that you've made that you're not really proud about.
• 3:17
  SPEAKER_00: I mean, we all buy things when we shouldn't.
• 3:20
  SPEAKER_00: And often when I speak to clients about different strategies to pay down debt, we talk about like the snowball method and the avalanche method and all of these other ways of paying down debt and getting rid of it.
• 3:32
  SPEAKER_00: But ultimately, it tends to come down to how they feel about the particular bits of debt they've got.
• 3:38
  SPEAKER_00: So, for example, if you've got um some money on a credit card and the only reason it's on a credit card is it was a holiday that you took that you absolutely hated.
• 3:48
  SPEAKER_00: Maybe you went with someone that you're no longer with, maybe you didn't enjoy the hotel or the trip, maybe you spent more than you should because you bought it at the wrong time for the wrong reasons or something like that.
• 3:57
  SPEAKER_00: But the problem is that when you look at that particular credit card debt compared to another credit card or bank loan or overdraft or some other thing that you've got, you feel particularly annoyed by it, then that's the one that you want to pay off first.
• 4:12
  SPEAKER_00: Okay.
• 4:12
  SPEAKER_00: And it might not be the one that is on the highest interest rate, but actually that's the one that's gonna make you feel that much better about money.
• 4:18
  SPEAKER_00: So when we're looking at ways of paying down debt, that's one of the things that we always look at.
• 4:22
  SPEAKER_00: But the thing about paying down debt, and I am, yes, talking about paying down your debt, we're not gonna look at uh writing it off and wiping it.
• 4:29
  SPEAKER_00: You're taking responsibility for that money that you've spent, is that it's important to do it, but it's not the be-all and end all.
• 4:36
  SPEAKER_00: And you know, in some cases, there are reasons why we might want to use debt for leverage, which again is another thing that I differ from someone like Dave Ramsey on, is that I don't believe all debt is bad.
• 4:47
  SPEAKER_00: But ultimately, if you are paying down debt, that is your past.
• 4:51
  SPEAKER_00: And by actively paying it down, you're taking responsibility for it.
• 4:55
  SPEAKER_00: But that doesn't mean that you can't enjoy now and that you can't be building for a future.
• 5:00
  SPEAKER_00: And that's the reason why effectively I'm using that three-pot method with your excess, because I want to make sure that even if you are allocating money to pay down your debts as fast as you can, whether that's credit cards and loans or it's your mortgage or whatever that is, I want you to have enough money in your budget to have fun now.
• 5:18
  SPEAKER_00: Okay.
• 5:18
  SPEAKER_00: Now, if you're paying yourself a regular amount of money each month, one of the things I suggest you do is set up a separate bank account that you use for fun stuff.
• 5:27
  SPEAKER_00: Now, back when I was doing this all on debit cards, before I was using credit cards for points and um that type of thing, which is a strategy, we'll cover another another day.
• 5:38
  SPEAKER_00: I seem to be saying this quite a lot.
• 5:39
  SPEAKER_00: There's, oh, we're gonna do another one on this.
• 5:41
  SPEAKER_00: There's loads of things I want to talk to you about.
• 5:43
  SPEAKER_00: Um, and yeah, I can't wait for this to become a resource that people can dip into as and when they need tips and pointers and insights on the things that really matter.
• 5:52
  SPEAKER_00: But when I um first started allocating my money into pots, which was around 2012, I think it was, I had a bank account set up which just had money in it for fun stuff.
• 6:05
  SPEAKER_00: So when I got paid each month, I would set up a standing order to transfer 10% of what I earn each month into this pot, and that was for fun stuff.
• 6:13
  SPEAKER_00: Now, fun stuff for me was things like um new clothes, meals out, money towards weekends away and holidays, um going to the cinema, treating myself to new books or or things to do, life experiences, things to buy, and that type of thing.
• 6:31
  SPEAKER_00: Um, and it's money that I put in every single month.
• 6:35
  SPEAKER_00: I didn't spend it every single month.
• 6:36
  SPEAKER_00: Sometimes there was money carried over.
• 6:38
  SPEAKER_00: But the key rule with it was that when the pot was empty, I had to stop.
• 6:44
  SPEAKER_00: And what that does is it makes you think more carefully about how you spend your money.
• 6:49
  SPEAKER_00: Because if you've got this pot of money for fun stuff, and you know, let's face it, we've got internet banking.
• 6:54
  SPEAKER_00: You can look on your phone now to see how much money you've got in your account at pretty much any time, as long as you can get an internet signal, but you know, there we go.
• 7:04
  SPEAKER_00: Um, you make better choices because it's like, well, do I want to spend eight pounds in Costa today buying a coffee and a cake, or do I want to put that towards something else?
• 7:14
  SPEAKER_00: It's the same as we teach our children, really.
• 7:16
  SPEAKER_00: You know, if you give them some pocket money, you know, they need to know that if they go and spend it on a magazine, they can't also have some sweets because it's one or the other.
• 7:22
  SPEAKER_00: There's not enough to buy both.
• 7:23
  SPEAKER_00: They have to make some choices.
• 7:24
  SPEAKER_00: And as a parent and you're educating your children, we try to give them those sorts of decisions.
• 7:29
  SPEAKER_00: And as an adult, sometimes we forget that because when all the money piles into one pot, you pay your bills, you pay your food shopping, you put petrol in your car, you do all your bits and pieces, you have a lunch out here and a meal there, and then suddenly you get to that week before payday, and maybe there's not as much money in the account as you hoped there would be.
• 7:49
  SPEAKER_00: And then when you really fancy a bit of a treat, there isn't any money there.
• 7:53
  SPEAKER_00: And you know, again, people talk about finances not being related to treating yourself, you know, and and shouldn't be, it should be logical decisions.
• 8:03
  SPEAKER_00: It's not logical decisions.
• 8:04
  SPEAKER_00: We spend based on how we feel emotionally.
• 8:08
  SPEAKER_00: We use logic later to try and justify what we've spent, but if you want to make sure there's always money ring-fenced to have fun, no matter what type of week you've had, then having that 10% put away or whatever number works for your budget will work wonders.
• 8:24
  SPEAKER_00: Now, you might decide that you're gonna pay for getting your hair and nails done out of that pot.
• 8:28
  SPEAKER_00: You might decide that's where you're gonna pay for your gym membership.
• 8:30
  SPEAKER_00: I mean, I'm not gonna put gym membership in a fun stuff pot, but some people do, you know, each to your own.
• 8:35
  SPEAKER_00: But the point is that no matter how much money's coming in, there should always be some money going towards improving your quality of life now and enjoying the journey.
• 8:44
  SPEAKER_00: Because let's face it, you get hit by a bus tomorrow and therefore squirreling all the money away for the future or paying your debt down as fast as you can.
• 8:50
  SPEAKER_00: Yeah, you've achieved something, but you're not actually enjoying where we are now, and that's really, really important.
• 8:58
  SPEAKER_00: So, one of the things that you can do when you're doing this is just to think about how you spend your money and just become a bit more conscious of it.
• 9:09
  SPEAKER_00: When you work through your budget planner, often there are some eye-opening moments.
• 9:12
  SPEAKER_00: I mean, I I've done this task with first-time buyers who are buying a house, um, especially those that are living with parents where they pay a nominal amount of keep to mum and dad for staying at home, and then the rest of the money they spend on all sorts of stuff.
• 9:24
  SPEAKER_00: Um, and when I've asked them to estimate, well, what do you think you'll be spending on gas and electric, or what do you think you'll be spending on food?
• 9:31
  SPEAKER_00: Often what I've done is I've given them a couple of weeks between the two appointments that we've had and said, well, go off and find out.
• 9:37
  SPEAKER_00: Go and have a look and see.
• 9:38
  SPEAKER_00: Ask your friends who own a home, or just like make a record.
• 9:42
  SPEAKER_00: Every time you go out and get bits of food, write it down, make sure that you've got, you know, all of that data.
• 9:49
  SPEAKER_00: And I remember this particular couple that I sat with, I was in their annex, sat at the end of the garden, they were sort of living there with some parents, um, and they'd asked this guy's mum to come and sit in the appointment.
• 9:59
  SPEAKER_00: I think they've been a bit scary about having a mortgage advisor come around and see them, and it's like, oh, this is all very grown up, and yeah.
• 10:05
  SPEAKER_00: And when we were looking at budget, and I went down through the budget planner, I said to them, Well, what do you think you're going to spend each month on food?
• 10:11
  SPEAKER_00: And I think they turned around and said, Oh, yeah, probably about£50 or£60.
• 10:14
  SPEAKER_00: And I looked at her and she looked at me and they looked at each other and I said, Right, I think what you need to do is go and start writing down how much things cost.
• 10:20
  SPEAKER_00: And when I see you in a couple of weeks, we'll have another look at it.
• 10:23
  SPEAKER_00: Now, a couple of weeks later, when we came back, we sat down and I said to them, Oh, did you have a little look at the budget planner?
• 10:28
  SPEAKER_00: Have you done the thing?
• 10:29
  SPEAKER_00: And the first thing this young lad said, and I kid you not, was, Do you know how much cheese costs?
• 10:34
  SPEAKER_00: And I just laughed.
• 10:36
  SPEAKER_00: I just really, really did.
• 10:38
  SPEAKER_00: Because when you're throwing food into somebody else's trop trolley as you're walking around Sainsbury's, actually you're not quite aware of what things cost.
• 10:46
  SPEAKER_00: Um, and being aware of it means you make conscious choices.
• 10:49
  SPEAKER_00: Now, when I'm working through a budget planner with a client, I don't care if you're spending£600 a month,£1,000 a month on food, as long as you can afford it, you know.
• 10:57
  SPEAKER_00: But if you're spending£80 a month on Sky TV and you don't watch it, you know, maybe you are watching Netflix or Disney Plus, your kids watch cartoons on YouTube and that type of thing, you need to be asking yourself, is it worth me still paying this£80 a month for this?
• 11:13
  SPEAKER_00: Or could I get rid of this and spend that£80 on something else?
• 11:16
  SPEAKER_00: So we're not talking about cutting back for cutting backstage.
• 11:19
  SPEAKER_00: Nothing you'll hear from me on any of these episodes is going to be talking about cutting costs, being frugal, or feeling skint in any way at all.
• 11:28
  SPEAKER_00: Okay, this is not a podcast for poor people who want to become rich.
• 11:33
  SPEAKER_00: This is a podcast for people who've got good income but want to make more from it, who want to be building something for their future and they want to feel more wealthy now from the money they're already making.
• 11:44
  SPEAKER_00: Okay.
• 11:45
  SPEAKER_00: And what that means is that when you look at how you're spending, it's a bit like that Marie Kondo thing.
• 11:53
  SPEAKER_00: You know, does it bring me joy?
• 11:54
  SPEAKER_00: Is it something that I'm gonna want to spend my money on?
• 11:57
  SPEAKER_00: If getting your hair and nails is really important to you because it makes you feel amazing about yourself, providing it fits within your budget and you can afford to do it, that's great.
• 12:06
  SPEAKER_00: But that's then going to be less money that maybe you spend on going out or going to the gym or doing something else.
• 12:11
  SPEAKER_00: You can't have all of it.
• 12:13
  SPEAKER_00: You've got to make strategic choices about how you spend your money.
• 12:16
  SPEAKER_00: And if you look at the big picture, where do you want to be in five years or ten years?
• 12:21
  SPEAKER_00: What's the thing you're aiming towards?
• 12:23
  SPEAKER_00: Is it working part-time?
• 12:25
  SPEAKER_00: Is it retirement, buying a new home, paying off your mortgage?
• 12:29
  SPEAKER_00: That goal that will help you then make decisions about the things that you're spending money on and things that you're not.
• 12:35
  SPEAKER_00: Um, and when you look through your bank statement, or even these days, your internet banking, if you go into your app, whichever bank you're with, there'll be a screen that you can look at, direct debits and standing orders, and you can go through and think, right, what is this?
• 12:48
  SPEAKER_00: Do I need it?
• 12:49
  SPEAKER_00: And actually, is this a good use of my money?
• 12:52
  SPEAKER_00: Um, if it is, absolutely brilliant, keep it.
• 12:56
  SPEAKER_00: But if it's not, then maybe think about should I get rid of it or shall I replace it with something else or something cheaper?
• 13:02
  SPEAKER_00: And even those things that you do get and you do use, think about how you pay for them.
• 13:09
  SPEAKER_00: Now, this is something that is quite eye-opening for a lot of people, but when you look at um a lot of things you pay for, especially if it's stuff that's done on a subscription model, often you will get a discount if you pay up front for a year rather than if you pay monthly.
• 13:24
  SPEAKER_00: Now, the most simple um example of this I can give you is something like car insurance.
• 13:29
  SPEAKER_00: So if your car insurance, for example, is£600 for the year, it's likely that then they will offer you the option.
• 13:36
  SPEAKER_00: You can do that or you can pay£60 a month.
• 13:38
  SPEAKER_00: And a lot of people will go, yeah, go on, then I'll do£60 a month.
• 13:42
  SPEAKER_00: The astute of you will realise that£60 a month over 12 months is not£600, it's£720.
• 13:50
  SPEAKER_00: So you are actually paying quite a chunk more for the privilege of paying monthly.
• 13:57
  SPEAKER_00: Now, that's all well and good.
• 13:59
  SPEAKER_00: People will pop up and say, Yeah, but I haven't got£600 to pay for car insurance.
• 14:03
  SPEAKER_00: And that's where getting your finances organised can really help.
• 14:06
  SPEAKER_00: Because what if when you've gone through your budget planner and you've worked out how much your car insurance is?
• 14:12
  SPEAKER_00: That's£600 for the year, you made a decision that you were going to put£55 a month away into a savings account every month, so that when the bill came round, you had the money to pay it up front.
• 14:24
  SPEAKER_00: Wouldn't that be a good idea?
• 14:26
  SPEAKER_00: Because by doing that, you freed up£120.
• 14:29
  SPEAKER_00: Now,£120 that could be spa day, that could be a weekend away, really nice meal out with the family, could be money you pay off your credit card, pay off your mortgage, put it in your pension.
• 14:42
  SPEAKER_00: You could do anything with it except maybe paying a finance charge to borrow money to pay your car insurance monthly.
• 14:48
  SPEAKER_00: It's those little tweaks that make all the difference when you add them up.
• 14:53
  SPEAKER_00: And this can happen within your personal life and your personal finances.
• 14:58
  SPEAKER_00: I see it a lot more with people in their business finances.
• 15:00
  SPEAKER_00: The main reason being is that when you're saying signing up for some sort of software, whether that's things like uh Kajabi, MailAlite, Canva, Adobe, all of those subscription type things, somebody somewhere will tell you, right, this is the thing you need.
• 15:14
  SPEAKER_00: It's amazing.
• 15:15
  SPEAKER_00: And you go to sign up for it, and they give you two options.
• 15:18
  SPEAKER_00: And one is£9.99 a month, and the other one is like 80 odd quid for the year.
• 15:23
  SPEAKER_00: And you think, well, I'll do£9.99 a month.
• 15:24
  SPEAKER_00: I'm not sure I'm going to like this, but we'll give it a go and we'll see what happens.
• 15:28
  SPEAKER_00: And then the problem is five years later, you're still paying£9.99 a month, except you're not because now it's£12 or£13 a month because it's gone up, but you're still on the monthly subscription because you've never taken this integral part of software that your business uses every day and would not be about and thought about doing something different with it.
• 15:47
  SPEAKER_00: Um, and this is one of the things then that's really important.
• 15:50
  SPEAKER_00: So then if you log into your account for MailAlite or Adobe or whatever and have a look at the upgrade type options, there's usually a switch to annual button.
• 15:58
  SPEAKER_00: If you switch it to annual, often you'll save 10-15% on your cost and just maybe do one of those every couple of months.
• 16:06
  SPEAKER_00: You don't want all the payments to come out on the same month.
• 16:08
  SPEAKER_00: That's going to cripple your cash flow in most cases.
• 16:11
  SPEAKER_00: But by doing it that way, you free up some extra money.
• 16:14
  SPEAKER_00: Now that extra money could then be reinvested back into something for your business.
• 16:19
  SPEAKER_00: You could use it to buy yourself some gifts, you could use it to put it into your pension, you could use it to reinvest back into staffing.
• 16:26
  SPEAKER_00: You could think, well, actually, that thing I wanted to buy for my business, that new iPad or whatever, that there wasn't really the money there in the savings to do, suddenly you've now created some free money.
• 16:37
  SPEAKER_00: It's just by making some little tweaks and making some different choices.
• 16:42
  SPEAKER_00: So today's task is going to be something that could be done on two levels, depending on whether you want to look at your personal finances, your business finances, or both.
• 16:51
  SPEAKER_00: And what I'm going to suggest that you do is to make a list of all the things that you pay for monthly.
• 16:57
  SPEAKER_00: Now, the budget planner is the easiest way to do this, but if you want to stick it into a spreadsheet or grab a piece of paper or an exercise book and just write it down, that would be fine.
• 17:05
  SPEAKER_00: Okay.
• 17:05
  SPEAKER_00: Look through your bank statements and say, right, what do I pay out every month?
• 17:08
  SPEAKER_00: And is this something that I use, that I want, that I love?
• 17:13
  SPEAKER_00: How am I spending my money?
• 17:15
  SPEAKER_00: And actually, if you're spending£100 a month on supplements, gym memberships, and other stuff, and you enjoy it and you get benefit from it, great.
• 17:24
  SPEAKER_00: But if actually you're subscribing to stuff that you don't use, or it's just building up in your cupboard because you never remember to take it, or actually you're like, oh, do you know what?
• 17:32
  SPEAKER_00: I really meant to switch that off, which you don't realise until it renews again.
• 17:35
  SPEAKER_00: Maybe now could be a good time to deal with that.
• 17:38
  SPEAKER_00: And I'd really love you to tell me what's that one thing that you've spotted on your budget planner that you think, do you know what, that can go?
• 17:46
  SPEAKER_00: And what's the one thing that you're like, do you know what, I'm not getting rid of that.
• 17:49
  SPEAKER_00: I don't care how much it costs, that is the thing that makes my life feel fabulous, and that is the thing I'm keeping.
• 17:55
  SPEAKER_00: I'd love to know.
• 17:58
  SPEAKER_00: It doesn't need to be a huge decision.
• 18:01
  SPEAKER_00: Just take a few minutes and get curious about what your money is doing for you.
• 18:05
  SPEAKER_00: If this episode made you think, subscribe to Fun Money Serious Wealth and check out the show notes on where to follow me so you don't miss the next one.
• 18:13
  SPEAKER_00: And if you know someone who's earning good money who's wondering what to do with it, send this their way.
• 18:18
  SPEAKER_00: Enjoy the fun of it, build the wealth from it.