While money is not everything, without financial fitness it is incredibly hard to consistently achieve the other 4 pillars and lead a fulfilling life. That doesn’t mean you need to be super rich but you don’t want to be worrying how you are going to afford to live and do the things you enjoy. Therefore, this is the first topic. No matter what your current financial situation, there is always going to be ways to improve.
There is a short video below accompanying this part of the toolkit. Two of the books provide a further depth of information and ideas to implement on how money really works and how to make it work for you. Depending upon our background it is very easy to have limiting beliefs on what money is, and school or Modern media certainly doesn’t help either. The basic fact is money is a facilitator. It’s a medium to exchange for goods and/or experiences that enrich your life. It is the means of recognising work done; rewarding that result and the value it has produced.
The action points for this Feel Good pillar are:
1. Carry out a spending review and document income and living costs for current life and ideally a target lifestyle
2. Work to build up easy accessible (often termed liquid) savings of 3 months living costs
3. Target saving 20% income every month
4. Read the two recommended books and learn how to make money work for you
5. Buy Assets - Build up savings in more liquid assets such as shares until you have sufficient to invest in assets closely aligned to your goals and lifestyle.
Tip #1 - Spending Review
There is a spreadsheet provided that has a simple table in one tab. The idea here is to document all your defined spending over a typical month. Some banking apps can now provide this information for you, so it can be worth checking your individual bank. This will enable you to understand your absolute minimum income required to live currently. And then define costs for further improvements in living. Then relate that back to what one has to earn on a daily/weekly basis to afford the life style.
Once you have all our outgoing listed, review those costs verses your income. It is good to categorise cost as essential, and what you can flex on. Ideally implement changes so you can consistently save 10-20% (or more) each month.
The second tab in the spreadsheet as set of tables to allow you to estimate the cost of living various life styles. Further instructions are in the tab. The idea is to make you dream about the life style you would like to lead and then cost it. Tim Ferris is famous for concepts linked to this that fuelled his bestselling book – “Four Hour Work Week”. Here he demonstrates how often the life we want is more affordable and closer than we think.
Tip #2 - Build up a 3 month Savings Pot
The first saving goal should be to build up a pot of funds that covers three months living costs. In an unforeseen situation we can often stretch that amount to live for 6 months. This in real terms is a significant amount of time and allows you to manage major events or make a fresh start. The confidence from having that freedom is fantastic, and will undoubtedly feed into making better decisions in life. Let's call it the "FU Pot".
3 months living cost fund should be in a 24/7 access zero risk savings account. One example could be in a Santander 123 bank account, or a building society savings account that isn’t for a fixed term before you can withdraw.
Tip #3 - Target 20% Savings Per Month
Once you have reviewed your spending and figured out what you can save. How should you go about saving?
While we are not authorised to provide financial advice we can provide some high level guidance that you can then further research.
After your 3 month Pot, savings should be in a NISA account until you max out your yearly savings allowance. Ideally one which allows share dealings. The Halifax offers a decent option here. Alternatively a widely used and easy platform is Hargreaves and Landsdown. There are other platforms including one that you can do everything via a phone app.
The tony Robbins book gives some great explanations on savings. Just look past the Americanisation. Implementing it in the UK on a basic level there are two type of shares to buy – index funds which track a market such as FTS100, and individual company shares that pay a reasonable dividend of 4% or more.
Setup a monthly payment into your savings account and make that action apart of your basic living costs.
Tip #4 - Read the Recommended Texts
The two financial texts we recommend reading are
1. Rich Dad Poor Dad by Robert Kiyosaki (PDF download below)
2. Money Master the Game by Tony Robbins (Provided at the property)
Alongside this, if you don’t already then we recommend checking out the “Money Saving Expert” website and signing up for their excellent emails. The founder, Martin Lewis, works tirelessly to provide great info and deal to enable us get more out of our money.
Another great resource is the explanation of how the economy work in - Ray Daio – How the Economic Machine Works. This is 30 minutes long.
Tip #5 - Progress from cash to owning assets
The way to out manouver inflation and to build real wealth is through owning assets. As you build up savings and understand your lifestyle design plan we recommend you look to invest those savings into owning assets that grow your wealth. Examples include Property, cash flowing business, precious metals, art etc. Tony Robbins book talks in more depth on this topic. The key is understanding how the asset delivers wealth and ensuring that aligns with your lifestyle and financial requirements.
Summary Points
Keep reviewing and assessing your financial fitness at least yearly and ideally have a plan which you assess each quarter. Take consistent steps to save money and investing it in a way that supports your lifestyle.
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