My journey through money mistakes has been costly. Sometimes I’ve just been plain silly. But the difference is I’ve learned from my mistakes. So what are the six steps I have followed to get me on the right track?
The first is to actively manage my money. A budget. Sounds simple, too basic to even bother about, but without a budget I wouldn’t know where I spent anything. In fact, to myself I’m quite a good liar. I could tell myself that most of my money went on stuff the kids need and I could convince myself I don’t really spend that much going out with my friends.
The second of my six steps is to have an emergency fund. Everyone should have one but, I as a father to a daughter with additional needs, I have realised this is an essential. If something came along that had to be paid for now, particularly in relation to my daughter’s needs, then I have to come up with the cash. Having to use and a payday or short term high interest loan to do what needs to be done would make my financial position worse.
The third of the six steps is get rid of all debt that isn’t a mortgage. Debt takes money because interest is dead money. Interest is money paid without any long term benefit to my family, and so is most definitely lost money. I can’t get ahead while I’m paying interest to someone else like a bank. Debt makes no sense.
The above three steps need to be followed in that order. I wouldn’t have been able to save for an emergency fund if I didn’t have a budget in place to set aside money. Also it would have been a bit risky to pay off all my debt without an emergency fund first, because I needed a cushion in the bank before I paid off all my debt in case anything happened in the meantime.
But the following three steps can all be done at the same time. I did. While they are all separate things, my budget allowed me to save for each separately, even if I described them one at a time over the last few weeks.
The fourth of the six steps is to build up three to six months of living expenses. This allows for a real feeling of security if anything were to happen to us or our incomes. Three to six months living expenses wouldn’t keep us going long term, but it would pay the mortgage and bills until we were able to make a proper plan.
The fifth of the six steps is to save for those large, one-off expenses that life throws at us all. I made purposeful saving a priority because I know I will have some large expenses for my daughter in the future, so I’m better off planning for it before it happens. Then these expense will have less of an impact on my overall financial position.
The last of the six steps is long term savings. Long term savings are key to my goal to giving my daughter long term financial security. I need to build up some wealth in order to set her up with the money she needs to live, hopefully very independently of us. While I’m sure she will receive other streams of income, hopefully from employment, she will need a bit of help at the start of her adult life. Building long term savings not only helps her financial security, it also gives me peace of mind that I will be in a position to help her whenever she needs help.
Following these six steps has set me up and made me feel secure in my ability to support whatever dreams my daughter may have. I admit I’ve lived and done all the silly things, but I knew something needed to change, yes I needed to wake up and smell the coffee (in my case tea) . These steps aren’t new or revolutionary – they’re what most money advisers say one way or another. But what makes them different for me and what makes them important to me is I’m doing financial planning not just for my own future but for my daughter’s financial freedom which will help her have the future she deserves.