It's time for the bi-annual review!
Back when I earned virtually no money, but had little in the way of responsibility, reviewing my finances made no sense. I already knew where my limited funds went (beer), and had zero interest in saving money.
A short while later, I went from having no money, to earning a 6 figure income. Such a drastic shift in finances caused me to go a little crazy on spending. I was eating out at every opportunity, buying anything that I was interested in buying, drinking expensive wine, but weirdly still managing to save some money. I recall coming to the sad realisation on one occasion that I had spent almost $600 eating out in a single month...
But going from a 6 figure income, to being a business owner, to virtually going bankrupt, and then back to a 6 figure income as an employee has forced me to shift my perspective on managing money and drastically improve upon how I manage my money moving forward.
Moving towards better financial behaviour
Once I ended my time as a business owner I commenced reviewing where my money was going. This essentially meant going through my transaction history on a regular basis to ensure that I knew exactly where my money was being spent and how much I spent on each aspect of my life.
I very quickly identified subscriptions that needed to be cancelled, realised that I was spending an absurd amount of money on coffee, and that I wasn't claiming work expenses to recoup costs that I shouldn't have covered from my personal income.
Reviewing my transaction records also has an additional side effect of making me more conscious of my spending, so that these days, when I go to buy that take away coffee I now stop to think about whether this is something worth spending my money on. And more often than not, I walk out of the cafe without a coffee in hand.
So what has this review taught me?
My latest review of my finances hasn't really taught me something new , instead it identified an opportunity that I hadn't given much thought to previously.
My employer provides me with a phone for use. And conveniently is actually quite happy for us to use our phone for personal use as well as for our work. I've have had a personal phone all my adult life, and right now it costs me more than $100 a month to maintain.
So, I've decided to end my contract on my phone and hand it back in to my phone company. It's an easy $1000 per year saving and it really makes absolutely no sense to spend that money if I have no need for a personal phone.
This doesn't sound like a huge saving, and it isn't. But with all the little savings that I've been making in recent months, they really do add up. My monthly expenditure now is very low. And I can comfortably save money, even with my wife not working right now.
Other saving opportunities
One item that I have been working on in recent weeks is the refinancing of my investment property. For various reasons, I haven't been able to refinance my loan but with this virus situation, I'm now in a position to refinance the loan on this property and convert the home from a negatively geared property to one that earns me $500 to $700 per month in profit.
So this saving will be my biggest by far. Rather than holding a property that costs me roughly $800 per month to hold, I'll now have a second income stream to help support us during these very strange times.
Concluding remarks
All up, my finances are looking pretty reasonable. There are always opportunities to improve, and I consistently look to find these opportunities.
Sometimes I look at the little luxuries that I allow myself and think that I should bring those to an end. My biggest luxury right now is fine whiskey. I tend to prefer the more expensive brands of whiskey, so from time to time will buy myself a bottle to savour over a period of a few weeks.
If I'm honest with myself I know that this is a luxury that I should remove from my life. But I do enjoy it, and sometimes you do need to reward yourself.
But overall I am happy with the progress made to date:
- I know my spending;
- I have found an extra way to save money; and
- once my investment property is positively geared I'll be in even better shape financially.
Does anyone else do these regular reviews of their finances?
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