How Not To Be Broke: Get Better With Your Money

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What Is Your Current Money Plan?

Do you find that you seem to wait all month for payday, then once it finally arrives, your money disappears in no time, and you find yourself sat once again waiting for the next payday to arrive.

This is a common thing among the majority of people, and no doubt you have friends that can relate to you as they are in the same situation. You tell each other, if I could just get this promotion or that new job, the extra money would be all you need and you wouldn't be stuck in this perpetual money trap cycle.

The problem is, when you do get the new job, or you do get the promotion, and your income increases, no sooner does your income increase do you find that your expenses also increase, and here you are again, back in exactly the same situation... sound relatable? 

The reason for this is you have the wrong plan for your money.

Most people go through life constantly working on a plan for how they are going to spend their money when they get it. Picture the conversation - I can't wait until I get paid, so that I can buy 'X' or go and do 'Y', or if I won the lottery, I would buy this house and that car, and go on this holiday and take all these friends. Is it any wonder with this sort of plan, that the majority of people live their lives payday to payday, or that most people who win the lottery or come into money some other way end up back broke again a couple of years down the line?

If you are constantly planning on ways to get rid of your money as soon as it comes to you, then you will never be financially independent.

If you want to change this, then you are going to need a new plan.

Your new plan should be focused on how you can save and grow your money. It's not to say to become totally frugal, but you should become conscious of how much you are spending on unnecessary things. Instead you should focus on using your money to work for you, generating additional income streams and improving your overall cash flow.

The average millionaire has 7 different income streams, whereas the other 98% of the population typically rely on just 1. Think about that.

When something goes wrong that disrupts your only income stream, such as losing your job, then that is going to cause some major problems for you, however, if you had income coming in from various sources, then issues with one wouldn't be such a problem.

So, what's the first step to creating this new plan?

Well, you start with what you have. The first step is to know exactly what your monthly expenses are... these are what you HAVE to pay, such as your bills, rent or mortgage, etc. - this does not include takeaways, pampering and things you can live without like your movie streaming subscriptions, after all, you should be using your time more efficiently by building up a business or improving your skills rather than binge-watching the latest series anyway!

The way to do this is to print off your last 3 months worth of bank statement, go through each transaction and categorize them into essential costs, things that you could do without, and things you can't avoid but could reduce with some thought. The results can be surprising to see how much money you spend per month on eating out, or on cups of coffee!

The purpose of this exercise is to open your eyes to your poor spending habits. Most people at first thought when you tell them to plan their money better would tell you (because the made themselves believe it) that everything they have spent had to be spent and that they don't have anything where they could make cut backs. This is nonsense.

The next step is to create your plan for how you will manage your money.

Creating Your New Plan

First, work out what percentage of your monthly income is spent on your essential costs. This should not be more than 50% of your income. If it is, then you are living beyond your means and should take steps to reduce your outgoings - revisit the previous step and look again at whether you REALLY need all those expenses, and if so, is there any way you can reduce them?

The next step is to divide your money up into percentages for different purposes, and only spend within these limits. The best way to do this I find is to open multiple bank accounts for each purpose and set it so that each time you get paid, the money is automatically distributed to the other accounts.

Now you can define your own percentages, but I would recommend something like the following: 
  • 50% Essential costs - These would be your unavoidable monthly living cost as defined in the last exercise, the further you can reduce these, the more you can allocate to the other accounts;
  • 20% Investment Fund - This will be your money that you will use to start generating other incomes. It is important to 'pay yourself first'. You should nurture and grow this pot with all due care and attention, using the money in it to make more money and then benefiting from the compounding that will occur when you reinvest your profits back into here to generate even more money (that's right, you don't spend your profit!); 
  • 10% Education - They say formal education makes you a living, self education will make you a fortune. You should be constantly investing in yourself and learning new skills to develop yourself. Find an area that you are interested in learning about, in particular, something you can use to generate an income from. Use this pot of money to buy courses and mentorships in the area you have chosen to expand your knowledge base and open up more potential areas to utilise your investment fund; 
  • 10% Saving - It's always a comfort to know you have a financial cushion should something go wrong. Most people don't have any savings at all. It all depends on your own risk appetite, but it's a good idea to have enough savings to cover you for at least 3 month should anything happen. Once you have your required cushion, the extra that you build on top can be used for long term purchases, such as a holiday or a new car; 
  • 5% Fun - What is the point in building up your money if you can't have any fun with it? Well, that is what this pot is for. It is important to let your hair down every now and then, especially to celebrate your successes and wins, so long as we control the amount we spend here; 
  • 5% Charity - Now this may seem a little strange to some people, but you should always allocate a portion of your income for charitable affairs. What you give comes back ten fold. there is nothing more satisfying than knowing you have been able to make a positive impact on someones life. A word of caution though, is to choose your charity wisely. You may want to pick your own individual causes, but if you prefer to just hand your donation over to some organisation to handle, be sure to find out first exactly where your money will be spent.


It may seem like it will be difficult to do this at first, but I promise, after the first month or 2, you won't even miss the money you aren't spending and it will just seem normal. You might even find yourself looking to reduce your expenditure even more so that you can bump up the percentages being paid into your other accounts, as it becomes addictive. Once you start seeing you have money building up in different accounts, you can't help to want to do it more!

Now you have your financial success plan in place to keep money rather than giving it all away, the next step is to look at how you can start to use your new financial pot to capitalise on opportunities and start to build up multiple streams of income.

You could invest in property for cash-flow and long term equity growth, learn How To Start Your Own Online Business to create a cash-flow machine, invest in stocks and shares and many other opportunities - the key is to pick one and get started with it.

If you want to find out more things that you shouldn't be doing if you want to take control of your finances, then you can download this FREE guide on '5 REASONS WHY MOST DON'T BECOME WEALTHY'

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