Personal Financial Planning for the 2020s

To put it mildly, I’m in debt. I paid for a full refurbishment on my house this year, which is still underway – and getting hit with depression and having to take three months off work at the end of 2019 threw my credit score into chaos. I’ve applied for PIP and get other benefits whilst I’m not making an income – but I’m slowly establishing myself as a freelancer and hoping to follow that path going forward in 2020.

The first thing I will do is apply for the New Enterprise Allowance scheme. I’m currently not allowed to do that as I’m still signed off sick, but it will provide me with a helpful boost to establish my business. Then I have to make sure I am meeting the financial goals I set for myself every month.

I believe the way I plan my goals may prove helpful to others who have irregular income, so I’m sharing it here.

My blueprint for Personal Financial Planning in 2020

1. Work out your essential outgoings

First, there’s the essential outgoings:
Gas and electric: £170
Water: £30
Internet & telephone: £65
Mobile: £30
Repayments to debtors (repayment plan): £5
Website hosting: £20

Essential outgoings are £320 a month, or £3,840 a year.

2. Work out your non-essential but highly desirable outgoings

Then there’s the non-essential, but still useful outgoings for work and pleasure:
Car repayments: £440
Spotify: £5
Diesel: £25

Semi-essential outgoing are £470 a month, or £5,640 a year.

3. Work out your habitual spending and base lifestyle outgoings

I drink a lot of Red Bull and I smoke cigarettes. Neither of these are cheap habits, but they are very much a part of being me, for now. Let’s say I smoke 15,000 cigarettes and drink 2,200 cans of Red Bull a year. That’s 1,250 cigarettes a month and 183 cans of Red Bull a month.

I buy my cans of Red Bull in packs of 24 and I buy my cigarettes in packs of 200. So that’s roughly 8 packs of Red Bull and 6 cartons of cigarettes.

8 x Red Bull Sugar Free 24 pack on Amazon UK = between £18 and £23 = £144 to £184 a month

6 Cartons of Marlboro Lights = £660 a month

I can make huge savings on cigarettes by travelling to buy them, but let’s not work that into the equation for simplicity’s sake at this point.

Total habitual spending is around £840 a month, or £10,000 a year

4. Work out your minimal food spend a year.

I know for others it will be much less than this, but the minimum amount I need for food is £5 a day. That’s a meal deal at a supermarket, or an offer at a local bar. I don’t cook often at the moment as the kitchen isn’t finished, but I will be able to reduce that later in the year. For now, my minimal food spend is £5 day, which is approximately £150 a month.

Total minimal food spend £150 a month, or £1,800 a year.

5. Work out your actual food spend a year.

In reality, I survive on take outs at the moment, and my actual food spend is more in the region of £15 a day. The idea of this plan is to compare the reality of your spending to the actuals and ideals. Don’t by shy with this figure, food is as essential to live as heating and water, so budget it in.

Actual food spend a month is around £450 a month, or £5,500 a year.

6. Using the figures above, work out what you need to make for each scenario.

The Essential Bucket

To pay your bills and to survive on a bare minimum is Figure 1 + Figure 4. In my case, that’s £320 + £150 = £470 a month, or £5,640 a year. This is the amount of credit you want to make available to yourself at ALL TIMES throughout the year. By credit, I mean, cleared debt off credit cards that aren’t going to reduce your limit, overdraft availability – you want to make sure you have the means available to cover your bare minimal essentials as a priority going forward. What if you don’t have that amount available? That’s the amount you’re going to work to make available to yourself at the start of the year – it’s a bucket you can dip in and out of when you have guaranteed pay arriving but not at any other time.

The first £470 made in any month should go into the essential bucket. Anything extra after filling the The Life Bucket should go into The Essential Bucket until the bucket is full (£5,640) for the year.

The Desirable Bucket

This figure is the Essential Bucket + Figure 2. This will cover all your essentials plus the highly desirable outgoings. Sure, I could survive without a car, and I could certainly survive without Spotify, but they do add to my quality of life – and having a car saves me a lot of time on public transport, that I can spend working instead.

The Essential Bucket is £470 a month, and the highly desirable outgoins are a further £470 a month. The second £470 made in any month should go into the The Desirable Bucket, to ensure that you have the desirable things that make your life easier and give it quality. Therefore the first £940 I make in a month is accounted for and bucketed. It is only earnings above this I get to spend on habitual and “lazy” compromises.

The Life Bucket

My Life Bucket is Figure 1 + Figure 2 + Figure 3 + Figure 5. It’s the amount you need to earn to maintain the lifestyle you currently have. In my case that is £320 + £470 + £660 + £450 = £1,900 a month.

If I were to get a full time job not working from home, the salary I would need to meet My Life Bucket would be £30K. Add on £5K for the inconvenience and extra cost of travel. A job in that salary range would be easily in my reach, indeed, I tend to go for jobs that pay three times that amount – but the quest here is to work for myself, during hours I choose, and not to go back to the every day grind.

Therefore my initial aim is £1,900 a month, or in dollars $2,500 a month.

7. Work out how you’re going to fill the life bucket.

With a rough aim of $625 a week, I need to split this evenly through my businesses. I believe I can make $400 a week from freelance work, and will aim to make up the rest in sales through Amazon FBA and the other income streams I’ll be establishing throughout the year. It’s not going to be easy, but by focusing on a figure to get started, I can keep track of where I’m at. The ultimate aim, of course, is to make $100K this year, and if not this year, then the following year, etc. Ths guide to managing my finances in the meantime is a blueprint that I hope is easy enough for anyone to follow to manage their personal finances in the year to come.

Simple New Year’s Resolutions for 2020 (and how to keep them)

Atomic Habits James Clear

If you don’t have a method to keep your resolutions, you’re likely to let them go by the wayside. I read an amazing book last year, Atomic Habits, by James Clear, which was a lifechanger for me. He outlined four ways to start building good habits along with other numerous tips to kickstart a better life. I can’t recommend the book highly enough to anyone who wants to keep their new year’s resolutions.

After reading it, I’ve become a lot more ambitious with my own resolutions this year – I think this book has given me a great guide and blueprint on how to achieve the things I want to.

1. Make your New Year’s Resolution Attractive.

Make Your New Year's Resolution Attractive

2. Make your New Year’s Resolution Obvious.

Make Your New Year's Resolution Obvious

3. Make your New Year’s Resolution Satisfying.

Make Your New Year's Resolution Satisfying

4. Make your New Year’s Resolution Easy.

Make Your New Year's Resolution Easy

Here’s a selection of my New Year’s Resolutions and how I intend to keep them this year!

Around the house

1. Turn off electric items when they’re not being used

Get Alexa or your home system to check in with you on this, and let Alexa turn things off for you! I’m particularly bad at turning off my computer at night before I go to bed, and something I need to get on top of. Thanks to technology, you can have a constant check-in – be that by your phone, or by email, or by other reminders you leave yourself.

2. Keep the heating down

Again, Alexa can keep control of this if you have the right installation. I have to keep my room at a certain temperature at all times due to my tortoise (who is being over-wintered), but there are still times I can turn the heating off entirely for a few hours and save some pennies.

Diet and exercise

3. Less delivery takeaways

By Habit Stacking, I will set up a routine where I go to the supermarket directly after seeing my mother. This should cut the amount of home delivery takeaways I get by half.

4. Start going to a gym

Whilst it’s tempting to rush into this on January 1st, I’ll leave it until later in the month. Starting on the 1st January sets yourself up for failiure, as everyone else will be expecting you to fail. In a few weeks, once I have the essentials covered through my freelance work, I will start to look at gym memberships.

Finance and work

5. Pay off the credit cards each month

Credit can be reused and recycled to pay off the bills if needed, so don’t be scared about using the money you have to pay off the cards each month (unless you’re worried that they’ll cut your credit limit for whatever reason). The aim is to put less and less on the credit cards each month, until eventually you have no credit card balance outstandng.

6. Don’t worry so much about work.

Whilst keeping to targets and making the minimum amount to survive is essential, don’t sweat it so much when you’re past the target. Despite having my personal goal, I’ll worry less about getting things done this year and make some more room for fun.