How to manage your money yourself, like a fucking grownup: Part 5

Reduce your spending ratio

Just landed here? You might want to start with part 1. Here’s part 2, part 3, and part 4.

Wait, did I say fun? YES! Because reducing your spending doesn’t have to be about giving up massages and only ever eating dry ramen and walking everywhere, in the rain. You don’t have to do that. Because if you look closely at your spending, you’ll find that there are a bunch of places you’re leaking money where you don’t even notice, or care. That’s where you start. And getting rid of money that’s leaking out to shit you don’t even really care about can be deeply satisfying.

Remember that Spending Ratio you calculated in step 1? Now’s the time to break that bad bitch out and stare at it. This is your challenge: make it lower. This number is your new obsession. Write it on a post-it and stick it on your bathroom mirror. Tattoo it onto your cat. Think about it as much as you can. And every month, just try to make it a little bit lower than it was the month before.

You do this by having a budget, and falling in love with budgeting. Does that sound crazy? It doesn’t have to be. If you’re using your Super Awesome Money Management tool, that you set up in part 1, all the hard stuff about budgeting has already been done for you. That leaves you with the fun part of budgeting: allocating your money. Taking a good look at all your planned expenses, and then deciding which dream you’re going to fund this month, and how much of that dream you can afford to buy, right now.

What’s a “normal” Spending Ratio?

Is 90% what most people aim for? 80%? You don’t care. You want that Freedom fund, remember? You get there by slowly cutting out everything in your life that costs money and doesn’t make you happy. But it’s a journey. Wherever you’re starting (when I started managing my money, my Spending Ratio was approaching 125%), just try to bring it down, bit by bit, every month. That’s how you win your freedom.

Be free like this unicorn.

The big mindshift

Typically, when we think about budgeting, because we want to get out of debt or save more, we think like this:

“Yeah! I’m going to stop buying anything except ramen noodles and basically never buy things and then at the end of the month I’m going to have a nice big wad of cash I can stuff into that savings account! GROWN-UPPING LIKE A BAWS.”

And then the month actually happens and there’s a cute pair of sneakers on sale and jesus a person has to eat more than ramen and all the friends are going out for dinner tonight and you don’t want to be a social pariah and you end up going on an impromptu roadtrip because #YOLO and you forgot it’s your brother’s birthday and what are you a monster, you have to buy him a present, and then and then and then…

And then the month is over and you’ve spent everything in your bank account. And that doesn’t mean you have no self control or are a terrible person. It just means you’re a normal human being, and normal human beings value things they can have right now much more than bigger things they can have in the future. That’s just how brains work. Our brains developed to help little monkeys find berries and pomp other monkeys better. They were not designed for a world where advertisers tell you that you need things a million times a day and where you’re likely to live to 100. Your brain is doing the best it can, but it’s not actually that effective most of the time.

So, you’ve got to give your little monkey brain some help, and flip the narrative around:

You don’t save what’s left after spending. You spend what’s left after saving.

Warren Buffet said this. And Buffet is grownup as fuck. You want to be like Buffet. If the money has already been saved at the beginning of the month, your brain doesn’t realise it ever had it. And you’ll discover that it’s actually pretty easy to make do with what you’ve got left. If you don’t have the money, you’ll get pretty inventive about how to still have fun without spending anything.

How to do this:

There are just two rituals that you need to help you reduce your spending ratio.

  • Every six months (starting now): Set up an automatic payment that goes off the day after you get paid, that goes into your target account. This is your slightly more “pessimistic” number, because you want to set up an amount that you’ll be able to afford to pay even in those slightly more expensive months (what you don’t want to do is have to pull money back out of your savings funds once you’ve put it in there, because that’s a bad habit to get started). Look at your budget and work out what you think you can reasonably afford to spend on your money goals, without trying too hard to cut back on your other spending. That’s the automatic payment amount. Every six months, you take a good look at your budget again, and try to increase these automatic payments by at least 10%.
  • Every single month, on payday: Pick one or two expenses in your budget, and plan to reduce them, using the list of Spend Like a Smart Motherfucker Inspiration below. Now, take a look at what your Money Management Tool says you’re going to end up with by the end of the month. Take however much you think you can save by reducing those expenses, and top up your savings. Right then, at the beginning of the month. Now you HAVE to stick to your plan. Otherwise it’s back to ramen, bro.

I remind myself to do this with a recurring meeting request in my calendar. It’s set up for 2 hours every month on the 26th, because I get paid on the 25th. This is a meeting I have with myself, which I dedicate to reducing one or two major expenses. You can do more at once if things are dire (like, say, you’re playing the Get the Fuck Out of Debt game). But I find it easier to promise myself I’ll work on one thing a month. It’s kind of fun. Find your own system, just do this regularly.

What order to tackle your spending in:

  1. Earn more money! You didn’t think about this one, did you?! But if you start a side-hustle and save all that extra green, that’s going to reduce your Spending Ratio. Here’s a list of ideas for ways to make a bit extra on the side. Learn a new skill and ask for a raise (if you’re a lady-person, you should probably just ask for a raise, because typically we’re socialised to not be very good at doing this). Sell some of your shit. Rent out your spare room on AirBnB. Start a side-hustle. Obviously, don’t do anything illegal or make yourself crazy by pursuing this one, but there are a lot of ways to turn your hobbies into a little extra income on the side, and have fun doing it.
  2. Recurring bills — This stuff feels like the necessities. The boring scaffolding of your life. These expenses don’t bring you joy, per se, but you’d miss some of them if they were gone. But you pay these bills every month, which adds up, and many of them could be reduced, and many of them could be cancelled, if you really thought about it. When did you last use that gym contract? Really really?
  3. Exceptions — For me, this meant spending more time outside and with friends and banning myself from ever going to malls. Because you buy shit in malls. Shit you don’t need. It’s also about having a better plan to deal with emergencies, which that Fuck Off Fund of yours can help with if it needs to.
  4. Day to day stuff (your “fuckaround” money) — Cooking at home rather than eating out, giving up on dying your hair and embracing your natural mousey gloriousness, that sort of thing. Do this once you’ve exhausted all the options above, because these tend to be things that give you a fair bit of joy and don’t actually cost that much in the scheme of things.
  5. The big lifestyle questions — This is where shit gets real. Thinking about the city you live in. The house. Whether you really need a car. This is pro-level decision making. But make sure that, at least once a year, you sit with yourself and ask whether what you’re spending on these things is really, really worth it to you, or whether you might be as happy with a smaller flat and taking the bus, but with far more financial freedom. Only you can answer that question for yourself. Mr Money Mustache (link below) is a great source to read if you want some help thinking through these big things.

Don’t forget that taxes are a thing. Especially if you’re a freelancer, or if you’re setting up side-hustles for that extra green (because if you are, you should be saving for your taxes every month so it doesn’t slap you in the face at the end of the tax year once you’ve already spent the money). This is one of those rare places in life where you probably do want to actually pay someone to help you. Ask friends if they have someone who does their taxes for them. Pay that person. It’s normally worth it.

The Spend Like a Smart Motherfucker List of Inspiration:

So much has been written about practical ways to cut your spending, that I’m not going to repeat them here. I’m just going to point you to some of my favourite sources.

Have fun with these. Finding smart ways to save more money can become a sort of hobby by itself (it has for me, but maybe I’m just strange). And every month, when you see that Spend Ratio inching down, and, eventually, when you see the balance on your Freedom Fund climbing up, it will be worth it.

Finally: Enjoy yourself

Money is a part of life, for all of us. Money is power, and it’s choice. It can trap you, or it can liberate you.

The thing is, though, learning how to manage it better is something we’ll all be doing throughout our whole lives. It’s not like you figure it out and BAM, you get your “I’m a Grownup” trophy. And there will be times you fuck it up, significantly. Times you cash in your whole emergency fund and go to Japan and wind up with credit card debt three years after you told yourself you’ll never have another credit card. Or worse, times you’ll get sick and lose your job and wake up in a cold sweat at 3 in the morning. Or times the market will crash and your investment will evaporate. All of these things will probably happen at some point.

But you’re not trying to be perfect. You’re trying to be better, and more conscious, and at least know what you have to do to dig yourself out of the holes you’ve dug into. You’re trying to give yourself more options. You’re trying to work towards a happier life that is more like the life you really want for yourself.

Most of this isn’t about money at all. It’s about knowing yourself. And getting wiser. And being mindful. And understanding what a meaningful life looks like, for you. It’s about all of the strange twists and turns on the weird story that is your life.

So, actually, the best things you can do to be better with your money are to go on long walks in the mountains. Have long, honest talks deep into the night with your friends. Sell your TV. Play boardgames with your family. Watch School of Life videos. Read. Practice a skill that makes you feel proud of yourself. Volunteer at a shelter. Make things. Fall in love. Meditate, if you’re into that. Learn to spend more time with yourself. Learn who you are. Learn what you actually care about, and spend more time and money doing those things.

Becoming the boss of your money isn’t just about being a grown up. It’s about taking control of your own choices. All of the stuff we’ve talked about until now is just scaffolding. Ways to take the worry away so that you can get onto the real business of your life.

Fucking enjoy it :)

If you found these posts helpful, or you’ve got your own strategies and tips to share, I’d love to hear from you in the comments. Mad love.