Friday, 2 October 2015

Comfy Cushions

We all like comfy cushions.

Ok, that was a broad and sweeping assumption but really, I'm talking about not having to worry about unexpected bills. Here is a terrifying statistic for you: 62% of people in a recent survey are one paycheque away from homelessness. What this means is that if some disaster strikes (car breaks down, refrigerator bites the dust) they would need to spend their rent or mortgage money to deal with it because they have nothing in their savings.

These people are truly the definition of living hand-to-mouth. Is that also you - all the bills are paid each month, but there is nothing left over to save?

My daughter is moving house at the end of this year - barely three months away - and as she has so far saved very little because she earns very little, she confessed to me last night that she is tired of never having any money and never knowing what will pop up to randomly demand all the cash she has left. Last month she had a wisdom tooth pulled out, which fortunately in Finland is a very cheap thing to deal with, but it still took a bite out of the money she does have. It was merely one small example of things not-planned-for, but causing financial anguish.

Totally out of the blue I found myself explaining my own financial setup. My husband is the main wage earner, but we are way under the national average household income (actually we earn about a third of average for four adults). And in fact we would be considered to be living below poverty level if only the euros and cents are taken into account.

Yet we never have to worry about an unexpected bill. Even a big one. There is money in the savings if something comes up. We won't be happy of course, but we can just pay it and move on. We can do this because we simply don't buy much. We spend less than the amount coming in, so it just naturally grows, slowly but surely.

Here is where the knee-jerk reaction comes in that people "simply cannot save" anything. Yes I know; but that is the wrong focus in my opinion. We have not set out to grow our savings and neither should you. The better aim is to stop spending. There is also an assumption out there that small amounts are insignificant. They're not! Every cent matters.

If you can't do more than pay the bills each month, there are two approaches - either earn more or spend less. The first one is tough, but in my daughter's case it's what she needs to do. Freelance work is too unpredictable and scant, so she needs a boring daytime income so that her immediate needs no longer cause stress.

For all the regular people who already work and for whom second jobs and promotions aren't on the cards, it comes down to spending less. This isn't a newsflash to most but it's staggering how many people try convoluted measures to do it when it could be far more simple. One dollar a day? Can you look at everything you spend and just identify one dollar a day? Can you delay one clothing purchase until next month? One small thing? One weekday cheeseburger? Fridays have a packed lunch instead? One Tuesday vegetarian dinner? One fewer fizzy drink and slurping a glass of water instead?

Try something small for just one month... keep the extra money in the bank. If you make it a habit you will find it no longer seems like an enormous sacrifice. Perhaps next month you won't get an overdraft fee or late bill payment fee: that's like doubling your money! Pat yourself on the back for having your bills covered and taking back a little bit of control. And then look again to find one more dollar a day - the next step of the challenge.