Welcome (back) to our Six Stones series. Our financial adviser, Jordan, is sharing as many tips, ideas and advice for people going through a divorce as a humble blog will allow. He’s staying away from specific financial advice – it’s all general advice over here, be sure to get personal financial advice before doing anything – but we hope you find some useful information in here as you navigate through/out of your divorce.
Now that we’ve defined your Needs, Wants and Worries, I wanted to step away from that, just for a second.
To talk about what you shouldn’t bother doing as you commence on your Money Management path.
Budgeting To the Cent
In my experience, very few people can manage a strict budget every day, week, month and year.
Sure, those that do manage to achieve some seriously impressive results. But for the rest of us, it’s a pain in the neck.
Track this, update that, spend this, save that. It’s a hassle and if somethings a hassle, it won’t get done.
It’s also not worth constantly chasing the greatest interest rate on your savings.
Yes, you should maintain some discipline in having your Savings in the highest interest account you can.
But as I’m writing this we’re at the end of a couple of years of savings-hostile interest rates. Which means banks aren’t offering much at all anyway.
And the idea of this whole process is to make it easy for you to control the flow of your funds, not to accumulate huge amounts of interest on large cash holdings.
So switching from bank to bank, chasing 0.5% more interest is – to me – a false economy.
A quick example – an extra 0.50% on $10,000 of savings is $50 a year.
Say it takes you an hour to move to another bank, and re-arrange any direct debits and savings plans. Is it really worth it? Is it really worth doing it repeatedly?
I’m not saying that $50 isn’t worth doing some work.
But you could also buy 5 fewer bottles of wine over the year (or 1 if you’re real fancy) and you’d have achieved the same outcome.
And it’d be a lot more fun.
No, my suggestion is to instead set up your banking as we’re about to show you and – barring any major changes in interest rates or your situation – leave it alone and focus on the enjoyable stuff.
Stack Up The Accounts
As far as I know, there’s no award for the Most Bank Accounts.
Nor should there be. Having stacks and stacks of accounts just complicates your life and clogs up your financial bandwidth.
In building our model, I’ve aimed to reduce the number of accounts you have.
Again, stacking them up like loyalty cards works for a very select few. But if our goal is to help you take control of your finances, I don’t think having eight different accounts really helps that.
If You’re Not Going to Make Any Other Changes
Taking control of your money is an unusual pursuit in today’s world. As old as that makes me sound/feel, it’s the truth.
It’s freakishly unusual to consciously decide on how you will manage your money.
We’re in a spend-now, worry-never world where the constant barrage of marketing nonsense and tricks has totally eroded our defences.
And not just in the upfront “Buy this and you’ll be a better person” messaging.
It’s also in the “oh, you have to do/have X” to be a ‘normal’ person.
Oh, you just have to.
Well, to put it simply – if you want to live an unusual life, you’re going to have to avoid doing the usual things.
And, to put an irritatingly positive spin on it, what better time to take control of your finances than after a divorce?
You’re already making changes in your life – some big, some small, some by choice, some…less so.
Money Management is the same. I’m going to ask you to make some changes to how you approach your money.
Nothing drastic, nothing painful, but you should expect to be making some changes. It can’t just be about the banking or the ratios or the mechanics of what I’m talking about in this chapter.
There needs to be a conscious commitment to this at a deeper level than the ‘mechanics’.
Otherwise all the work and effort you’re about to take on will be for nothing.
There is, after all, no point in saving $50 here, only to flush it down the toilet over there.
And with that wonderful image, on to the 3 B’s!