Making Money Moves

Make a Money Plan for 2022 - Part 2

Budgeting basics, high-yield savings accounts and why you should invest are all here in our “Make a money plan - Part 2” guide!

Making a Money Plan Part 2: budgeting basics, high-yield savings accounts and the reasons why you should invest.

There you are!!! We hoped we’d find you back here! Ready for Part 2 of Making a Money Plan for the New Year? If you haven’t read Making A Money Plan Part 1 yet, we reckon it’s worth a goosey gander so you’re ready to tackle what’s coming next. We want you to feel like the absolute money goddess we know you can be! 

In Part 1, we took a minute to assess where you’re at with your finances right now - the good, the bad, and the ugly! We created financial goals and money intentions to help you figure out where you’d like to be with your $$. 

Next up, we’re tackling some of the actual moves that can help get you there. Sometimes all this money planning can seem super overwhelming 🤯, but we find it helps to break it down into three manageable chunks - budgeting, saving, and investing.

Now we know, it’s not literally just writing those words on paper. But having just three things to tackle, one at a time, can make this seem a little less “FML.” 

Let’s jump in and start on the Money Plan Part 2.

Why budgeting is so important

Getting to grips with budgeting basics and setting up your own budget spreadsheet is a great way to give you some control over your money. It’s not about cutting out your coffees, dinner with friends or that Uber ride down the block because it was raining. It’s about being mindful of what you have, where it’s going, and what habits you could change to get you closer to your dreams.

Make sure you have a budget planner.

One of the best suggestions we have is to create a monthly budget planner. And before you freak out, let’s get specific and break it down for you:

  1. Literally open a spreadsheet (or use a good budgeting app) 
  2. Write your income 
  3. Write your expenses for the month - the stuff that needs to get paid 
  4. Categorize them to see your areas of spend

This is a good time to look at your committed outgoings and see if anything could be reduced. Paying too much with that electricity company? Let’s see if we can remember to switch off my lights! Can you negotiate on insurance premiums? What about your subscriptions? Realized you’re paying yours AND your bro’s Netflix?! Downsize or go in on a subscription with a friend!

Now that you have all that in order, your next step is to look at how much money is left each month. Budgeting basics dictates that ideally you want to take this leftover amount and divide it into buckets dedicated to different types of spending:

  • Day Trips 
  • Socializing e.g. dinners, lunches 
  • Date Nights 
  • Clothes 
  • Birthday Gifts 
  • Coffees Out 
  • Emergency fund & Savings (take a look at our article on the 4 Important Money Steps to help you out)
  • Investment Account(s)

The key is to be realistic, cut costs in savvy ways, and don’t restrict yourself so much that you end up over spending out of frustration or a “f$ck it” mentality! 

A good budgeting tip is to do a quick check-in on this budget planner at the end of the month. Then do a full health check on it every 6 months. Has anything changed? Make note of your actual number against the different types of spending - sometimes it helps to have an account like Revolut, Mint or YNAB that lets you categorize how you spend, so you can import that info quickly and easily. Bish bosh. Done. 

Get yourself a high-yield savings account.

Now that you’ve got an idea of where your money is coming and going, the next thing to think about is how to save some money. That means taking some of your income and putting it into a savings account. 

Why bother having a savings account? Couldn’t you just leave it in your checking account?

Naddaa, not good. Let’s be real. Say you were to leave all that money in one place and mixed up with everything else that you use for your monthly expenses. It’ll FO SHO get spent! For anyone preaching that you won’t, that you’ll be REALLY good and watch your balance, we hear you but we preach back that we’ve seen this go wrong time and time again. 

Plus, you always want your money to work hard - like really hard. It’s the kind of work that should happen while you’re sleeping. So what's even better than having just a regular a$$ savings account is having a high-yield savings account.

A high-yield savings account is just like a regular savings account except you get significantly higher interest rates than a regular savings account - sometimes 10-25x higher!

This means shopping around and getting a high-yield savings account that has the best interest rates in town. Newsflash, these interest rates aren’t wild. You’re not going to save your way to retirement on these earnings, unless we’re talking Bezos money (maybe). We cover more about high-yield savings accounts in this article, but these currently have an interest rate of ~0.05%. These savings accounts should be a place to keep a small % of your money. It can include emergency fund money, money for holidays, or the money you keep for when the boiler eventually breaks! 

The real money maker in the long term, is investing…

Start investing your money.

Investing money means taking it and buying assets that have the potential to increase in value over time. It could be investing in stocks, buying a house, investing in index funds, or dabbling in some cryptocurrency. We’re just scratching the surface when it comes to investing options, but there’s plenty more detail to come in future articles!

Do I need to be an expert to start investing?

No, you don’t. Getting to grips with the investing basics is key and a few investing 101s. 

There’s no “right way” when it comes to investing. But the general rule that’s been tried and tested since the dawn of time (ok, not literally but you know a longgggg time ago) is:

  1. Be in the game
  2. Remain consistent
  3. Do it for the long term. 

You’ll see a bunch of ‘advice’ out there, probably from some Tave Bamsey on TikTok telling you how to make a quick buck overnight but NEWSFLASH - that stuff is super risky. For most people it only ends in tears. Why? Because often the people giving the tips have cashed out already & that means we’re already late to the game. 

If you’re thinking about where to start when it comes to investing, a good guide would be to start small, low-risk, and plan to put some dedicated percentage of your income into an investment account every month over a set period of time, ie: 2-5+ years. Once you’ve got a handle on those investing basics - such as maxing out your employer retirement plan contributions and taking a look at Index Funds & ETFs - and you realize you still have some dollar to spare, you can then look at the more risky stuff.  But only if you want to, that is. 

Why should I invest if investing is risky?

If you're sitting there thinking, “Cool I get what this is all about but why should I invest? Isn’t it better to just save my money and keep it safe?” We hear you. We battled with this thought, too, at the beginning of our investing journey. But the reality is that when you leave your money in a savings account, even if you’ve done your homework and it’s in a high interest one, it just isn’t going to outrun that pesky thing called inflation. 

Investing has some risks but done right and given enough time to balance out over the years it’s very very likely to increase in value. Why let your hard earned money just sit there when it could WORK for you?!? Literally while you sleep, it works. That is at least worth exploring, right?

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