Episode 261 - Managing your personal finances
During these uncertain times, income may be much reduced. I share how to manage your personal finances, make savings and enable your money to go further. We approach this both as a business owner and as an employee. Our audience are a wide mixture of agency owners and awesome staff members, therefore I’d like to cover all bases.
Click here to view the Money Management Spreadsheet.
In this episode:
- Gathering data
- Income streams
- Savings that can be made
- Impact of being furloughed
- Impact of isolation on finances
I went live on my personal feed and have shared a replay here for a full deep dive into the spreadsheet.
Welcome to the Agency Trailblazer Podcast. This is your host Lee. And on today’s show let’s talk about managing our personal finances. Now we are in uncertain times and for many people your income may have reduced either slightly or significantly. I’m really aware that this podcast has a really wide mixture of listeners, both business owners such as freelancers, agency owners, etc. But also we have the amazing staff that work at many of these agencies around the world who tune in every single week to learn how to support the agency that they work for and to learn how to support their clients and their colleagues. So I want to create some content here today that will help you understand how to manage your personal finances. First of all, if you are a business owner, remember that your personal finances will put pressure on your business. So if you can improve your personal situation, then you can also improve what you are doing within your business.
Start first at home and get your home in order. And then you can apply the same principles to the business as well. And then if you are working for an agency and you’re either seeing a drop in hours or you have perhaps even being furloughed if you’re here in the UK and seeing a significant chunk of your income removed, then this episode will be for you to help you to understand how to manage the money that you have, the income that you have, the outgoings you have savings that you can make, what the impact of being furloughed is on those incoming and those outgoings and also the general impact of isolation on our finances. So let’s look at this in a way that we are used to and that is gathering data. The first step for any project with an agency life is to gather information so that we can look at that information and make decisions based on that data.
So we should look first at our incoming and our outgoing financial transactions. When we’re armed with this information, we can make relevant decisions on what we can cut in, what we can change. We had not gone to know what the problem is without the information, therefore we can’t solve the problem without the information. And that’s the same when we’re building a website. When we’re creating software or when we are doing a design, if we don’t understand the problem, if we don’t understand the aspirations of our client, if we don’t have that information with us, then we’re not really in a position to provide the solution to that. Therefore, in the show notes, I’ve shared with you a spreadsheet in a similar format to what I’ve used now for years. I’ve shared so often that back in 2007 2008 it was a really, really difficult time and actually before that I had made a catalogue of really bad financial decisions.
I had accrued loads of debt. I’d got a few county court judgments, I’d done a whole load of defaults. My own credit rating was absolutely obliterated and that kind of started from age 18 through my early twenties lots and lots of bad decisions and lots and lots of putting my head in the sand. Being afraid of looking at the information I hated looking at my bank, I still do. I still have the anxiety from when I was a young man. Even now, even though I know my finances are okay now, I still have that anxiety because I created for myself this fear of the data, this fear of the information. So I struggled through the problem, never really finding a solution because I didn’t take the time to look at how big the problem was, what the financial situation was looking like, what my incoming was, what my outgoings were, etc, so that I could actually make decisions to actually solve it.
And I’ve created a copy of that spreadsheet, which you can go ahead and download. This was a spreadsheet we started in about 2007 where we listed all of our income and that’s all the different streams that we had and then everything that we had going out as a family, and this was where everything changed. First of all, we very quickly discovered that we were living in a an overdraft world. Essentially our outgoings were outstripping our incoming. It was clear that we needed to make some financial decisions to ensure that that balanced up and that we can also chip away at that overdraft and reduce it to zero. Our income is usually just a handful of sources. For example, there would be your income. That may also be your partner’s income. You may also be receiving income from the government. For example, here in the UK we receive child benefit and depending on where you are in the world, there may be other benefits that you receive from the government.
So be sure to get every single different source of income into the spreadsheet. Remember, if you receive dividend payments as well from companies you may have shares in, etc. Be sure to note those down in the income column. Next what you want to do is look at what is going out. And the easiest way to do that would be to download three months worth of your bank statements. You can go into your online bank and you can either export them as an Excel spreadsheet or you can print them off or just collect the printed bank statements that you have and create a list of all of your outgoings. So as an example, in the spreadsheet that we share in the show notes, we cover off rent or mortgage. Your council tax or whatever taxes you may be having in your particular area. Internet, we’re talking TV, gas, electric, water, telephone, cell phones, food bills, loans, credit cards, card payments, etc.
All of those are listed in there. And as you go through your bank statements, you will find lots of different elements that you are spending out on. There are certain things where it’s quite hard to put an exact value on, but if you were to consider the amount of money you spend on a take out each month and create an average so that you can understand how much money you may be spending on entertainment, on take outs, on meals out, etc. So you can set some sort of budget of what your normal spending habits on average us so that you can put them into the spreadsheet to give yourself that visual or that high level look at what is going on on a monthly basis. Once you filled both your income and what is going out, you’ll have two figures you’ll have how much is coming in versus how much is going out.
And that will give you a final figure of disposable income and that may be a positive or a negative number and right now that doesn’t matter. What is important is that you’ve got all of this information down and you know the picture. Therefore you can see whether you have a problem or whether you have a situation that you can just simply make some improvements on. I will talk as well on furloughing shortly because you may have a particular level of income at this point, but if you have been furloughed here in the UK, meaning the government will pay 80% of your salary, I believe up to 2,500 a month, then that 20% reduction in income is going to have some impact and there will be areas that you can save on. Next I’m going to talk about areas that you could make significant savings in your personal finances to get that disposable income number into the green if it’s in the red or to help you chip away at the overdraft.
And then what we’re going to do is look at the impact of being furloughed and the impact of isolation on your finances. For many of us who have not had this exercise of getting everything down into a spreadsheet, the added fear of isolation, the added fear of furlough of losing business, whatever those fears are, will seem really, really overwhelming. And what we don’t recognise is that there are actually certain things that we no longer have to pay out for. So let’s get everything down on paper. Let’s make the savings where we can and see whether or not that disposable income number is looking healthier at the end of it. Let me caveat this with this is my experience. These are the decisions that I have made. I am not a financial advisor. I am not liable for any financial advice. You need to go and do your own due diligence.
You need to get the relevant advice and make the decisions that work best for you. So please don’t sue, but let’s get serious and let’s just share some of the ways that you could be saving money. On the spreadsheet that I share in the show notes, there is an example tab and for me, I remember we had credit cards and loans, so there’s quite a few payments that were going out every single month. What I was therefore able to do was to get a loan that would allow me to put all of those other payments into one monthly payment. That meant I got rid of all those credit cards, all of those extra loans, everything was placed into one low interest loan and I could then chip away at that every single month and that freed up a lot of cash. Again, you need to take financial advice on this sort of thing, but for us that was very helpful and massively decrease the amount of money that we were putting out every single month.
The next area, and probably the easiest area for you to save money on would be your food bill. I imagine that your habits have been to go to the supermarket and throw everything that looks great into the shopping cart and you have a little bit of a panic attack at the end of it because you realise you’ve spent 200 pounds and you’re like, Holy moly, this is a lot. You put all the food in the cupboards and then the following day you think, I’m not actually sure what we should eat today. There’s nothing in, and then you end up going down to the store locally to pick something up for dinner that night, and before you know it, you’ve spent 700, 800, 900 or more pounds a month on food. If, however you were to flip that and create some form of meal plan, what you know, what you’re making every single day, then I promise you that will create significant savings in your food bills.
And we used to spend about 700 or 800 quid a month. We got ours down right down there to an average of 50 to 60 pounds a week, which is on average of 300 or 400 pounds. I’d encourage you to look at the replay that I share in the show notes where I went live on my personal feed and I deep dive into all of those money saving techniques. So go ahead, click on that link in the show notes and follow it through and then come back to it with your own numbers and again, follow that through and see if you can make significant differences in how much you are spending out and if you can make that disposable income at the end of every month a good healthy number. We’re coming in to land and I want to look now at the impact of being furloughed and also the impact of isolation on our finances.
Now if you have been furloughed here in the UK, so you’re getting 80% of your salary from the government or at least a chunk of money in, then that will reduce the money you have coming in, which means you will also need to look at your outgoings to see what extra savings you can make. That means making a few extra tough decisions. However, there are also some savings that you will naturally make as a result of us being forced to work from home or to stay at home. If you’re being forced to stay at home and not work either be furloughed there will be costs that you will no longer incur. If however you’ve been forced to socially isolate and work from home again, there will be costs that you will no longer have. So in the example on the spreadsheet, I show a few lines in the video I did that will be dramatically decreased.
And the first one would be childcare. If you are now at home permanently, then you will not have those childcare costs. It’s likely you’re not allowed to take your child out to childcare anyway. So you are able to have your children at home. The schools are closed here in the UK, so most families are spending time together, which is wonderful, but also that means that those childcare costs no longer exist and I know that they can be significantly high. I’ve heard of families where one of the partner’s salary just covers the childcare alone and then they everyone lives off their other partner’s income. Also there are natural costs like petrol. If you are going out there to an office, you are naturally going to save money on petrol. We’ve not been in our car now for four weeks. We’ve spent zero for the last four weeks on petrol and on our car.
With those two examples you can see that there will be cost savings you can make naturally and there will be a natural impact of the isolation. Other areas you could look at making savings would be your takeaway budget. How much are you spending on takeaways? Do you need to do that? Also your entertainment budget and like we mentioned before, areas such as your food bill. I do recognise that a lot of this is focused here on the UK. As a UK business owner, I’ve obviously got a lot of access to this information through my accountant and through government updates, so a lot of the focus is on what I know for our area. What I’d encourage you to do is look at what you can do in your country, what access to cash can you get beyond furlough, beyond loans from the government beyond any other sorts of help that’s available.
There are also a few other areas that you could look at. Obviously decreasing those bills. The other would be cancelling all of those non-essentials that you may have and furthermore, you could have conversations with your mortgage company, for example, looking for a mortgage holiday, your landlord, if you are renting, what can be done on that, and I would always encourage you to not struggle alone. Get that information down, gather that data, review it, and then seek help from other sources to help you keep that in check to help you get access to funds. If you need access to funds or to help reduce some of those outgoings just for a short period of time. It’s so much better to have those conversations with creditors, with your utility providers, with your mortgage company, with your landlord, or conversations with people who can offer help, advice and assistance than it is to try and struggle through all of this alone.
We are living in a time that we have never experienced. The recession was scary, but it didn’t necessarily affect everybody in such a way as this affects everyone. We are trapped in our homes in many cases we don’t know when the end is going to come. There is a lot that we are unclear about and every person is affected in some way, so please, please either reach out to myself, firstname.lastname@example.org or reach out to a friend just for some support, someone to talk to for some advice. Let’s do a quick recap. We started off with the importance of gathering the data and we shared with you the spreadsheet that we have and the video replay that we have of the live stream, so go ahead and check that out. Then gather that data, look at your income streams, and then also put down all of those outgoings that you have.
This gives you the real picture rather than reacting to everything that’s going on around you and you can make informed decisions about what you can save, how you can get out of debt, how you can survive over the next few months, etc. We then talked about the impact to all of social isolation and also being furloughed if that’s something as an employee that’s happened to you and how our costs will naturally reduce because of social isolation. So that should be factored into our planning, especially if we’re looking at planning for the next month or two during this uncertain time. Folks, if you have had value from this podcast, please let me know. Come and join us in the Facebook group, www.agencytransformation.com/group that will redirect you there. It would be great to have a conversation. Please share your questions, your thoughts and also your advice to other people.
We are all in this together and it would be great to be able to share advice, tips, and importantly love and hope. So come on, join us www.agencytrailblazer.com/group and finally a huge thanks to our ongoing sponsor that’s Cloudways. You can check them out over on www.cloudways.com Or check the show notes for the latest offers that they have available. They are by far my favourite of all hosting companies on the planet and they really do believe in giving to the community and giving value. A great example is how they support this podcast to ensure that we can serve you with content, with helping with information that can impact on your business and in your life. So be sure to check them out if you are looking for a cloud host that is super fast, super responsive, and freaking awesome. So with that said, if we don’t see you in the community, we will see you in next week’s episode.
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