Budgeting, Money Mindset, Personal Finance

You Don’t Need to Be Rich to Be Financially Stable

Hello friends,

Today I’d love to share with you one of my biggest money beliefs: that you don’t need to be rich to be financially stable.

Shortly after deciding to write this, I realised that being ‘financially stable’ is a very personal thing, and means different things to different people. So I asked friends, both in person and on Instagram: what does being financially stable mean to you?

The answers I got were fascinating:

Whereas to the people I asked in person, it was more or less “Not living paycheck to paycheck.”

What’s my answer? For me, I would say that I feel financially stable now, but that I sure didn’t before. But whyWhat has changed? Personally, I still look forward to payday and save up for big wants & needs (eg. diligently saving 40% of my income for our wedding last year; saving up for a new car & laptop this year because they’re both old).

And it comes down to this: I don’t lose sleep over money. When it comes to finances, I’m grateful to have peace of mind and not to worry much. Of course, it’s not that I can afford anything my heart desires, but that if something comes up – a goal, a dream, a passion I want to pursue – I feel confident knowing that it is achievable. 

So what makes me feel financially stable now? If my definition is not losing sleep over money, what has changed to allow me not to worry and stress about it anymore? After all, I’ve had my financial ups and downs. Working 3 jobs at 21? Up. Moving to a new city on my own? Down. Landing my first corporate job? Up. Quitting a toxic job and spending the next year restoring my mental health and doing volunteer work? Down.

Here’s why I believe that you can achieve financial stability, whether or not you consider yourself ‘rich’:

It’s not about how much you make.

Financial stability sounds simple enough. Live within your means. Spend less than you earn. This sounds easy for most of us, but in reality, we’re not truly spending less than we earn, even though we fool ourselves into thinking we’re doing so. For a lot of us, buying a house, a new car, or a holiday has become more about if we can afford the monthly payments, rather than if we can genuinely afford to buy them at all.

What do I mean by ‘afford’? For me personally, it means that everything you want and need to pay for can comfortably fit within 80% of your income. If you’re earning $100,000 but spending $120,000, are you financially stable as opposed to if you’re earning $50,000 and spending $40,000? What if you’re earning $80,000 and you’ve proudly fit all of your expenses and financed purchases into $75,000, but you always feel like you have no room to breathe?

So how can you make sure you’re on the right track to financial stability, regardless of your income? I do the following:

Look at the bigger picture.

It took me too long to realise that when I was broke, I was always living paycheck to paycheck because that was all I chose to see. I was only living in the now, and not thinking of the future. So instead of asking yourself if you can afford something right now, ask yourself if you can afford it over the whole year, and budget annually on top of budgeting your pay cycles. Take a holistic view. You might be rolling in it this month, but what about 6 months down the line? Will you be earning $3000 this month with only $1000 in expenses, but earn $50,000 over the whole year with $60,000 in expenses? Knowing that my entire year’s savings & expenses fit within 80% of my annual income gives me a sense of financial stability.

Just because you can doesn’t mean you should.

I have a love/hate relationship with ‘enjoy now, pay later’ schemes. I love using them to delay payments and in turn maximise credit interest on my bank accounts, but I hate the stories I hear of people getting into debt because they get suckered into buying things they don’t actually want or need. (I also hate the excessive messaging of ‘treat yourself’ or that self-care is all bath bombs & champagne without actually working on yourself.)

So what do I do? Personally, I don’t use Afterpay, Laybuy, and the like unless I can afford to buy what I want outright. That way, I know that I can make the repayments whenever I want plus never be charged late fees – which I read up on beforehand. It’s all good when you’re signing up for ‘4 easy fortnightly payments’, but are you aware of the $10 late fee and potential additional $7 late fee for each if you don’t meet them? Did you know that consistently having failed payments affects your credit score? I know it doesn’t sound fun, but knowing what you’re getting into will give you peace of mind – and a sense of financial stability.

Be true to yourself. 

I know how this sounds: “How does this relate to financial stability?” Being true to yourself is about spending your money on what you truly want, and what’s in line with your values. As per my favourite personal finance book, Love Your Life, Not Theirs, so much of our spending comes from a place of jealousy and insecurity. We buy what we think will look good to others; we say yes to things we don’t love or value to feel like the version of ourselves we wish we could be.

When you stop the comparison and people-pleasing, you realise you don’t need to say yes to every drinks invitation; you don’t need to buy a new outfit for every occasion, and you don’t need to buy a fancier car than you care for (and can afford) to impress others. You are free to live authentically and be true to yourself; to spend that money on what truly makes you happy – whether that’s art supplies, writing classes, photography gear, inspiring books, hiking gear or concerts and other genuinely meaningful experiences!

I actually think this is why I saved so much money and was so financially stable even when I was only working part-time in 2018 – I spent so much time at home, with noone to impress and no marketing or ads to see. I also hardly went on Instagram back then. That year I hardly bought anything apart from groceries & the occasional book – I wore what I had and even made my own skincare!

It’s not about being the best. It’s about being better than you were yesterday.

For me personally, an essential part of being financially stable is not being stagnant or falling deeper into debt – it’s about consistently growing and moving forward. 

Y’all know I am a huge believer in the 80/20 rule, or living on 80% of your income and saving 20%. Sometimes it’s easy to save even 40% when you’ve just gotten a bonus or expenses are low; at other times you might only be able to save 10% due to unexpected costs or a special event. Now that saving for our wedding is over, I am content with 20 – 30% every fortnight.

But some fortnights, I simply can’t or rather, don’t prioritise saving this amount. For example, the week of Valentines this year, my fiancé and I spent $300+ on dinner and a concert, while I also gifted him an online masterclass costing $155 and paid a $400 deposit for our holiday to India (!!!).

Even with this much spending on a special event and bucket list goal, I still saved 10%, à la The Richest Man in Babylon, which advises you to save every tenth copper. The idea is that no matter what, you’re always working towards your financial goals. Can’t do 20%? Do 10%. Can’t do 10%? Do 5%. Either way, your savings are still increasing or your debt is still reducing, without requiring much sacrifice on your part. It’s a win-win! Honestly, if I could go back in time and give my 21 year old self financial advice, it would be to save whatever you can, because at least you’re still moving forward – rather than the mindset of ‘It’s so difficult, why even try?’

Another reason saving by percent and not dollar amount is the best way to save? It feels easy. Say your fortnightly income is $1600. Does it seem easier to say ‘Put $160 away into savings’ or ‘Put 10% – or 1/10th – into savings’? Both are exactly the same, but doesn’t making the amount only a tiny fraction of your income seem so much more painless – like you’re giving up less? It also works perfectly for people who are self-employed or earning an inconsistent income!

Now to address the answers above. Fyi, I don’t have a ‘proper’ answer for these, they are just what I do!

Not worrying about how to pay for everything and living week by week 

I must sound like a broken record, but you never have to worry about how to pay for everything or live week by week if you’ve already 80/20’ed your income, right? If you’ve written down all of your weekly / fortnightly / monthly expenses and this fits within 80% of your income, hooray – you’re worry-free. If not, something needs to change – whether that’s your premium Netflix plan or even your rent. Which is something I have done several times – paying one-off moving costs to save on indefinite & ongoing weekly rental costs. It’s worth it!

I also direct debit all my bills so that my power, water, internet, council rates, and phone plan all go out automatically – but I always diarise them so there’s no nasty surprises!

Swiping your card without needing to check the balance

Within the last few months, I realised that I have peace of mind when I have $100 in my chequing account linked to my debit card at all times – no more, no less. (More = waste of money that could go to increasing savings / paying down debt; less = not enough if something happens and say, online banking goes down.)

I definitely don’t actually spend $100 spontaneously on a day to day basis, but it means that when I go out to lunch, fuel up my car, or grab an extra donut for a friend while I’m getting Krispy Kreme (Choc Iced Custard please!), I don’t have to check my balance or worry if I have enough. I just know I do, and this knowing is a great feeling. It’s reassuring, comforting, and makes me feel like I’ve really got my shit together, ya feel me?

Because I top up my chequing account to $100 whenever possible, but might buy the aforementioned lunch, fuel & donuts throughout the day, my real chequing account & debit card balance at any given time fluctuates between $50 – $100. The rest of the money constantly comes from or goes to a flexible on-call savings account.

For you, the amount you need in your chequing account to not feel like you have to check your balance may be the same, or it may be $50, $200, or $300. Whatever it is, if always checking your balance is a cause of stress or simply inconvenience for you, why not consider deciding on your number and keeping your account topped up?

Having a better contingency fund in place so that when big wants or needs come up, it’s easier to afford!

My fiancé and I have accounts both for wants and for needs. Our ‘wants’ account is another on-call savings account, where every pay, we send $100-200. Whenever we have any ‘spare change’ in our chequing account, I like to even it out then send the difference to this account. For example, if there’s $86.20 in our chequing at the end of the day, I’ll send over $6.20. It’s amazing how quickly the ‘change’ adds up – and voila, we have a fun fund!

Our ‘needs’ account is our emergency fund – we’ve simply named it ‘Rainy Day Fund’, which experts say should be 3 – 6 months of your income and depends on how long you think you’d need if you lost your job. Ours is currently the equivalent of 4 months of our income. We use this for big things like house maintenance, though recently my fiancé agreed to let me take $1000 to kickstart my India travel fund while I agreed to let him spend $500 on new gaming headphones and put $500 into his own savings.

But we try not to touch our Rainy Day Fund, and instead finance with Q Card as much as possible (not an ad lol). When you pay with Q Card, everything is 3 months interest free, with special promotions or partnerships making them between 5 – 24 months interest free. It’s our go-to for car repairs because they are hella expensive. Our local Bridgestone takes Q Card with 6 months interest free, so we put it on the card then – important! –  diarise the payments we need to make, because they sure won’t remind us – that’s how they make a profit.

Say we put $800 on Q Card to be paid over 6 months; we get paid fortnightly so we put into an Excel spreadsheet that we need to pay $66.66 every pay so as to not pay a cent in interest. (Because it’s a whopping 25.99%!! Not today, Satan.)

So there’s my thoughts on what it means to be financially stable: it’s not about being rich. It’s about looking at your money holistically, spending in alignment with your values, and working towards financial stability – one step at a time.

I hope you’ve found this helpful! As always, you can leave your thoughts or ask me anything in the comments below – or anonymously here.

Love,

Sophia 

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