There was nothing fun about going broke and having a large, powerful bank breathing down my neck. And yet, it led to massive personal growth for me. I got my act together and learned about personal finances (and of course, paid back every last cent I owed), and I learned incredibly useful lessons along the way.
Easily the best and most useful of these lessons was the realisation how much stuff I don’t need in my life. My clothes didn’t fall apart even after three years. I didn’t need to order in pizza, I could bake the frozen version from the supermarket just fine. I realised with relief, that neither my happiness nor my self-worth depended on anything I needed money for.
It also taught me a lot about my spending style, and the reasons why I had always been terrible with money up until then. One major point is what I call “money leaks”, and it’s so big, I decided to dedicate an entire article to it. Heads up: If you identify and plug the places where you’re “leaking money”, you’ll end up with much more, without penny-pinching.
If you identify and plug the places where you're 'leaking money', you'll end up with much more, without penny-pinching. Click To Tweet
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Identifying your money leaks
We all have different spending habits. That’s why it’s important to track your spending for a while. Don’t worry, you won’t have to write down every croissant you buy forever! Just stick with it for a month and see what you can learn from it.
A lot of money advice seems to focus on frugality. My approach is a little different: I recommend you save money in order to finance more joy with it! Plugging the money leaks is much easier this way. By the way, if you haven’t done my free online training yet, you can sign up for it here – it’ll give you 3 days of lessons and assignments you can put into practice immediately.
A money leak is an expense that’s not strictly necessary and doesn’t contribute to your joy and passion (or passions) in the long term. In the following, I’m going to give you a list of common leaks, in order to give you an idea. Yours might be completely different, of course, but it’ll be easier for you to spot them once you know what to look for.
These are recurring, often monthly, expenses which seem completely insignificant on their own. How much can those few bucks for Netflix really hurt? The problem is, that it’s a constant “leak”, and if you add up all your subscriptions, the amount you spend on them per year can be rather frightening.
The solution: Ask yourself if you can get the same thing for free. Could you pool your Netflix account with a friend, or watch the same shows on DVDs a friend owns and could lend you? Do you get a newspaper whose main articles are all available online for free? Is your TV really enhancing your life, or taking time from your reading and your passion? Are you paying for an anti-virus program when a free one would work, too?
Clubs and gym memberships
Do you still pay for that gym membership although you’ve stopped going six months ago? Or do you pay for a social club whose meetings you hardly ever attend? It might be time to weed those out.
The solution: The gym is not the only way to get into shape. Look for online workout videos and find a sports hobby you actually enjoy, like running with a friend, or playing volleyball with a group at a public volleyball court. You’re more likely to stick with it this way, and it won’t cost you a thing!
Certain shops and websites run regular offers which are so cheap, it seems insane not to buy them. The problem is that this tricks you into buying things you would never have got otherwise, and a lot of the time you end up buying additional stuff, spending even more.
The solution: Before you hit the “Add to Cart” button, ask yourself if this pretty porch lantern is really essential for your passions and your joy in life. You have lived, how many years, without it – could you perhaps do without a little longer? If it's something you wouldn't buy if it wasn't cheap, then even the cheap price is too much. Click To Tweet
Once you’ve plugged those money leaks, you’ll be surprised how much more cash you have left every month. It’s time now to invest this – into savings, into “play” money (a certain amount you’re allowed to blow each month), and of course into your passion! Have fun with this, and always think in terms of what else you can afford now, rather than what you’re denying yourself.