The Simple Formula to Ensure You've Got Stacks of Cash in Your Bank Account


Everyone has their vices to get through the week. Me? I’m a total nanna and when it gets to be 9pm, I’m out. A taxi home at the end a night in the city is one of my vices. A sneaky taxi home once a month fits my budget. But every week – well, that’s not so great.

We all have our vices, but the trick is to be aware of what they are, and how often we use them.

Now, slipping into these habits is super easy to do. We live in a culture that normalises an excess of spending, long lunches, new clothes. But buying objects often for a short term boost don’t lead to financial stability – or, in fact, happiness – long term.

A lot of the time, we spend everything we earn each month, not realising that we spend our money on some vices to make us feel better in the short term. We spend a bunch of cash that could be a safety net for us in a tough time.

But I’ve learned that I would much prefer to have a big financial safety net to help me through a stressful life situation, rather than an extra little indulgence each week. These vices add up over time, and by looking at them with a critical eye, you can change your financial future.

What’s the magic formula?

The formula to having more money in the bank for a financial safety net is: spend less than you earn.

Sounds simple, right? Well, simple isn’t the same as easy!

Spending less than you earn is about knowing how much you earn each month, and how much it takes you to live each month, and how much money you spend on those little impulse spends. Yep, that’s right, knowledge is power.

From there, it’s about assessing what you spend money on with an honest perspective and making new habits so you’re spending less on the vices you – let’s face it – don’t even need.

Related: How to Be Happy: Five Science-Backed Routines That I Wish I Learned a Decade Ago

Why is this even important?

I worked in a well-paying job for a few years in my early 20s. I didn’t spend excessively, and I thought I was good at saving because I didn’t spend everything I earned each month. I had a little safety next, but I realise now that I could have been much better.

The thing that I’ve come to realise is that emergencies in life happen. Literally every couple of years, I’ve had something come up that required a bunch of cash at once –

  • Breaking up with an ex meant I moved house (which included a massive outlay of bond and moving trucks and paying double rent and buying furniture)
  • I was made redundant at work (so I needed to live off my savings for six months while I found a new job)
  • My ancient car finally gave it’s final, choked breath (despite the amount of money I spent on mechanics doing everything they could.)
  • My cat had massive dentist bills (yes, dentists for all species are hecking expensive).

Either way – about every two years, the savings I had built up were decimated. Every time a disaster hit, it was about a year apart, so I had savings to cover it because I did save.

But then two disasters hit at once. I was completely out of money, and out of options. It was crushing.

And that when I needed to become better with money so I wasn’t in that situation again. And that’s what I’m learning now.

There will be a point in my life where I will have a solid emergency buffer with my savings, so if else something hits, I’m stable. After that point, I can look to use these savings to build wealth over time.

But for now, I’m starting one step at a time by ensuring the amount I spend is less than I earn.

Related: The Three Books That Changed the Way I See Money

What’s your magic formula?

Okay, so we’re looking at ensuring the amount you spend is less than you earn.

Going over your past bank statements means you can find:

a) out how much you earn from your salary each month on average (let’s say this is $3000)

b) your essentials to live: how much you pay for rent, electricity, phone, transport and internet (let’s this is $2000)

c) everything else: categorise what else you spend your money on. It might be coffee, dinners, taxis, the pub, the gym, clothes, fashion, brunch. (For example, this is $1000)

In this hypothetical, my income is $3000, and my expenses (my essentials + everything else) is $3000. So I need to to spend less than I earn. A simple way is to look at the ‘everything else’ category and see what I can cut.

If you find you’ve got hundreds of dollars in the ‘everything else’ category that just gets ‘magically’ spent each month, then its time to assess those habits and make new ones. These small changes add up over time, and you’ll find that you have money for that emergency buffer.

Now, some people might not have much in their ‘everything else’ category and are still struggling to make ends meet. Those people might look at different changes, like switching phone providers to a cheaper one. Or look for opportunities to get more money, like a raise, or a side job. Be creative to earn more to build that safety net.

Related: Here’s How Using Your Library Can Save You a Grand This Year. You’re Welcome.

The little things count

Eating lunch out on a Friday with coworkers is fun. But if you do that every day, you’re spending legit five grand over the year.

If you have takeaway coffee twice a day from a cafe, that’s two grand every year. Especially if you’ve got a coffee machine at work you could be using.

If you want to change how much money you have in your bank account so you’re set for an emergency, then changing the habits and routines you make every day, mean your money builds up over time.

The new habits

Now, you might think that these are habits that ‘poor people’ make to save a dollar or two. But actually, the truly wealthy (not people who are in debt to buy pretty things) do exactly this. They spend less than they earn – for years.

But, let’s be honest. Sometimes building new habits around these swaps can feel a bit weird at first, especially if you’ve done something one way your entire life.

If you’re used to getting a takeaway coffee on the walk to work, switching to a hot thermos of coffee from home might feel strange. You might feel people are judging you. They totally aren’t. They care about what you drink as much you care about what they drink. Which is about zero. It’s just about getting used to a new routine, and remembering why you’re doing it.

You might forget to take your thermos – so come up with a system so you’re less likely to, like literally leaving the thermos at your front door so you can’t leave without taking it, or set an alarm on your phone.

Instead of meeting a friend for a coffee in a cafe – why not suggest you got for a walk instead with a hot thermos? Explain what you’re trying to do around making small changes with money – and you might just inspire them to do the same, too.

Remind yourself that with every swap you’re building a big old safety net for your future.

And for some people, making the swap isn’t enough – you might find restricting your access to that money will also help. Some people actually set up a fee-free bank account, and automatically transfer $5 or $10 away into a separate savings account each day in lieu of that coffee they didn’t drink. You won’t feel the financial drain each day; but you will see the savings add up when you check back in in a month or two.

The result

Switching one latte to a thermos each day for a few months made a huge difference in my life. I wasn’t making hundreds of dollars overnight, but if I accepted that time was my bff, these simple changes made a difference because they added up each day.

A few months after making these swaps, I had another vet bill. And when I looked at my bank account, I had the money to pay in one go. And it was a massive relief because my hard work had paid off.

Things were different for me. I had one way to help build a stronger financial future because I did something new. I needed to face my fear and accept responsibility for how I used my money. I needed to gain knowledge of how I spend my own money, to make truly smarter decisions. I needed to face the discomfort of building new routines.

This is just one step that I’m taking to take control of my money, and my future. But I know it’s a step in the right direction.

The action plan

Break it down. Sit down with a coffee, put on some sexy secretary glasses and open up your bank history to do some maths. This will take about an hour, but it will be so, so important for your future.

RELATED: HOW TO: How to Conduct a DIY Money Audit

I like to look at three months of my spending history to get an ‘average’ of what I might spend in a month.

Work out:

  • How much do you earn per month?
  • How much do you spend on ‘essentials’ – rent, electricity, phone, internet?
  • What is the ‘other’ spending – coffee, taxis, dinner out, lunch out, movies?

Now you know how much you earn, and how much you spend.

Ask yourself:

  • Are you spending everything you earn?
  • Do you have at least a $1000 saved for an emergency? If not, come up with some swaps so you’re saving a little bit each day that builds up over time.

Pick one of the items from your ‘other’ category. Think of an alternative to it, and focus this month on swapping it to a money-saving alternative. For me, it was a luxury latte, swapped to a DIY coffee. And getting more organised so I caught fewer taxis!

Just start with one new habit a month so you’ve got time to build the new routine into your life, because remember, new things take time and practice to master. But you got this!

DIY inspo

Settle down with a hot beverage of your choice, and spend an hour doing the math to see how much you truly spend. Then, come up with an action plan to build up $1000 in emergency savings over the next few months.

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