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I used to be a good saver… at least I always thought I was. You know, $5 per week pocket money and I had over $300 in my savings account. So lets see… 600 times my weekly “salary” – WOW! Who wouldn’t be happy with that kind of savings impact – particularly if you could have that on your “adult” earnings.

Of course, a lot has changed. Bills of course, and all the responsibilities of a family and household…. but I don’t think that’s all it is.

I feel pretty sure I’ve not had a savings account since I saved up, bought my first house and – most importantly – got a loan. That’s when your mindset changes. The focus changes from a positive “saving” to a negative “repaying”. Suddenly it’s not so much about how good you’ve been and living within your means, but rather how much you owe to someone else.

Even though I was pretty savvy about it all at the time – bought well within my price range and put extra money in to pay the loan off quicker (and no doubt it set me up well), it is still a different mindset and you re-wire your brain accordingly.

So here I was, in my 20’s with an investment property (I actually couldn’t afford to buy in Melbourne, where I lived) and really doing quite well with the repayments – and selling was good too because I was still in the “first home buyer market”. And then I moved (okay, skipped to my 30’s here) and found my first true-love (house that is, husband came later). It was going to be my forever home. It was significantly more expensive than my previous house, but “that’s okay. I’m earning more and I want to be here forever…” but life isn’t that straight forward anymore.

Before I go any further, I really ought to share a bit about my lifestyle at the time. Nothing too extravagant, except that I coped with my deadline driven jobs with nice holidays. Travel was my escape and planning the trip was key to my sanity during the rest of the year. It was my coping mechanism for work I was good at, but not enjoying or feeling fulfilled in myself. And one day, looking at my bank statement I suddenly realised I was spending more than I was earning. When I’d bought my house I’d borrowed a little more than I needed which I’d kept in redraw “just in case”, but I was slowing eating into that. I was earning a good wage but slowly getting myself into more debt without realising it.

So what’s my point in all this?

When things change slowly, we don’t necessarily realise that our relationship to money has changed.

Once you’ve gotten in the habit of spending a certain amount, its a lot harder to cut back. Even more so when a drop in income is dramatic, such as when you lose your job, or other big financial impact (like the plumber’s bill – but that’s another story).

I’m not a financial advisor, or an expert in finance or legals, but from what I’ve seen, most of us live only a few pay-day’s from losing it all. Everything keeps rolling along (relatively) smoothly until a wheel falls off. Because, just like in business, we are totally dependent on our cash flow to keep us afloat. One big disruption (perhaps a redundancy or a major client leaving) has a massive impact on our ability to survive.

So what can we do about it?

Firstly, like any other “bad habit” – we have to first recognise our real situation:

  • what are my spending habits?
  • what are my “must haves” or “must dos”?
  • what are my fixed financial commitments?
  • where might I have flexibility?

..and can I afford to keep these up?

What is my “rainy day” plan?

What if I become redundant? (I’ve been there a few times now, and it’s not enjoyable)

Secondly, we need to be prepared to, And Commit To making the small, progressive and consistent changes in ourselves (behaviours and mindsets) to ween ourselves off a credit-dependent lifestyle and into a more stable positive (lower risk) cashflow lifestyle. Setting goals and working towards making them happen!

I know I’m a work-in-slow-progress, but every step helps me sleep better at night, which is definitely something I want more of! Which is even more important when you are starting up your own business – sleep & cashflow that is. Cashflow is the make-or-break of every business, so having your own under control is really important – as is understanding it’s importance to your planning and goal setting (+ action taking) activities.

When I reflect back on my mindset and the impact it had on my finances… I had the Intention to pay off my loan, but I didn’t have an active, dedicated Goal to do it. So it wasn’t my priority, but more a “good thing to do”, and therefore also easy to put off.

It’s one of my goals now.

Is it one of yours? Let me know!