Workshop Financial Know How

Background

I see people struggle with money. There's never enough. It brings stress and anxiety into their lives. I can sense fear surrounding the issue of money.

It seems to me that many people lack basic skills to deal with money. And a lack of courage and interest to honestly look at one's financial situation, maybe out of fear of finding out just how bad the situation is. I hear stories in the news of people not having enough money to cover an unexpected expense of a few hundred euros. That's worrying.

After my divorce in 2013, I radically changed my life. For one I started cutting my expenses. The next four years, each year I managed to shave 10% from the budget. Before I would spend 25k€/year. Now I am spending about 15k€/year. And I find that my quality of life has greatly improved: I eat better food, I have more time to spend with friends and family and I can spend my time on activities that I find meaningful.

With this workshop, I hope to inspire other people to do the same. To take their life's direction into their own hands.

Outline

Workshop Financial Know How (financiële kennis en kunde)

• Workshop goal

  • Increase awareness on money and about money
  • Cultivate willingness to look into own finances

• Goal beyond the workshop

  • living a good life
  • no financial worry
  • no feelings of deprevation or lack

• Current Mindset

  • how do you talk to yourself and others about money?
  • what are your expectations of money?
  • what are your beliefs around money?
  • how was money treated in your family growing up?
  • examples of beliefs
    • money is power
    • money is security
    • money can buy me unique things or experiences: a vacation, an expensive dinner, fancy clothes, awesome adventures
    • I dislike people with money
    • I envy people with money
    • I don't have enough money
    • money stresses me out

• Guiding principles

  • One iron rule of personal finance

    • Money coming in needs to be greater money going out

  • Mindset is key

    • unconscious expectations and convictions about money drive decisions
    • be interested in this part of your life: nobody cares more about your money than you
    • take responsibility for your current situation
    • make the unconscious conscious to affect rapid change
    • believe you are capable of changing
    • making mistakes is ok and expected

  • Observation is essential

    • keep meticulous records: know exactly where your money is going, when and how much; see further down how to categorize

    • review money flows on a regular schedule, at least once a month

    • "Know Thyself"

      • what are your needs and wants?
      • how do you go about getting your needs met?
      • how is that working?
      • what is important to you, to your partner, to your children?

    • assess the situation honestly and with a willingness to do things differently going forward; let go of judgement and blame

      Start where you are. Use what you have. Do what you can. -- Arthur Ashe, American athlete

    • use metrics to help guide you

    • assign responsibilities in a couple according to abilities

    • keep your partner in the loop

      • share your observations
      • share your findings
      • share key metrics
      • make suggestions
      • encourage your partner
      • be sensitive to the feelings and needs of your partner
      • listen to suggestions from your partner

  • Use a holistic approach

    • experiment, have fun
    • because everything is connected
      • changing your job can change the way you commute
      • starting a business will bring lots of small and big changes
    • use a web of goals approach
    • be aware of other forms of capital
      • living, material, intellectual, experiential, social, cultural and spiritual
      • find ways to increase their flow into your life to meet your needs

  • treat your finances as if you were running a business

    • a business needs to show a profit year on year to keep existing
    • think about investments, i.e. things that will generate income
    • assign the role of bookkeeper / accountant / controller

  • treat managing your money as a game, a challenge

    • cost cutting is then not a punishment nor to deprive you of happiness, it is to get you to a better place
    • get your creative juices flowing on finding ways to cut costs and to increase income without sacraficing your happiness or contentment
    • things can get tough, or difficult before they get better

• Visualization

  • a bathtub leaking with holes and a faucet trying to fill it

• Metrics

  • assets (bezit)
  • liabilities / debt (schuld)
  • equity (eigen vermogen)
  • saving rate (spaarsnelheid)
  • burn rate (leegloopsnelheid)
  • cashflow over time → buffer needed to balance out fluctuations
  • use a few general categories to classify expenses; in parenthesis possible further breakdown categories
    • taxes (national, province, council, road)
    • housing (rent, water, energy)
    • eating (groceries, eating out)
    • transportation (car, public transport, bicycle, plane)
    • stuff (clothing, gadgets)
    • debt payments (interest, downpayment)
    • health (doctor, dentist, prescriptions, glasses, hearing aide)
    • insurance (healthcare, for house, for car, liability)
    • entertainment (going out, media, streaming, subscriptions)
    • education (tuition fee, books, outings)
    • other/rest (charity, random fees, cash, unknown)
  • use a few general categories to classify income
    • income (monthly)
    • wage (hourly)
    • investment (return on investments)
    • welfare (gifts and handouts)
  • graphs
    • expenses in percentage of total per month
    • expenses in currency per month
  • rankings
    • top 10 biggest spendings per year
    • top retailers where I spend my money
    • amount of transactions per month
  • ERE Wheaton level

• Tools

  • your will / determination
  • notebook to record expenses (huishoudboekje)
  • spreadsheet software: LibreOffice
  • accounting software: Gnucash

• Practical

  • What does not go out, does not need to come in!
  • it is easier to reduce spending than to increase income
    • spending is entirely under your control
    • getting a raise depends on other people
  • pay yourself first
  • reduce spending
    • find and contemplate on recurring expenses
      • Does it spark joy?
      • can I find a similar service for less money?
      • is the current service still a good fit or can I move to a smaller / cheaper plan?
    • find and contemplate on the biggest categories
      • usually these are: food, housing and transportation
      • transportation: live closer to job
      • transportation: use a smaller / cheaper vehicle
      • transportation: drive less, cycle or walk more
      • housing: move into a smaller home
      • housing: pay off mortgage
      • insurance: can I self-insure this type of loss?
      • debt: use snowball method for paying down debt
    • find and contemplate on large one-time expenses
      • how can I avoid this expense in the future?
        • did I really need this?
        • use a cooling-off period before actually buying
        • keep up with maintenance
        • buy a better product
        • buy a second hand product
        • can I do the repair or maintenance myself?
    • brainstorm on other ways to cut spending
      • food: once a week grocery shopping
      • food: use a shopping list
      • food: learn to cook
      • food: buy in bulk
      • food: supplement with foraging
      • energy: keep track of usage and share weekly with co-habitants
      • energy: turn off lights, gadgets, heating, cooling when not in use
      • energy: shower less and shorter
      • taxes: use tax deferred accounts
  • increase income
    • brainstorm on ways to get more money flowing in
      • ask for a raise at work
      • put unused money in a savings account
      • start investing your money
      • rent out a spare room (if you have one)
      • rent out use of your car (if you have one)
      • start a side gig repairing stuff for other people
  • change your life's direction
    • start a business
    • take care of other people's homes, pets, cars, etc.