Posted by & filed under Finances 101, Savings.

Did you read the article in Grazia last month where a young woman “confessed” to earning £40,000 but being broke? The young women describes a situation where her parents regularly bail her out financially, she lives at home and struggles to get the deposit she needs to get on the property ladder.

This article got a huge amount of attention – a lot of it negative. Commonly, the feeling was that this person didn’t know how lucky she was. Especially as the UK’s average salary is £26,500.

I am really torn about what I feel. I completely understand the desire to have fun before you settle down and how this pulls you in the opposite direction to the need to save for a deposit to get your foot on the property ladder or to save/invest for your future.

I also think that there is a deeper negative message with the article. The young woman is living in a negative cycle when it comes to money. She is trying to do everything but actually achieving very little. I see this often when I talk to groups about money. People approach me at the end and tell me stories of how stressed they are, how they can’t afford to save in their pension/property deposit etc.

Rather than doing something, this leads people to bury their head in the sand and do nothing!

So how do you break this cycle?

I think a good budget done at least annually that reflects your real life is the best foundation to good financial planning.

Next I think you need to commit to bunkering down in the short term. If you don’t have a short term emergency buffer, you need to be strict with yourself and to cut back on all unnecessary expenditure until you have a reasonable amount in cash (at least one month’s worth of outgoings at the start).

This will help break the hand to mouth cycle that is described in the Grazia article.

If the young lady had an emergency cash buffer she wouldn’t have to ask her parents to help out financially when she needs new tyres for her car. This will also break the feeling of guilt and lack of power that she is feeling.

Finally I think you need to commit to a goal. If you make a realistic goal for the right reasons you are more likely to achieve it rather than being on a financial yoyo diet. See next week’s blog to learn how to set a financial goal.

Are there any negative financial cycles that you need to break?

Lots of Love

Miss Lolly xx

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