How I Reorganised My Finances to Get My Money Under Control

First published on November 20, 2019

Almost exactly 2 years ago, I was in a weekly practice of asking myself a question: which one thing that drains me of energy will I stop doing this week?

One of the most powerful answers that came back was: worrying about money but not doing anything about it. 

I was in the classic self-employed trap, perhaps a classic human trap, of knowing (and being reminded through worry) that my finances weren't in order and this could put me at risk. The most obvious risk was an unanticipatedly high tax bill (and how could I even anticipate it given the poor handle I had on my money?). The next risk was a real down period: what if my clients dried up? What would I do?

But the whole money thing scared me and stressed me out. So I avoided it completely. Which meant nothing changed, which meant I continued to get worried and stressed, which scared me, which meant nothing changed... repeat to infinity. 

Until I gave that answer to the question in my practice. Within a few minuttes, on my walk to the station, I came up with the plan. All of it was knowledge that I already had:

1) An accountant had told me to set up a separate account for my business to divide my money and give me a better idea of how my finances were. 

2) Everyone knows you should have a tax account, where, every time you get paid, you put a certain amount of your income. 

3) My coach Rich had told me about how his business stalled when his dad died. These kinds of things happen to us, and we need money for those days. 

4) Rich had also told me his practice of giving his accounts funny names to change the energy around them. 

So I opened three new accounts: one current account for my business, and two savings accounts. One of the savings accounts - the 'rainy day' fund - I named 'Winter Is Coming'. My other, I couldn't name (my bank wouldn't let me), so I decided that the reference to each payment into it would be I LOVE PAYING TAX (thanks Rich). 

Then I set the inital percentages:

50% to my current account (I needed money to spend on things).

25% to I LOVE PAYING TAX (Depending on on how much money you're making, this is probably more than you need to put in, but at first I needed to catch up. I didn't have any savings for tax from the last year or for the current year). 

5% to Winter Is Coming.

The remaining 20% would be a float in the new current account for my business.

There were various teething troubles - it was troublesome to open accounts in some case, I had to move all my clients to paying fees to a different account. 

Then I had to let my energy settle: it suddenly looked like I had way less money than I'd had before, which was really tough, but in fact I just had a clearer picture of my financial situation. 

This was a pain period I had to go through: at first, I just had no cash in any account. Payments I received didn't feel as significant because they were getting diluted and spread between four account. But I knew that I was doing something about my finances, and the rush of agency made this tolerable. 

Over the next two years the biggest insight I had was in a conversation about this with my sister. I realised that none of these transfers make much difference when the small payments go in: you don't really notice the difference between getting £100 or £50 in your hand most of the time and the little additions to the tax account or the rainy day fund don't shift much there. And, when you get paid a small amount, that's rarely when you spend unwisely.

The time this practice comes into its own - and it becomes a practice, and one I celebrate every time money comes in, knowing that I am in control of my money - is on the good months. 

When several big payments come in, without this practice it's too easy to spend that money. We always spend up to our means, that's just how humans work. And this is damaging if you should be saving hundreds or thousands for tax and instead you're relaxing your spending, eating out more, buying yourself things and all the rest. 

So when the big payments come in, not only does putting them in the tax and rainy day accounts make the biggest difference to the balances, but it protects you from the highest risk that you will extend yourself beyond your means. 

That, in particular, I think, is why my finances are in a better place than they have ever been. That and, of course, the fact that I listened to the worry and took action.