There is, however, a healthy space between dower financial management and impulsive consumerism. Money can be enjoyed without guilt or fear.
This blog is a continuation of the idea that financial literacy is important for everyone. While this blog can be read in isolation, we recommend checking out Part 1 first off.
Financial literacy is something that can improve the circumstances of people no matter where they are in life. New Rivers is dedicated to making slavery obsolete. We are also dedicated to supporting families as they transition into a life beyond slavery. One of these supports is to provide opportunities for them to dramatically increase their financial literacy. It is important to help families, who for the first time are receiving regular incomes, to understand how to manage their finances to reduce the risk of falling back into debt-based slavery. The financial management principles which are vital to these family’s survival can be applied by individuals and families who are currently experiencing cost-of-living challenges. The principles we are exploring are: living within a person’s means, enjoying money, debt and creating margin. A recap on the principle of living within one’s means can be found in Part 1 of this blog series.
Enjoying Money
Financial management is often incorrectly viewed as something that needs to be endured rather than enjoyed. Consumerism and financial management often seem like opposing forces pulling at our finances and our sanity. There is, however, a healthy space between dower financial management and impulsive consumerism. Money can be enjoyed without guilt or fear. Imagine buying something you want without feeling irresponsible. Life spent saving for a rainy day can result in a life which never enjoyed a sunny day. The reward for working hard can be more than a bank balance. It can include a life of contentment which takes the opportunity to spend money in ways which bring joy and positive experiences to our lives. There are a few steps which allow for the enjoyment of money.
Your Financial Circumstances
First up, realise that your financial circumstances are YOUR financial circumstances. Another way to phrase this sentiment is to stop falling into the comparison trap. Personal worth is not the same as personal possessions, despite what every advertising company and social media algorithm wants you to believe. Ultimately, you get to decide what you want to buy and the way in which you will buy it. The greater the connection between what you decide to buy and your realistic level of discretionary spending, the greater your ability to enjoy money. There is nothing wrong with enjoying possessions and activities which are different from those enjoyed by others in your social media feed. That said, there is also nothing wrong with enjoying the same things as those on your social media feed do (which is probably why they are on your feed). The important principle to understand is that your purchases are YOUR purchases. You need to pay for them. An advertising company or social media algorithm is not going to pay for them. Accepting responsibility for purchases can free us from the comparison and uncontrolled consumerism traps.
Budget for fun!
There is no point in looking at purchases outside of a budget after the decision on how much discretionary spending is available. For example, there may be enough discretionary funds available to attend a concert in another city but not enough to fly first class or business class. Therefore, there is no point in checking the prices for these seats. Save time, book economy and enjoy the show. It is liberating to spend money on items and experiences when you know that all other expenses are covered and that no debt is being incurred. Guilt-free discretionary spending is a reward for sticking to a budget which not everyone enjoys.
Earn it!
An important financial management principle is to work with what you HAVE not what you are GOING TO HAVE. Effective budgets need to be based on the amount of funds which are actually available. There is no value in creating and sticking with a budget which has an inflated income. A trap many fall into here in Australia is spending tax rebates before they arrive. They are then left with debt if their tax return is less than anticipated. A good starting point is the actual amount of income which regularly comes in. If your income fluctuates, then find the average and then round DOWN. This approach creates a margin in your budget for unexpected expenses or opportunities to enjoy money.
Spend it!
Discretionary spending is not savings. A budget which allows for savings and unforeseen expenses creates space to enjoy money with less worry. Getting into the habit of enjoying money is as important as living within one’s means and saving. A failure to enjoy money can lead to fear and worry, which dominates our approach to financial management. Something changes in our approach to money when we regularly spend it on the things we want. It is difficult to believe that we do not have enough money while we are enjoying it.
The transition from slavery
These principles can be applied to the example from the previous blog of the financial circumstances of a family transitioning from slavery to low wage employment. As an example, a Pakistani family transitioning from slavery to low-wage employment will have access to day wages of around 1,500 rupees being brought in by at least 2 members of the family. This income of 3,000 rupees per day ends up being around 78,000 rupees per month. By living within their means, which includes setting aside money for contingencies, this family is able to spend 2,000 rupees per month on items or activities they want. By all accounts, 2,000 rupees or approximately $10.50AUD does not equate to a lot of buying power. However, setting aside and then spending this money is a financial habit which will allow this family to progressively and sustainably increase their discretionary spending.
How does discretionary spending increase if it is not saved? It becomes a habit by which we gain contentment with what we have and what we can have. Regularly enjoying possessions and activities is an important habit to develop. Spending 2,000 rupees on items or activities the family enjoys begins to help this family understand that work can provide more than their basic needs. Work becomes less tedious when some of the money earned is regularly enjoyed without sacrificing the family’s needs. Creativity also gets awakened when the benefits of financial management are tangibly seen and enjoyed. The family in this example is sending their children to school for the first time in their lives. The parents understand the importance of education. Children also understand its importance on some level but that does not mean that they actually enjoy school. However, when children receive a tangible benefit, like a cold soft drink after a hot day in the classroom, without fear or guilt that they will not have enough money to meet their needs, they and their parents can feel a sense of ownership and pride in being able to provide and enjoy a treat.
Enjoying money is an important part of financial literacy. It is perhaps the one principle that challenges the concepts of scarcity and worry the most. The habit of guilt-free spending also helps reduce the fear of money. Money can be “tamed” through financial literacy. Our upcoming blogs will continue to explore how financial literacy can help families escape slavery for good. The principles of living within one’s means, enjoying money, debt and creating margin are also beneficial for individuals and families who are facing cost-of-living challenges here in Australia and around the world.
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We are always interested in feedback and new ideas that people may have with respect to changes that can be made at the brick factories and any other businesses that New Rivers is involved in. We look forward to hearing from you - email us at info.newrivers@gmail.com.
Pictured: Manfred, Michelle (centre) and the New Rivers Team
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