On June 1st, 1997, columnist Mary Schmich wrote “Advice, like youth, probably just wasted on the young“ for the Chicago Tribune.
In it, she wrote:
Don’t expect anyone else to support you
Maybe you have a trust fund, maybe you’ll have a wealthy spouse
But you’ll never know when either one will run out
You’ve most likely heard these lyrics in Baz Luhrmann‘s Everybody’s Free (To Wear Sunscreen), which took the famous piece of prose, whacked a soaring tune under it and made it a worldwide hit.
(John Safran later delightfully bastardised this.)
It feels pretty cheesy to kick off an article about saving money with a corny song, but the lyrics ring true. It’s pretty common for the majority of Australians to rely, in some part, on others for financial stability. And this is a problem.
One in three cash-strapped Aussies consistently spend more money than they earn and have very little savings stashed in case of an emergency.
According to research by the Commonwealth Bank, 56 per cent of people wouldn’t have enough cash to survive if they suddenly lost their income. Again, one in three admit they wouldn’t be able to cough up $500 in an emergency.
Saving for a rainy day isn’t easy. It’s a different beast to saving for a lush Euro trip or a swanky coat. Saving with no real goal in mind is tough, but it’s one of the best things you can do for yourself.
It’s called an ‘Eff Off Fund’ and it’s financial self-defence.
The term was coined by American writer Paulette Perhach in a brilliant piece she scribed for The Billfold.
In it, she tells the story of a woman who graduates college, gets a job, buys IKEA furniture and clothes and fancy cocktails and basically lives like any other woman in her early 20s. Then her boss sexually harasses her, her boyfriend turns out to be an a hole and she’s up to her nose in debt (that description really butchers Perhach’s storytelling – my apologies – but it’s the gist of it).
She then rewinds that yarn, and starts the story over: at the very beginning, before shit hits the fan, she starts an ‘Eff Off Fund’. Instead of buying a nice car and routine lunches with her paycheques, she throws the money into this fund.
Then, when crappy things start happening, she can leave her partner and/or her crappy job and support herself while she lands back on her feet. And when she does land back on her feet – she can finally afford that car and those lunches, minus the stress.
Moral of the story: no one can have a hold over you if you’re the boss of your own finances.
“But I would never let that happen to me, I’d always be smart enough to work my way outta any financial troubles,” you might say to yourself.
But here’s another cliché just for you: life is unpredictable. It’s human nature to think nothing bad will happen to you; until it does. And while saving with the mindset of scnitt might hit the flange isn’t particularly inspiring, it’s clever.
Ok I want an Eff Off Fund. How much do I need in my FOF to be sufficiently un-f-withable?
You can work out how much you need in your FOF by using the following equation:
Despo money + first & last month’s rent + 3 months worth of costs = Eff Off Fund
Despo money
This refers to a big chunk of money you might need to use in an emergency. Like if you need a flight out of somewhere, or money for a hotel while you figure out your next move. $1500 is a safe amount.
First & last month’s rent
Pretty self-explanatory, but you should have enough funds to pay for your last month of rent somewhere, and your first month somewhere else. This negates the situation where you might be stuck living with someone who is putting you in danger. Depends on how you’re living, but this could be anywhere between $1000 – $3500.
3 months worth of costs
This one is especially important in the unfortunate event of losing your job. Bills, food, petrol and other general living expenses sadly continue on, regardless of your employment status. So tally up how much all these outgoings cost you per month – and save that amount.
How can I start saving for my FOF today?
Interestingly, when it comes to saving, men and women typically have different styles.
The most common way men save (36%) is in a fast and determined style. They focus on saving as much as possible in a short time frame.
Women, on the other hand, are more likely to be slow and steady savers (39%), saving small amounts over long periods of time.
Whatever your style, channeling it into a FOF isn’t a bad idea. Here are some quick tipz:
- You can start off small. Lots of financial advice columns suggest always saving 10% of your income. It’s pretty achievable. But if you can’t summon the strength to put this away, start with just $100 a month. See how that goes. If it feels good, up it to 10% of your wage.
- Think of ‘saving’ as another expense. You fork out money for rent, petrol and food. Make ‘saving’ another category which you need to pay for.
- Track it all. The big four banks all have apps you can use to help keep abreast of your incomings and outgoings. The government also have a free website / app you can use that’ll help you keep track of your savings. It’s not riveting, but once you see positive changes, you might be hooked.
- Create two bank accounts – one for your wage and one for your spending. If you’re super serious about saving a tonne in a short amount of time, you can try siphon only the bare minimum from your wage account to your spending account, and live just off that. Plus, most banks offer attractive interest deals when you open more than one account.
- Try out the ’30 Day Rule’. You know when you see something you really, really desperately want, and you cave in and buy it on the spot, only to regret it or care for it way less once you’ve got it? A good way to circumvent this is to try out the 30 day rule. If you eye something you want, let yourself think about it for a month – once the idea of instant gratification is gone, you mightn’t want it so bad.
- Meal prep. The very sound of that phrase might make you immediately turn off, but hear us out. Spending an hour or two on a Sunday preparing meals for the week ahead can revolutionise your damn life. Truly. Buying your lunch everyday is expensive and most of the time, it’s not necessary – you can make stuff that’s just as tasty and convenient at home. You just need some inspo. Here’s a good place to start.
- Tell people you’re saving. The more people you tell, the easier it is to keep yourself accountable. But, be selective with the people you tell – you don’t want a mate knocking at your door asking to borrow your hard-earned when they need it.
It doesn’t matter where you start, or how long it takes you – saving will never fudge you over.
*The above article does not constitute financial product advice. You should consider obtaining independent financial advice before making any financial decisions.
