doing fifo financially smart

ACORN LIFE PATH

7 GLADALAN WAY, PIARA WATERS WA , 6112
P: 1300 309 012 M: 0459 111 890
Ruth@AcornLifePath.com.au
www.acornlifepath.com.au
  • Why controlling your spending is so hard.
  • Contact

Did you ever go to the movies, order a giant tub of popcorn and sit there tossing kernel after kernel into your mouth until the whole thing was empty? Even then, you scraped the bottom with your fingernails for the excess salt and gooey grease.What would happen if movie theatres gave you the same quantity of popcorn in 10 smaller bags? So every time you finished a bag, you would have to stop and consciously think about whether or not you wanted to open another. After all, one giant tub of popcorn is no big deal, but if you polished off five bags and reached for your sixth, wouldn’t you feel like a complete pig?

This is an example of how to partition. A study by Amar Cheema and Dilip Soman in the Journal of Marketing Research showed that this is the key to controlling consumption with regards to two of Australia’s favourite pastimes: eating and spending.

You know why controlling your spendingis so hard?

Plastic has killed the concept of the transaction cost. By “transaction cost,” we don’t mean the fee you have just incurred for the item; the transaction cost exists in your mind. It’s the awareness that you’ve just engaged in a trade of cash for goods or services. You received something, but you spent something to get it.

In the debit era, life has become one big swipe. Whether its coffee at your local cafe, a week’s worth of groceries or a high-definition TV, the action is the same: a simple swipe. Our resources have become hopelessly aggregated. This means that in our consciousness, all our money is lumped into one big popcorn tub out in the stratosphere, and we don’t know exactly how much we have or how much we’ve spent this month, because we have access to an overdraft (usually a credit card) and a seemingly limitless credit ceiling (if you have an offset mortgage account).

The answer to controlling your spending is to learn how to partition your money. Here’s how it works.

Identify your discretionary income

By “popcorn,” we mean your discretionary income (the amount of money you have for spending after necessary expenses are taken care of). First things first: After every pay period, the number one thing you should do is PAY YOURSELF FIRST. That means you are your first bill. You are more important that the grocery store, the petrol pump, and the electricity giant waiting for his turn. Next identify your monthly bills and set up as many as possible to go out automatically each month.

Now sometimes this isn’t so easy – particularly when you receive a different income every week, and some weeks you may have very little coming in, or even zero. We know how difficult that can be and that’s why we have developed a Spending Plan (don’t use a budget – they don’t work for 95% of us!).

Acorn’s Spending Plan is a software package that has specifically been written for FIFO families to take the peaks and troughs out of your daily money management. It then works with you to set up different “buckets” and ensures that you pay yourself first, your bills are paid automatically, and gives you ‘guilt free’ money to spend according to your own Values. The result is happier finances and this often translates into happier relationships. To find out how the Spending Plan can help you, give Ruth at Acorn a call today on 1300 30 90 12.

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Written By ACORN LIFE PATH

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