How I Get A Grip On Finances In 2020

In my new year’s goals & resolutions video I mentioned that one of my goals for 2020 was to find out whether we could get a mortgage and buy a house (and if yes; to do so). Now as a small business owner in online entertainment with a very variable income, I feel like I need to make a bigger effort to “prove myself” to whatever bank we choose to get a mortgage from. These are difficult times on the real estate market in the Netherlands, and my job doesn’t put me in the most favourable position for that off the bat.

One sure-fire way to give myself a head start is to have a good grip on my finances, more than ever. Only ever having worked as a freelancer/small business owner means I’m used to living with an uncertain and variable income, and it has taught me to make the most of a little. I’m also very lucky I’ve made it through university debt-free and credit cards aren’t really a thing over here, so I feel I have a good base to start from. There’s always room to improve though, and today I wanted to share the steps I’m taking to get an even better grip on my personal finance.

Know What’s Up

For the past few years I’ve been keeping excel sheets where I log all my income and every single purchase I make, as well as other expenses for every month. I update this sheet once a week so that I’m always on top of my spending.

At the bottom of the sheet, I’ve written down a few categories that I like to track, such as groceries. This allows me to see how much I’ve spent on each of these categories each month.

How I’d like to improve this practice this year, is to make an overview of our monthly income and spending as a “family”. We share quite a few expenses of course, such as rent, insurance, wifi… It’d be good to have an overview of how much money we have available to us on a monthly basis, how much we have to spend on bills, and where we could potentially save.

Another thing I did is to download a mobile app that tells me exactly where my money is going. It syncs to my bank account (the app is published by my bank as well so I know it’s safe), and automatically categorises all my spending. It also allows me to set up monthly budgets for certain categories, and it’ll even send notifications when I’m about to go over budget. I like to check this app periodically to see how I’m doing.

Cut Expenses

Knowing exactly how much income I have and how much I’m spending each month makes it much easier to find areas where I can save some money. I used the aforementioned app to set a monthly grocery budget which is a little bit lower than the average amount I spent on groceries the past few months. I used to be insanely good at budget-cooking as a student and even though that’s not necessary anymore, it won’t hurt to use those skills to cut a few euros off our monthly budget.

Living in a small space as well as becoming more eco-conscious has put me on a more minimalist path over the past few years. I don’t have the desire to buy more and own more as much as I used to when I was younger. I’m starting to actually value quality over quantity and feel more comfortable with only having items that serve me. This mindset shift, losing the desire to shop, saves a lot of money that would otherwise be spent unnecessarily. I don’t lose items as often or forget I have things and accidentally purchase multiples. I also no longer shop just for the sake of it. This helps a lot when it comes to cutting expenses!

Another thing to be mindful of are subscriptions. You may be spending lots of money periodically on things you barely use, or don’t at all, without realising it. I’m currently re-thinking whether we need our online TV subscription (we got rid of cable a while ago), and all other subscriptions are re-evaluated every once in a while. A magazine subscription you no longer care for or membership to a gym you never visit, are really easy expenses to cut.

Save Consciously

Up until now, the way I went about my savings was just to transfer some money to my savings account whenever there was more than a certain amount of money on my regular account. That works alright, but I go about it in a much more mindful way now.

The first step for me was to open a new bank account where I could send all my VAT money. When I do business within the Netherlands I’m obliged to charge VAT which I then have to pay to the tax authorities once every quarter. Even though I always had a rough idea about how much this might be, it’s usually a considerable chunk of money and if it’s all just sitting on my bank account, it’s easy to start considering it as part of my income. Now that I have this second account, I transfer the VAT there as soon as I receive a payment. I know that’s money I can’t spend and it’s reassuring to know I’ll always be able to pay that tax.

After I’ve made the overview of all our monthly expenses, I plan to give myself a monthly allowance, and save everything else. This should level out my income a bit more, or at least give me a more consistent spending budget. I’ve always saved more on good months to compensate for worse months, but I feel like I should do so more consciously. If anything remains of the monthly allowance at the end of the month, I’ll save that as well.

Of course a fuller savings account is a huge advantage when you’re trying to buy a house. I think this’ll be an important one for us so I really need to pay close attention here.

Get Educated

Towards the end of last year I started reading some Dutch finance blogs. Most of the finance blogs I generally come across are either American or British, and even though I can definitely learn a thing or two from those, the Dutch ones are much more relevant to my situation. I’m learning more about finance in an accessible and applicable way, through short pieces that break down things that might seem very complicated if you don’t know where to start. I find that I pick up on a lot of useful information this way.

I also plan to learn much more about the world of mortgages, as well as investments. These are topics I know next to nothing about as they haven’t really been relevant in my life thus far, but as I get older I feel like I should know a little bit more about managing larger sums of money like that. I feel like these’ll be complicated subjects, but I’m excited to learn more, especially now that banks are about to stop giving interest altogether and I’ll want a better way to store my money.

Gather Documents

Last year I finally bit the bullet and got myself a bookkeeper. Even though I’m pretty good at doing the little day-to-day administrative tasks, end of year tax reports would send me into a right panic. They were alright to do as a private person, but there’s so much more to them when you’re a business owner, especially one who operates internationally, and I had to admit I simply wasn’t up to the task.

Long lists of numbers make me dizzy, quite literally. I’d be worried about doing something wrong and unintentionally evading taxes, or wasting large sums of money through not making use of some small business owner benefit that I might have been entitled to.

All in all, even though I tried to make sense of it, I decided it wasn’t worth this kind of stress. I’m very happy to have someone who checks my daily admin and does all the complicated tax reports now.

Now that we’re looking to get a mortgage, I’ll need proof of income through yearly reports. After my three years as a business owner are up this coming spring, I’ll get those off my bookkeeper so that I can take them to a mortgage advisor and see what our options are. I’m sure neat versions of financial overviews will also help with that, so I plan to have as good of a report on hand as possible.

I feel like this should be a good place to start. I have a couple of friends who have bought properties before so I’ll definitely talk to them to see what their experiences were, as well as a professional advisor given my unique financial situation. Here’s to being in control of our own money!