Finding Financial Freedom
7th December, 2020 in Financial Health
I remember the days, back when the Aviation cocktail was the exiting new old thing, and I didn’t think twice about dropping £100 on a bottle of champagne. I spent years working as a bartender, and at the end of it, after all those years of effort, I was no richer than when I had started. I drank, snorted, feasted, and blew all of my money on having a good time, while never giving even a moments thought to saving a little bit for the future, or that proverbial rainy day, let alone the 2020 shitstorm we’re all going through.
According to the UK’s Office of National Statistics, hospitality is the worst paid industrial sector in the UK. In 2019, the 4 lowest paying jobs in the UK were all in the hospitality industry, with bartenders coming bottom of the pile, with an annual wage of just £16,055. Wait staff did slightly better on £16,286, kitchen assistants got £16.604, and theme park attendants £16,766. In 2020, Jeff Bezos earned those amounts roughly every 6 seconds!
In the same study for 2020, it’s all change and they report bartenders seeing a 17% increase in annual wages, which I find highly difficult to believe given the year that we’ve had in hospitality.
If you can cast your mind back to your school days (for me that’s a long, long time ago) most of us were not taught personal finance at school. Our maths classes revolved around algebra, quadratic equations and other theoretical mathematics, rather than the useful life skills of personal finance, a basic understanding of financial tools, and a structured plan to manage our money. And I haven’t put my metalwork, electronics, or Latin classes to use either.
With hospitality being such a poorly paid industry, it’s even more important that we’re smart with our money. I certainly wish I had squirrelled just a little away during my years behind the stick to find a little financial freedom. It doesn’t really matter how much, a little is better than nothing, and the habit of saving is a good one to get into, and the more you save, the more you’ll earn once you learn how to make your money work for you.
Having a little bit of money that you can fall back on in times of global pandemics, or other unexpected life circumstances, is true financial freedom, and can help avoid stress, improve life and make you feel just a little bit better about everything.
I’m certainly no Jordan Belfort, and I’m still not in the position to splurge on absurdly expensive bottles of champagne, but I have learned a few things along the way which I’d like to share with you.
Know Your Spending
It’s so easy to keep track of your spending these days. Get your phone out, and download any one of the plethora of money management apps. I personally use Emma, but there are others available. These apps sync to your bank accounts, and give you a live dashboard of your assets, debt, net worth and spending so you can see exactly where your money is going through detailed analytics.
Pay Your Debts
Saver Interest is the money your bank pays you to borrow your money, debt interest is the amount that your bank charges you to borrow money from them. Debt interest is always higher than saver interest, so before you even start saving, you need to pay off your debts first.
If you’ve got outstanding credit card debt, which has among the highest interest rates, then see if you can find options to borrow at a lower interest rate. This could include borrowing from family and setting up a direct debit to repay them at 0% interest, or taking out a loan at a single digit interest rate instead of the 20%+ that credit cards usually charge.
And always, always avoid payday loans. They often have insane representative APR rates of well over 1000% and are a sure fire way to get yourself into serious money problems.
Save Your Tips
If you get any cash tips from your job, don’t spend them on drinks at the bar at the end of your shift. Put them into an oversized whisky bottle, deposit them into a savings account, or hide them in a shoe at the back of your wardrobe.
Invest Your Change
There are plenty of apps available now, such as MoneyBox which I use, that allow you to round up your debit card purchases and invest them. This is an unbelievably easy way to begin saving and I manage to put away about £40 per week without even thinking about it.
The more you save the more you earn
The great thing about interest, is that the more you save, the more interest you earn, and it compounds. It doesn't matter how much you save, but the sooner you start, the more you'll earn.
Let me explain Compound Interest quickly. If you have £1000 in your savings account, earning 5% interest, after 1 year you will have earned £50, giving you £1050 in your account. Even if you don’t add any extra savings, the following year you will earn 5% on £1050, giving you £1,102.50 so you'll earn £52.50
The bad thing about interest, is that it compounds in reverse too, and the debt interest rates are much, much higher, so the more debt you have, the more your debt will increase, which is why you must always pay off your debts before saving.
I hope what I’ve learned over the years of wasting money, and only recently seeing the value of being a little more financially wise will help you take control of your money and take steps towards financial freedom.
If you want to learn more about money, then check out the Healthy Hospo digital app where we have a lesson dedicated to your Financial Health, and how you can improve yours. Get access to the lesson, plus all our other lessons and much, much more, for less than the price of a cup of coffee a month. Now THAT is a wise financial investment 😉