Out of sight, out of budget

In the last few months, I have made major decisions which have negatively affected the proportion of my assets which are cash or cash equivalents. Simply put, I have invested money in things which I think will generate good returns in the long-term. My funds for present consumption have decreased as a result. This has made me realise some interesting things about personal finance.

As regular readers will know, I have been tracking my income and expenditure since January 2016 and therefore I have had to witness the horror of being over-budget in several months. Interestingly, this has not happened since I have had less ready access to cash (this includes bank balances). As far as I can tell, nothing else has significantly changed in the past few months that could’ve possibly affected my ability to stay within budget, therefore we can conclude that the lower liquidity is the factor which has made the difference.

I observe that two things have happened:

  1. The reduced access to ready cash makes me rethink every discretionary expenditure. I ask myself if it is really worth the hassle of going to get more cash to meet a particular expense. Once I go through this process, I realise that I decide quite a number of expenses are not worth it.
  2. Seeing a bank balance which does not include some accumulated savings has reduced the level of psychological comfort which allows me to spend without regards to my income level. In other words I am living within my means.

This does not mean that it is a good idea to invest in less liquid assets just to reduce your cash balances to encourage you to save more. For one thing, what has worked for me may not work for you. Another thing is that one has to be careful what assets they are investing in long-term and I think I will discuss that in another post.

So, what helps you to meet your savings goals? You can share it in the comments. If you have any question you could also leave a comment and I’d be happy to answer.

Later, everyone.

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Jerome Kuseh

Accountant | Economist-in-Training | Private Investor
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2 comments

  1. I think this will work for me too. No cash to spend, no expenses. With short term investments , there’s that tendency to always borrow from family and friends to foot certain bills. Because one way or the other,you will have cash to pay your debts in the shortest possible time.

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