The Rise of Peer to Peer Lending

Peer-To-Peer lending is fast becoming big business. If you’re switched on to the financial news, you may be wondering why it has taken so long to catch on. Zopa launched all the way back in 2005.

For the majority of us, it is a new concept and one that is worth knowing about.

 

What is Peer-to-Peer?

Peer-to-Peer is a method of lending and borrowing money without the involvement of the middleman of a bank. Whilst the system still requires a middleman of sorts, normally a website, the terms of the lending agreement are between the investor and the borrower.

When you keep your savings in a bank they offer you a set rate of return, or interest, on your savings. They then take this money and offer it out to other consumers, charging them a higher rate of interest. This is the primary way in which banks make their profits. Their profit is the difference between the two interest rates.

In order to maximise their profits, it is in the bank’s interest to keep the interest that they pay to their investors (customers) as low as possible and to keep the interest rate they charge for providing a loan as high possible.

When you invest through a Peer-to-Peer website there is no middleman in these agreements. The interest rate is agreed between the investor and the borrower. Of course, this is affected by market forces. If you’re offering to lend your money out at 50% interest and everyone else is offering their’s at 40%, no one will take you up on the offer.

Of course, every company needs to make a profit and Peer-to-Peer brokers are no different but, in general, they take a predefined percentage of your profits and not only is this made clear on investment but compared to traditional banking, their cut is incredibly low.

Why now?

The rise of the Peer-to-Peer format was perhaps an inevitable effect of the advancement of technology. We’ve seen the concept of peer-to-peer gain traction in almost every industry. Well known examples that you may have heard of include AirBnB and Uber.

The more and more connected our world becomes, the easier it is to connect people directly and this is disrupting many traditional industries. It will be very interesting over the next few years as these upstart Peer-to-Peer models become the establishment standard and then begin the push for profits that every corporation eventually undertakes. Will they be true to their model?

There has been another enormous factor in the prevalence of Peer-to-Peer lenders and that was the financial crisis, credit crunch, call it what you will.

Interest rates plummeted and those with the money to start saving saw the returns offered by the high street banks disappear to almost nothing. So people did what they always do, started searching for the better option.

So why Peer-to-Peer? The difference is enormous.

I bank with a high street building society. If I wanted to use my bank for savings, the most generous account on offer at the moment would offer me 1.25% annual return.

A quick glance at Ratesetter‘s front page offers me up to 6.2% interest, Funding Circle is offering me an estimated return of 7.3%.

If you’ve got the money to put away it’s a no-brainer.

 

Where can I get involved?

There are a multitude of sites available for you to investigate and each offers different advantages and disadvantages.

The current main players are:

Zopa

RateSetter

Funding Circle

But there are many others out there now so don’t be afraid of doing your own research.

No idea how to decide? I’ll give you a few pointers on what to look out for.

• The Rate of Return – Don’t just go by the big number on the front page. Dig deeper and see what the actual current rates are
• The Charges – Each of these companies makes money. Find out how much you’ll be paying them.
• The Risk – Some of them offer contingency funds to cover bad debts, but not all of them.
• Access to Money – You can’t always freely access your investment money in these schemes, although they do often offer a secondary market to sell your stake if you want out quickly.

It’s also worth bearing in mind that the Peer-to-Peer industry is now regulated, offering you greater security. New regulation is coming in all the time, have a quick read up on the latest developments before diving in.

As you can begin investing from as little as £10 this is a great way to start saving and start controlling your investments. I highly recommend it.

 

 

 

 

The Key to Confidence

Most of us are not blessed with a natural confidence but, just like any skill, it is something that can be taught and can be learned.

Many things have been written over the years regarding the best way to achieve confidence. The most oft repeated quote in my experience is to:

Fake it until you make it

The idea being that if you pretend that you are confident, and act in this way, then to the world outside of your own head you are confident. By other people considering you to be confident, they react in the desired manner which leads to an increase in your actual confidence.

This self-reinforcing loop is a useful psychological trick that can actually be applied to any habit-forming exercise but I don’t think it is as appropriate in this case as many make it out to be.

If the goal of the exercise is to achieve a certain feat, such as giving a presentation or navigating the way through the rigors of public speaking, then this method is certainly helpful. In such circumstances, all that is needed is the appearance of confidence, this is not a true possession of confidence.

 

So how is true confidence achieved?

First we must consider what we are defining as confidence. It is certainly not the ability to appear confident, this we have addressed above.

To quote the Cambridge Dictionary, confidence is:

the ​quality of being ​certain of ​your ​abilities or of having ​trust in ​people, ​plans, or the ​future.

From this we can infer our own working definition.

Confidence is not the ability to act like a situation does not bother us, but the belief in our own ability to succeed in a given situation.

Merely acting as if we are confident, does not give us the self-belief necessary to achieve this but it can help in reinforcing it.

To achieve this level of self-belief requires honest and thorough self-assessment.

One who is sure in their abilities can be absolutely confident. This does not mean that only those with exceptional abilities can be confident, quite the reverse. It is just as important to understand our own limitations and boundaries. By keeping our situations within these boundaries you can achieve complete confidence in everything that you do.

Of course, this leads to the issue of limiting one’s horizons. If we only put ourselves in the positions where we are confident that we can succeed then how can we grow? How can we experience new things? How do we push ourselves to achieve our potential without working outside of our comfort zone?

And more than this, does it imply that only those with experience in a situation can be confident? Otherwise any confidence in a new situation would be misplaced.

 

This is where a greater understanding of self-assessment is necessary and a greater understanding of self as a whole. It is not only our practical skills that we need to assess, not only our experiences or history that are important. When trying to find this key to our psyche we must realise that there are many other parameters at work.

It is entirely possible to stride into the unknown with a true basis of confidence and self-belief. To achieve this, we need to look at some of the more esoteric psychological limitations that we have.

Stop and consider your own abilities in the following terms.

What is your ability to learn?

What is your ability to improvise?

What is your ability to adapt?

By framing our abilities in more flexible terms you can see that having absolute self belief that a situation is within our abilities to learn, improvise and adapt will leave you much more confident in dealing with the situation.

These are just a few examples of those skills that are not often focused on when considering how prepared we are. Take the time to consider what these secondary abilities are for you personally. Very few people will be confident it all things, rather try to establish your own limitations and your own abilities. You’ll find that the confidence will come after the greater understanding of your own skills.

 

Habitica – Habit Forming Productivity

This is the first of a series of posts that aim to be a guide to some tools for self improvement. These applications all share some common themes, firstly they all follow a process known as Gamification. This is the application of the gaming reward principles used in a non-game environment, the hall marks of such an approach tend to be the awarding of achievements for progress and “levelling up”.

The first post on Duolingo can be found here.

Today we will be looking at Habitica.

In the past I have tried various different methods in order to organise myself, prioritise my tasks and schedule my week. This has taken several forms that, if you’re anything like me, I’m sure you will recognise.

I’ve had the full year wall planner above my desk, complete with colour coded stickers. I’ve written lists on bits of paper that are inevitably lost and only found months later. I’ve tried spreadsheets of to-do lists, that I never updated, and a check list in Microsoft OneNote on my phone, that I updated but never completed.

It wasn’t until I was looking into the concept of Gamification that I came across what is one of my favourite new applications, Habitica.

 

Overview

Originally named HabitRPG, Habitica is an amalgamation of a to-do list, a calendar and a straight up RPG (Role Playing Game).

Upon joining you have to customise two things, your character and your tasks. The tasks are split into three sections, Habits, Dailies and To-Dos.

Before getting into the technical details of the different types of tasks you can set I want to focus on the aspect that makes the site so exciting, the RPG elements.

When you create your account you also create an Avatar, in a gloriously retro pixel art style. This avatar is the character that you are working towards leveling up.

For each Habit that you complete, regardless of the type, you are awarded experience points and money (in character money only!). This allows your character to level up and to buy gear to improve your characters statistics, much like a normal RPG setup. This immediately adds a carrot to motivate you to complete your habits, but what about the stick?

For every daily task that is uncompleted or for any negative habits your avatar takes damage. With a health bar of fifty points, this can vanish before you even realise. Death means that your character loses a level and you use one piece of the equipment bought for your character.

 

Introducing Multiplayer

Habitica has so far provided you with a carrot and stick to become more effective in keeping up your habits, but there is another level that really brings it into its own class. This is where that most powerful of motivators comes into play, accountability. Once you have your character you can form a party. A party is a group of players that combine to complete quests.

A quest is normally in the form of a “Boss”. Each day, every habit or to-do that you complete is tallied and, at the end of the day, deals damage to the boss. However, every uncompleted daily or bad habit will cause the Boss to deal damage to the entire questing party! There’s nothing quite as motivating like having to complete that last thing on your list so that you don’t have a large group complaining at you the next day!

I’ve joined a group with complete strangers and have found this to work perfectly as motivation, but I can imagine that being held accountable by friends, relatives or colleagues would lead to even better results!

There are plenty of other aspects to the “Game” side of Habitica, such as pets, potions, customised rewards and guilds, but these aspects are better explored than read about. Suffice to say that there are plenty of collectibles to keep you interested!

 

Habit Types

From a productivity point of view, Habitica is essentially a To-Do list. Each habit fits into the three categories previously mentioned, Habits, Dailies and To-Dos.

Dailies are the basis of the RPG element and are the items that I am most motivated to complete. These are tasks that you have set to be completed on set days of the week, this can be any combination of days of the week or even be set to repeat after a certain number of days. A daily that you haven’t ticked off by midnight will deal damage to your character and your questing party, so these naturally become your priority.

Habits are for those items that either happen multiple times a day, or more infrequently. These can be set up to have both positive and negative consequences, but there is not automatic cut off time for these to be completed. An example of a habit I have entered would be a simple “Eating Healthily”. This has both a positive and negative option and after a meal I judge whether I think it was healthy or not and award myself the appropriate prize or punishment.

The final type of task is a To-Do. These are for longer term items and one-offs that you need to complete. These have a simple check box to mark their completion and award you the experience and money bonuses when they are completed. There is no negative side to these.

 

Additions

As well as the additions to the RPG side of Habitica, there is much greater scope for the customisation of goals than I have the space to write about above. This includes the ability to turn a single task into a checklist of smaller tasks, customisable difficulty levels for each task that affect the risk and reward received and challenges issued by guilds that can add tasks to the list of anyone that signs up.

Habitica also operates a colour coded system for every task, from red for bad to blue for good, on every single habit or task which allows you to see at a glance which areas you will have to improve on.

 

All in all, this is a fantastic site. It is an open source project and completely free to use, and with applications for Android, iOS and even Windows Phones it is truly universal and easy to use.

The only downsides that I have found so far are that the mobile applications have a limited functionality when compared to the website and that the website itself has problems loading on certain machines and browsers. However, as a non-profit that is constantly improving itself I have no doubt that these issues will be resolved and if you’re too impatient to wait then contact them and help!

 

 

 

 

 

 

 

New Year’s Resolution – Why You Should Have One

It’s that time of year of year again.

Christmas is over, the new year beckons and we all start thinking about what life holds for us in 2016. You’re finally over the wine and food hangover from Christmas Day and you’ve decided that 2016 will be your year! So you sit down and write your resolution for the New Year.

I’ve noticed an interesting trend in the media in recent weeks discouraging people from making resolutions. They describe how making a resolution can only set you up for failure. How most people will fail their resolution in January. How gym memberships soar but only for the first few weeks of the year.

There are two important things to take from this. The first is that they’re right, most people break their resolutions quickly if not straight away. The second, and more important point, is to realise that this should not prevent you from making a resolution in the first place, you just need to do it correctly.

 

Setting a Goal

We will all have different targets for the year, from promotion to weight loss, and it is important to set yourself the right type of goal.

When considering your goal it is important to set yourself a quantifiable target. A set target allows us to measure progress and plan a route to success. Consider the following two resolutions, which is easier to aim for?

I will lose weight

or

In 2016 I would like to lose 2 stone in weight

The first resolution is well-intentioned but vague. You can measure your weight loss, but not your progress towards an ultimate goal. You’ve also set yourself a time limit; this goal must be reached by the end of the year. Both of these factors make it easier to motivate your self and visualise the end result you desire.

 

Waypoints and Targets – Your Plan

Take the time to plan out how you are going to achieve your resolution. You don’t necessarily need to come up with a day by day breakdown of your plan but you do need concrete ideas on how to achieve your goal otherwise it will never happen.

Remaining with the example above, there are several different routes you could take, joining a sports club, eating less junk food, cutting out sugary soft drinks, calorie counting, weekly gym sessions, a specific diet plan or a combination of all the above.

Come up with a rough idea of how you will achieve your goal, with a more specific plan for the first couple of weeks. But remember, the waypoints are not your resolution, the end point is what matters.

 

Failure

One point that has been missed by the resolution naysayers is around the point of failure.

Just because you miss a target, you have not failed your resolution

In all likelihood you will have a bad day, a day where you don’t achieve what you want. This is not failure. This is human nature.

What you need is the persistence to realise that one set back is not the end. You made need to reassess your targets and come up with a new plant, but it is not failure.

If you’ve set a good resolution then a temporary set back is not an issue.

Back to our example;

You want to lose two stone in a year, you’ve planned your targets and know that you need to lose around 2 1/2 pounds a month for the year to reach your target. You’ve decided that a weekly gym trip will be enough to achieve this. You stick to it.

At the end of January you excitedly jump on the scales, ready to tick off the first waypoint. To your horror, you’ve managed to gain a pound in the last month!

This is where the perseverance comes into play. This is not a failure. You just need to adjust your plan.

Have you been eating more to compensate going to the gym? Have you been snacking more often because you’ve earned it by exercising? Re-assess your plan and come up with a different option. Try combining the exercise with something else.

 

Key Points

To achieve your resolution this year:

• Set a quantifiable aim
• Set waypoint targets to achieve along the way
• Measure your progress
• Reassess your targets if necessary
• Never Give Up

 

 

Strength Through Adversity

“That which does not kill us, makes us stronger.”

• Friedrich Nietzsche

A famous quote that has become part of popular culture, to the extent that Heath Ledger’s Joker twists the phrase in the riotously successful Dark Knight film.

Everyone has heard of this and will recite it quite happily on any occasion.

It is also a quote that I have come to fervently believe in.

When considering this idea it should be specified under what context this is being analysed. I’m not addressing a physical definition, that can be empirically disproved, try asking an amputee. In the context of this post I will be discussing the matter as one of mental strength.

I believe that adversity, of many kinds, can help us forge the mental strength necessary for a successful future and not just in a professional context.

Perspective

The first advantage gained by overcoming obstacles is that we appreciate what we have more than if it had been an easy ride. Someone that has grown up in the depths of poverty would appreciate being wealthy more than those that are born to it. That isn’t to say that those born wealthy can’t enjoy their wealth, merely that without the perspective of poverty to strike it into contrast it would be life as normal for them.

For someone that has had to strive to reach such a position the rewards will be all the sweeter.

This holds true for many adversarial conflicts. For example, someone with a long term illness would be more appreciative of the freedom when healthy again than someone that takes it for granted as they have been healthy their whole life.

Perseverance

Experiencing failure, in all aspects of life, is a natural thing. I would go so far as to say that it is a necessary thing. The first time a person fails something it can feel like the end of the world but there is an important lesson that should be taken away from that first failure. That we learn from failure.

Richard Branson famously started a myriad of businesses before launching Virgin. It was the lessons he took from the failures that made him so successful.

Those that have failed learn that it isn’t the end of their life, that life continues on afterwards and improves again. Whether it’s the failure of a marriage or a business the result is the same.

The ultimate adversity, failure, teaches us the most important of things. Just because we have failed, doesn’t mean that we should stop trying. We learn to persevere.

“Character Building”

This is one phrase that is bandied around frequently by anyone that is forcing others to do unpleasant things, especially by PE teachers. This holds whether physical, such as cross country running, or mental, tedious tasks in the workplace.

Each time this phrase is parroted, you shouldn’t complain because it is character building.

This is not true. Character is made through adversity, yes, but not by being forced to do meaningless or repetitive tasks. There is nothing to be gained from this except drilling in an unnecessary obedience to authority.

Adversity is, and should be, an important part of developing a person’s character but these lessons come naturally through life and shouldn’t be sought after or pushed upon anyone.

Adversity can give us strength of character, perseverance to take on challenges and keep trying when they fail, the perspective to enjoy our successes and the drive to achieve them. Adversity is not something to be actively sought, but the greatest life has to offer comes from fighting through adversity to the achievement on the other side.

The Two-Way Job Interview

Much of the fear that comes from Job Interviews is rooted in the feeling of being on trial or judged by the people, or panel, that is conducting the interview however it should always be remembered that a job interview is a two-way process.

A job interview should not just be a one way diatribe of questions thrown at you, with you aiming to convince the prospective employer of your worth, it should involve questions and answers both ways. How are you to know that his a company that you wish to work for?

A job is a long term commitment of a large part of your waking time, deciding how this time should be spent can not be left to a panel of interviewers to decide but should be taken into your own hands. Take the time in the interview to establish the best points of your prospective employer so that you know that the fit is right for you.

There are a few key points that you may want to consider, aside from the pay scale.

What does the company social life look like?

Some companies put on extra events, socials, barbecues and sporting events for their employees. Sometimes this is based around membership of a social club, sometimes it comes mandated from head office.

Other companies have a working tradition of leaving work at work, clocking out at half five and not even thinking about work or your colleagues until you clock back in the following morning. These are entirely contradictory working cultures and it is important to work out which you would prefer.

What about overtime?

This is another factor that varies wildly between companies and between potential employees. You may want to work your 40 hour week and that’s it or you may be willing to work as many hours as they will pay you to work. Find out what is expected from you and what you would want to be offered from them.

Is there Room for Progression?

Would you be happy working this job for the rest of your career? If not then it is worth inquiring about the opportunities for internal progression that the company can offer you. If there’s a clear path to your career goal then this is a bonus but don’t forget to ask about some alternative routes such as internal or external training and qualifications. The company may be willing to support you or even pay for extra qualifications if it leads to them having a more productive employee and it certainly won’t hurt your chances of future promotion, either within the company or with another employer.

None of these factors should be a deal breaker, just as no one factor should decide which candidate they hire. Try to approach these subjects throughout the course of the interview rather than saving them for the inevitable section at the end. Having these interspersed throughout will turn the experience into more of a conversation and dialogue.

This has several advantages. It will make you feel more comfortable if you having a conversation rather than just responding to a series of questions. Being more comfortable and relaxed results in being more confident and always gives a positive impression to the interviewer.

It also gives the impression of being more proactive, rather than just reacting to the questions the interviewer can see that you are actively involved in the process and seeking information.

Perhaps most importantly, it can help you decide if it is actually somewhere that you wish to work.

Saving on a Low Income

Savings are the cornerstone of financial security at any level. We all know that it’s something we should be doing, so why do so few people manage it?

When you’re living paycheque to paycheque, as many people are in the current economic climate, it becomes a daunting task to set aside any money for the future. The primary concern is to meet the rent and bills now rather than worry about hypothetical costs further down the line and this perfectly natural. This doesn’t mean that it’s impossible to start saving, just that it requires discipline.

So what are the key points to start saving for the future?

Firstly, start small. If you don’t think that you can afford anything then start very small.

Put away £1 a week if necessary, 10 pence, whatever you can afford. Make sure that you do this regularly, have a set time every week so that you don’t forget. In fact, the easiest way to do this is to set up a regular transfer from your account to a savings account. If you set the transfer to go through on the same day as your payday then the money will go straight out to your savings, it won’t be in your account long enough for you to notice that it’s gone!

Secondly, start today. Don’t plan to start next week, next month or next year, start now. Every day that goes by your savings will increase, every day that you don’t is a missed opportunity.

Another crucial point is very simple. Don’t touch the savings! Towards the end of the month you may be tempted to take money out of your savings to see you through until payday, often with the intention of paying the extra back in. Don’t. You’ll have to pay a little more in to your savings just to get back to where you were, so you’ll be more likely to do the same the next month, and the next month. It’s an easy cycle to get into and a difficult one to get out of so avoid this trap in the first place.

However, you do need to establish what your savings are for. Are you saving for retirement, a new car or just to have some emergency money? What establishes an emergency? Set yourself boundaries and stick to them!

I’ve found it helpful to have to separate savings accounts, one for long-term, one for an emergency fund. The long-term savings I do not touch under any circumstances, that will eventually be a deposit on a house, or even a retirement fund. The emergency fund is different, this covers expenses that aren’t covered in my monthly budget, but only emergency expenses.

For example, if the MOT is due on my car, then this is budgeted for and paid for out of my regular account. However, if my car breaks down and costs £200 to get back on the road, then this is an emergency payment from my savings. I need the car working and cannot afford to take that hit to my monthly budget.

Using the same example, it shows how important savings are. If I didn’t have that backup in place then that would have to come out of my monthly budget and leave me short on everything else for a month. This could leave me with no money for petrol, food or even rent. Having that backup, however small it is, can make the world of difference when the situation gets difficult.

A lot of keeping control of finances is about forming the right behavioural habits and this is no exception. You’ll feel the difference in your budget initially, but after a few months it’s unnoticeable. You grow accustomed to living off slightly less money, meanwhile your savings can just grow and grow.

Budgeting Basics

The budget is the basis for any form of financial stability, from household to business to country.

So what is a budget and how will it help?

It’s not a magic fix to money problems, quite the reverse, it is a tool to help you see where the problems are. If you’re overspending then a budget will help you see where your problems are, but it won’t fix them. That’ll be down to you to spend less. There’s no other way to do it.

But it can make a big difference in telling you where your money is going. That £2 a day on a coffee, £3 on a sandwich and £8 on a pack of cigarettes? That comes to £4745 per year. Surprised? That’s where the budget will help you.

How do you set up a budget?

There are two routes to go down, you can either build your own budget or use a template. I would always recommend building your own budget, it’s tailored to exactly what you want see and is as simple as you make it. The problem with templates is that they can be incredibly hard to customise and get the information that would be useful to you.

That being said, there are good budget templates available on programmes like Microsoft Excel, there are great apps available for all phones and plenty of websites that will let you budget online for free. If you’d rather stick with something pre-made then this is the route to go down. Make sure you check out some reviews before committing to a format. You don’t want to waste time setting up your finances in an app that you stop using after a week!

From here I will focus on the very basic steps to create your first budget.

Step 1

The most basic version of a budget is simply a list of your expenses. Make a note of everything you spend, from the pack of chewing gum you bought when walking through town to the new car you’ve waited years for. Write it down. This will start the habit of noticing what you spend. How many times do you spend that 50 pence on chewing gum? How long did you save for the car? The simple act of recording this will start you being more conscious about your expenses.

If you find yourself forgetting then follow this one simple step.

Keep. Your. Receipts.

If you’re ever asked if you want a receipt, the answer is yes. You don’t throw that receipt away until you’ve recorded the expense. With pockets bulging with receipts, or a pile building up on the desk you will soon remember to keep records.

Step 2

Once you’ve got in the habit of recording all your expenditure it’s time to dig into that raw data a bit more. Divide your expenses into categories, just broad ones to start with as you can worry about subcategories later. A simple division would look something like this.

• Food
• Travel
• Bills
• Rent
• Miscellaneous

Start recording each receipt into a different category. This is the time that using a spreadsheet becomes a lot easier than a paper copy but if you’re not familiar with the software then stick to paper!

Over the course of a month, this will allow you to see how much you’re spending on each category.

Step 3

Now is the point that we get a bit more complicated. It’s time to set your budgets for each category.

Some of the categories, such as rent or bills, will be for a fixed amount so these can’t be set. So take your whole monthly income and take away these fixed costs. The remainder is what you have left to allocate. Let’s have an example using the categories above.

Alan earns £1000 per month.

He pays £500 in rent and £200 in bills.

As these are both set costs you need to take these off the £1000 before splitting the budget.

This will leave Alan with £300 per month to split between the final categories of Food, Travel and Miscellaneous.

How you do this split is entirely down to your circumstances but make sure you give yourself an exact figure to aim for!

Step 4

Sticking to your budget is the hardest part. Once you’ve spent your allocation for the month you have to stop spending money in that category, although for obvious reasons this isn’t always possible. If you’ve no money in your budget for food and still a week to go before the end of the month then you can’t starve. But when you buy food, make sure that the extra comes out of the allowance for another category.

These imbalances will happen frequently to start with as you learn which things cost you the most. Take a look back at where you’ve overspent and underspent at the end of the month and adjust your budgets accordingly. Prioritise the things that are the most important, food being a primary example, but don’t go overboard. If you can buy food on a lower budget by shopping more sensibly then maybe that extra money could go towards something more fun?

As you get used to budgeting you’ll get better at it in several ways. After a while you’ll know roughly how to split the budget into categories and which ones need more money in but you’ll also get a feel for what you can afford within your budget. You’ll automatically check yourself when shopping, to ask whether this means you’ll overspend and once you have set targets it is much easier to motivate yourself to meet them.

The important thing to remember is that budgeting is a habit. It takes time to form the right behaviour patterns but when you start following the process automatically the difference can be fantastic.

Budgeting gives you control over your finances and gives you the ability to make informed decisions about what to spend your money on and when you can afford it. Some of you will be content to keep this to a monthly level, being assured that you can meet your bill payments. Some of you will end up with a much more complicated budget breaking down your expenditure into weekly and even daily intervals, matching your costs down to a penny. Either way, it can give you more comfort and peace of mind when managing your finances.

Pursuing Your Passions

It is vitally important that we retain passion in our lives. It drives us forward, gets us out of bed in the morning and leads to the creation of great things.

It is something that’s often drilled into you in your formative years and yet falls by the wayside later in life.

How often were you asked what you wanted to do when you grow up?

How often is that asked now?

Confucius famously said:

Choose a job you love, and you will never have to work a day in your life.

This is very true, but often we aren’t given the opportunity to chase our dreams.

The reality of life is that very few people have a job that they have a passion for. Most people end up in a job to pay the bills, some accidentally drift into their careers, some keep the same job from the age of 16 to retirement. Those that make an active choice to pursue a specific ideal job are getting fewer, especially in times of economic uncertainty and record unemployment.

But do we have to lose our passion? Of course not. We need to find ways to keep it.

The first piece of advice I can give is the obvious one. You can find a different job. If you know what you want to do then make a plan to get there. It’s never too late to make a change. There are a wealth of options available to make a change in your life. If you’re under qualified for the position you want then start with that. From evening classes to the Open University there are a myriad of ways to learn and gain qualifications and almost all of them have options to finance any fees. It doesn’t need to cost you the world but it can make the world of difference.

Always remember that it is much easier to job hunt from the position of having a job. When you’re unemployed and need the money it is far too easy to take the first job offered. When you’re already employed then you are searching from a position of strength. Any prospective employer would need to meet your terms to employ you. Use this.

If this isn’t an option, and for some people the process can be prohibitively risky, then look for passion elsewhere. Whether it’s a sport, a hobby or volunteer work everyone can find something to inspire them. Everyone has that one thing they’ve always wanted to do and never quite got around to. Painting, writing, rock climbing, kayaking, ballroom dancing, pottery. It doesn’t matter what that dream is, chase it.

For some of you, you’ll have no ideas. To you the advice is a little different, go out and do something. Anything. You’ll find something out there to inspire you. But you won’t find it sitting at home. Take the initiative and bring passion back to your life.

Harnessing the Achievement Reaction

The human brain is wired to respond to success with positive feelings and emotions.

Without getting too deep into the chemistry involved, success is something that triggers the release of dopamine in the brain, a hormone that triggers a pleasure response.

It is crucial to harness this in a positive manner as there are many opportunities that are wasted as success is passed over.

This mechanism is very cleverly used in many walks of life, often by corporations who seek to leverage this reward system for financial gain. You can find it in places from Casinos to World of Warcraft and the reward system is the root cause of many addictions.

Using the harmless example of video gaming (I don’t want to get involved in a post on drug addiction!) this is now almost ever-present in games and the process is simple. The game awards you for completing things in the game, with a badge or achievement. Often these are completely meaningless, they over no tangible reward, no money (in-game or otherwise), no extra help in the game. The majority of them are simply to give you a goal to aim for and the feeling of success when you’ve reached that goal.

The clever part of this is the pace at which you reach the achievements, when you first start playing a new game they will come in rapid succession. You’ll get rewarded for completing the simplest things and yet this will still trigger the feeling of success. As your time with the game progresses, your achievements will get further apart and harder to manage. Chasing that initial feeling keeps you coming back to put the hours in.

Crucially, there is never a gap in the progress. You’ll never have that moment after success to think, “What next?”

The completion of one goal is followed immediately by the next objective. On the rush of success you’ll plunge headlong into the next challenge.

So, is this a bad thing? In the case of addiction, yes. But it doesn’t have to be. In the case of World of Warcraft it’s just very good game design and a very good business model.

Can we make it a good thing? Absolutely. Use this system in your daily life. Note all of your small successes, set a goal and reach it. This will give you a feeling of accomplishment and pride. But, as with the examples above, don’t stop there. Use that good feeling to head towards your next objective.

If you have a series of goals mapped out then you can move immediately from one success to another. It’s important to celebrate our successes but it can be easy to fall into the trap of using success as an excuse to delay the next project. Don’t let this happen to you!