Wealth management consultant Vince Scully shared his ‘PEARL’ saving strategy
A leading wealth management consultant from Australia has shared his simple ‘PEARL’ budgeting trick and explained how it can save you thousands of dollars.
The finance author and former Macquarie Bank advisor Vince Scully said the mistake that most people make with their budget is that they think of it as a diet rather than a spending plan that can allow them to buy what they want.
‘Stop thinking about a budget as cutting things out, like being on a diet, and rather think of it as a spending plan, like a nutritional plan,’ Vince told FEMAIL.
‘It’s about living the life you want with the money you have.’
He recommends categorising all expenses into the P, E, A, R or L categories – Postpone, Eliminate, Avoid, Reduce or Love (stock image)
What is the ‘PEARL’ budgeting system?
P – Postpone
E – Eliminate
A – Avoid
R – Reduce
L – Love
To try the ‘PEARL’ trick for yourself, Vince recommends you first of all make a list of all your expenses.
Then, scroll through your expenses and categorise them as you go, using the letters P, E, A, R or L based on the system’s five categories – Postpone, Eliminate, Avoid, Reduce or Love.
‘If you think about your spending in these categories it will make it easier to prioritise,’ he said.
‘It will also subconsciously focus your mind on cutting the chore stuff first.
‘This can yield the biggest savings with the lowest impact on your life.’
When you think about any P or Postpone costs, Vince said if you reduce your haircut from once every four weeks to once every five, then you will have cut that expense ‘by a quarter’.
‘If 13 haircuts a year becomes 10, that simple saving can add up to hundreds of dollars,’ he said.
Vince explained that by categorising every single expense, you will save thousands and be able to eventually afford your own home (stock image)
Costs that should be marked E – to be eliminated – could go next to subscriptions or memberships that are rarely used.
Identifying something that falls into the A or Avoid section is trickier, but could include looking at the circumstances you find yourself in, or the people around you who encourage you to spend more than you might otherwise.
For some people, this could be marking an A next to a situation where ‘a couple of beers after work’ turned into a big night, while for others it could be next to a receipt for some clothes a friend encouraged you to buy but you never wear.
What are Vince’s five tips for managing your money?
1. Document: Note where you are spending.
2. Analyse: Examine it to see where you could get more out of your money.
3. Plan: Keep ahead of your next step.
4. Track: Make notes on how you are going and amend them accordingly.
5. Repeat: Implement this process into your routine.
‘For the R or Reduce category, planning ahead can help you to make smarter choices,’ Vince said.
‘This could be making lunch instead of buying it every day.’
Finally, with the L section, work out what you love – whether it’s good food, cosmetics or other items you can’t do without.
Vince said by assessing where you spend and what gives you the most joy you can identify true waste – the things that aren’t giving you value.
‘If you start with an annual plan, you can then spread the total over the 12 months and set aside some from each pay for lumpy expenses,’ Vince said.
‘The big advantage here is you don’t have to scramble to find money for your holiday – it will be sitting in your bills account when you need it.’