We waste £1600 a year due to difficulties managing money.
It’s called the ADHD tax.
This newsletter isn’t about the ADHD tax. It’s about trying to avoid it.
This is the ADHD Tax Avoidance System.
In this post I’m going to show you exactly how I manage my personal finances to avoid the perilous cliffs of the ADHD tax.
The Tools
If you want to copy this system, here are the tools you’ll need:
This spreadsheet (click to make your own copy)
Last 3 months bank statement (to see how much you spend)
A Neobank account (Monzo, Starling, Revolut, etc.)
Your bank must offer you multiple virtual cards or this system won’t work. Virtual cards are non-physical cards you can use via your Apply Pay, Google Pay and/or online. This is why it’s important to use a Neobank (as listed above).
Step One: Calculate Your Monthly Burn Rate
Burn rate is an accounting term, often used in business, to calculate how many months you are away from financial ruin.
It’s useful for personal finance too.
Burn rate is like having a financial compass that shows you how long your savings can last without any new income.
Your burn rate is simply how much you spend each month (on mortgage, bills, and groceries, etc.)
To make burn rate useful, calculate how long your savings can cover this amount without new income.
For instance, with £30,000 in savings and a £2500 monthly burn rate, you're covered for a year.
With the current economic climate, one year of living expenses (if possible) is sensible.
Here's how to find yours:
Gather Your Bank Statements: Start by collecting your bank statements from the last three months. They hold the key to your regular spending patterns.
Download and Fill Out the Spreadsheet: Use this spreadsheet to organise your financial data. It's designed to make this process straightforward.
Record Your Income and Expenses:
Income: Enter your monthly income in the designated area of the spreadsheet.
Expenses: List all your monthly expenses. This includes your mortgage or rent, utility bills, groceries, and any other regular payments. Don't forget the small ones – they add up!
Calculate Your Yearly Expense Total: The spreadsheet will automatically total your monthly expenses. This is what it costs you to live each year.
Compare with Your Savings: How does this yearly expense total stack up against your savings? Do you have enough to cover a year's worth of expenses?
By the end of this exercise, you'll have a clear picture of your monthly spending and how well-prepared you are if the shit hits the fan.
Knowing your burn rate empowers you to plan better and avoid the financial stress that often accompanies ADHD.
The boring part is over. Now it’s time to setup your online banking and put the ADHD Tax Avoidance System into action!
Step Two: Setting Up Your Bank Account
I use Monzo Plus (£5 a month) for its great feature of setting up multiple ‘pots’ for different expenses. I then connect each pot to a virtual card – one for each key expense like mortgage, groceries, and fuel. This is very easy to do with Monzo Plus (other Neobanks are available).
How it Works:
Monthly Allocation: Right after paying myself a salary, I distribute funds into these pots. For example, £400 for groceries goes into the 'grocery pot'. This pot is linked to a 'Sainsbury’s' virtual card. This card is the ONLY card I use to spend at Sainsbury’s.
Dedicated Spending: Each virtual card is used solely for its assigned expense. My 'mortgage pot' card pays the mortgage, and the 'fuel pot' card covers petrol costs and so on.
Financial Organisation: This system ensures I always have enough for essential bills and expenses. Money in each pot is only used for its specific purpose.
What is my current account for?
Everything else.
Once ALL essential expenses are tucked away in their pots, any money left in the current account can be spent. On anything.
Meaning I can be impulsive and “waste” money while knowing all essential expenses will be paid.
Financial Peace of Mind with ADHD
In summary, the ADHD Tax Avoidance System is more than just a financial strategy. It's a pathway to peace of mind.
By mastering your monthly burn rate and streamlining your banking with tools like Monzo Plus, you gain control over your finances.
Managing money with ADHD doesn't have to be a struggle. With the right system in place, you can confidently navigate your financial journey.
🚨 I have a very limited number of spaces available for 1:1 coaching.
If you’d like to learn The Drug Free ADHD Toolkit and find a way to work with your ADHD, rather than against it, please apply before the spaces fill up.
I am happy to accept clients with Access To Work funding.