Take Control. It’s your money and your future
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We spend most of our lives working. Why? To earn money. We exchange our passion, time, effort, and brain power for dollars. To create our life choices.
So it makes great sense that we optimise what we do with that money that we’ve spend a lifetime accumulating. But what does this statement mean and where do we learn how to take control of our money? This is where it becomes a challenge. We don’t learn this at school. But we, as individuals have to accept the challenge to become financially literate and to develop positive beliefs around money. It’s our responsibility.
What does being in control look like? There are a number of recognisable characteristics
- Belief
- Education
- Planning
- Organise your defences
- Investor
- Enjoying some treats
Beliefs
If you do nothing then nothing will happen. Nothing will change. It is up to you. And it’s not that hard. Stay curious. What are your underlying money beliefs or blocks?
Educate yourself
A lot of financial matters can be complex. And the financial services industry promotes this view. But many of the really important matters are based on simple principles that are not difficult to understand. This is where you need to take an honest look at your financial literacy. If you think that you are lacking then do something about it. Start learning. There are many options here both formal and informal. The best courses are structured and assume no previous knowledge.
Planning
There is an old saying used by financial advisers. “Those who fail to plan, plan to fail”. And they are probably right. Your financial plan may be complex, or it may be very simple. But you need a plan!
For example, let me introduce you to the very simple long term “Coffee Plan”. This is a very simple financial plan of investing $35.00 per week, (equal to the price of 1 cup of coffee per day). It may seem very modest. But in 50 years at 5% interest rate it brings in more than $400,000. And if you increase the amount invested as the price of a cup of coffee increases then you will most certainly finish up a millionaire, whether you like it or not. My 12 year old grandson is right on to this and loves the fact that he will be a millionaire one day.
Superannuation is a very good formal example of the “Coffee Plan” in action.
Why do we plan? Because it gives us structure now, and allows us to make predictions about the future. Planning is a critical element of taking financial control.
Planning also allows us to consider how our future will change as we move though the stages of life from dependency on our parents, being a single adult, maybe raising and educating our children, saving for retirement and then finally retiring. Each of these stages has different cost and savings implications.
More complex financial plans include salary sacrifice arrangements, superannuation strategies, company and trust structures, deploying tax-effective investments, estate planning and so on.
Organise your defences
Don’t be surprised when something goes wrong. Life has both ups and downs. It is prudent to anticipate both. We all know the feeling when the washing machine dies, the car needs major repairs, or you need serious dental work. Gulp! However, you should not be surprised. This is part of life and needs to be considered if you want to be in control of your money story.
There are two general ways to build financial defences. They are an emergency account, I call mine a “woops account” and insurances. We know our TV, appliances, white goods, car etc have a fixed life span and will need to be replaced. Therefore, it is simple logic that we have designated money to replace them.
Then there are the less predictable events such as divorce, or loss of your job. These can cause financial difficulties if funds have not been set aside previously. Perhaps we should not be so surprised given that approximately 30% of marriages in Australia end in divorce. I have always advocated an amount for ‘leaving home’ money. And 56% of all workers have been employed in their current job for less than 5 years and 21% had been in their job for less than 1 year (Australian Bureau of Statistics).
Then there is illness and/or the death of a partner or spouse. The financial implications of illness and death are best defended by setting up insurances. Check out your/your partners’ superannuation fund where you will find these available.
Depending on how complex your financial scenario is, you can DIY or engage a financial adviser. The Australian financial services industry is comparatively well-regulated and there are many professional advisers to choose from.
Investor
Successful investors get rich slowly. This is a lower risk approach and it works. So accumulating wealth takes time. A lot of time. You must look beyond the horizon to a long-term future. Be patient. That is what successful investors do!
We’ve already spoken about the “Coffee Plan”. It demonstrates that becoming an investor can be easy. If your finances are really tight then your investment plan might be $1.00 per day. But the key is to start investing … today.
I am not describing how to invest but emphasising the importance of starting to invest. This is the first step and the biggest step. It is something that you can do NOW. Becoming an investor can begin before you are educated and without a plan.
These can come later. If at the end of the month you have only $5.00 saved it doesn’t matter. What you have done is to take that first huge step.
As you progress as an investor you will learn, you will develop discipline and you will develop a financial plan. A plan that you are comfortable with.
Investors understand their investments. Importantly, when you do invest make sure that you know and understand exactly where your money is being invested. If the investment offers a special deal, is shrouded in mystery, or promises very high returns … then run!
Enjoying some treats
Treats are rewards. The most obvious treats are holidays. They need to be included in your budget. We have them and we deserve them. But never borrow to pay for them.
Our lives are filled with events that deserve to be celebrated. Birthdays, Christmas, anniversaries, weddings, divorce and so on. It is a long list and is generally associated with an expression of friendship or love. Such gifts and events are highly symbolic. However, the strength of our friendship or the depth of our love is not related to the price of the gift or the expense of the event. So, again, always spend within your budget and never borrow.
Treats are to give pleasure to us and those near to us. Once we have met our lifestyle financial obligations there are general three reasons why we invest.
The first is to spend the money on something that give us pleasure. The second is to know that we are financially more secure than we were previously, and that gives us pleasure. The third is to bequeath our investments in our will for the benefit of those we love, and that gives us pleasure.
Take Control. It’s your money and your future. Your future financial self will thank you.
‘Jan’s experience and deep financial knowledge was relatable and easy to understand and she was so supportive.’ Maria
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