You’ve heard the expression “too much month left at the end of the money”, right? Seems that is exactly the case for many of us. A recent article in the Herald Sun* points out that around a third of Australians are living pay-check to pay-check. Which got me thinking… why would that be?
Well, to begin with, we spend most of our money pretty much as soon as we get it – on things that make us happy. We no longer have a strong savings mentality. According to the article, only 22% of the respondents said they were tyring to save money. Our spending is driven by the desire to live in the moment, enjoy life and sometimes, to portray the lifestyle we think we should have.
Probably the most common thing I hear people say at our events and in meetings is: “I just don’t know where all my money goes”. Its not going into savings; most people don’t have a budget or savings plan they are sticking to. It’s not being invested; less than 10% of the population owns an investment property for instance. To make matters worse, household debt and credit card debt continue to climb.
The end result is we feel like we’re getting further and further behind.
So how do we turn this around? Here’s a few ideas to get us started.
Step 1: Get yourself a plan. Focus on the future, where you want to be, what your vision for your life and circumstances looks like a year from now, five years from now and ten…
Step 2: Set a budget. Get on top of your cash flow. Map out your fixed expenses and track what you’re spending on the rest. If you can’t measure it, you can’t manage it. There are some good, free phone apps for this; I’m using TrackMySPEND by MoneySmart.
Step 3: Get professional help from independent, qualified and experienced advisors. We do it when we plan our holidays. We do it when we plan to build a house. Why not when we plan our financial future?
Step 4: Pay down “bad” debt. Work on the credit cards first, then the store cards, the personal loans and allocate your extra cash (even if there’s only a little bit) to paying these down. Eventually, you’ll be in a position to start getting some good debt – debt that gives you leverage, creates income and saves tax.
It takes some focus, it takes some effort, but after all life is for living and being financially free makes it a whole lot more fun!
*Australians struggling to save, living from week to week between paydays. Karen Collier, Consumer Reporter, Herald Sun July 9, 2017
Words by John Di Natale, Director of Equi Wealth