Posts Tagged ‘money’

Money: Save 10% of your income

March 18, 2009

Money is important, but if all your money goes out the door and there is none left for the future…your job is just treading water. To get ahead, you need to make changes. 

Save 10% of your income

I first read this suggestion in “The Richest Man in Babylon” years ago, but I didn’t take action. 10% seemed such a small amount at the time that I just didn’t do it as it didn’t seem worthwhile. I didn’t set aside a separate account, but said to myself

“I’ll just put some money away when I have some left over at the end of the month”. Of course, that never happened!

Finally, I started a separate account called “Cash” and started putting 10% of my income into it AS SOON AS the money appeared in my account rather than at the end of the month. It was pretty pathetic at first but I had at least started. Now that account has a tidy sum in it and I like watching it grow in small increments each month.

 

If you saved $20 per week for five years in a savings account with an interest rate of 6% paid monthly, after five years you will have $6,214.33 in this account. If you managed to put $100 away per week, you would have

$31, 071.66 in five years time.
Imagine if you had done that five years ago!

 

This account is not a savings account in that you intend to spend it eventually. It is a lifetime account, one you leave there as the basis to your personal wealth. It should only be used for growing your assets and investing. It is important to do this and recommended by so many wealth coaches for the following reasons.

1)       Discipline with money – You have committed to save, you have taken action and you are mastering this amount of money. As it grows you will have the discipline to carry on saving, and you won’t spend it. This proves to yourself that you can control money. It doesn’t control you. You are a saver, not a spender. This is important for your mindset about money.

2)       Attraction for more money – This initially tiny but growing amount becomes like a gravitational field and attracts more money. Interest compounding on the account over the years makes the growth accelerate. Compound interest is when interest is paid into the account, which in turn grows the principal, and in turn generates more interest.  

3)       Basis for further investment – As the amount grows you can use some of it for further investment; not spending, but investment to grow your wealth.

4)       A safety net – Although this account is not meant to be touched, it is a safety net in case of emergency. It is there if you lose your job, or you need some expensive surgery, or you are in an accident, or a loved one needs an operation they can’t afford.  Life will throw curve balls at you! Having some money in an account you won’t touch is important in case you do really need it someday.

Take action now and open an account for your 10% money.


Think of it as your discipline, your safety net, your dreams, and your money confidence and watch it grow.

Don’t spend it on something you think you really want, as chances are you will want something else in six month’s time. It is not for spending. It is for your future. If you have the discipline to do this, you will also see a change in your attitude towards money quite quickly. 

What is 10% of your income now? Will you commit to putting that into a lifetime account? How much will you have in this account after five years? 

Money: Financial education and taking action

March 10, 2009

Many people have money problems even when they work fulltime. Here are some ways to help. 

Get some financial education

You need to know the financial basics. If you don’t know what assets and liabilities are or if you only have a vague sense of possibilities in investments, then you need to get some financial education. Read some books (there is a list under Recommended Reading), see a financial advisor or go to one of the many online sites that offer financial education. Once you understand how money works and how it can best be used, how you think about money will change.

Find out about investment options. Many people think the jargon around investing keeps them out of the game. But it doesn’t take too long before you understand some of the concepts and you can see there are many other ways to make money that are interesting and inspiring. People invest in many different ways depending on their interests and risk profile. You just need to have some curiosity and understand that the knowledge will benefit you, if you learn and take some action.

What are some of the questions you have about money and investments? Where can you find out the answers?
Take Action: Spend less than you earn

This may be basic, but so many people don’t actually do it!

For example, when you think about how much your salary is, you think of the gross amount (the amount before tax and deductions). If you divide this by 12, you may have a healthy monthly figure. But if you take out taxes, deductions like superannuation, insurance and then repayments and regular bills, it may not leave you much left over for the fun stuff. So you need to know what you earn AFTER deductions and what you are spending.

Spending money is addictive and a vice everyone enjoys to some extent. You work hard to buy more stuff and as you earn more, you spend more. If you get a raise, then you can buy that new car or new clothes, or get a better apartment in a better area.

But is it possible to do things differently?

  •          Think before you buy. Do you really need this? What does it add to your life right now? Are you buying it because of what you want other people to think? Will you still want it in six months? If not, is it worth it?
     
  •          Analyse your credit card bill. Go through the paper copy or download it. Categorise and total it based on the expenses e.g. supermarket shopping, takeaways and restaurants, entertainment etc. Look at how much you spent on things that weren’t necessary. How many items on your bill do you not even remember? Are you surprised by how much it adds up to?

How many of those expenses could you scale back and how much would it save you per week or per month?

Money: How can you make the most of the money you earn?

March 5, 2009

You do earn money in your job, so you just need to keep hold of it. If you implement some of these strategies, you will give yourself more choices about the work that you do and the life you lead.

If you take action to control your money, you will find more opportunity to enjoy your life and your job.

You can invest in self development, perhaps towards a different career altogether. If you have some extra money, you can pay off some debt so you don’t feel trapped where you are now. You will feel there is hope that you will make it out of the situation you are in now.

The money you earn can be used to leverage yourself out of your situation and into opportunities you cannot yet even conceive.

Here are some initial steps.  

Assess: What are your finances like now? 

Be honest! You are only trying to fool yourself if you exaggerate any of the figures or reduce your debt levels on paper.

Give yourself a financial health-check.

·         How many days/weeks/months could you live with your present lifestyle if you had to stop work tomorrow?

·         How much have you saved for emergencies?

·         What is the value of your assets? (what you own e.g. house, car, investments

·         How much is your total debt? (what you owe other people e.g. mortgage, personal loan, car finance)

·         What are you worth? (total assets – total debt)

·         What is your income every month? Are you dependent on your job, your spouse, or the government for this income?

·         What are your expenses every month?

·         What are you left with every month? (income – expenses)

·         How much do you invest every month?

 

Assess: What do you want financially?

 

People don’t usually think too much about what they want financially because it seems obvious! They want enough money to fund their lifestyle and buy the things they want. They want to be able to pay the bills, keep the family happy and have a holiday every year. But have you ever written down what you want financially for the rest of your life?

Have you thought about what you want in retirement? Or if you want to be financially independent before then, how much would you need to accomplish that?

·         What do you want your life to be like in the future?

·         How much money will you need to live that life?

·         How far are you away from when you want to retire?

·         How much money do you need to save/invest  to have a great lifestyle when you retire?

You need to be specific with the numbers and make it tangible, as these are the first steps towards your financial plan. A good start is to see a professional financial planner who will help you with your financial goals and the practicalities of how to achieve them. It may cost you some money now, but in my experience, it will make you a lot more in the long run!

Money…5 Financial Tips

August 2, 2008

Someone we know just won the lottery here in Australia. At least this proves it is not an urban myth!
But a lottery win is not a financial plan – and for most of us, we can’t rely on luck for our financial future. We need to make active choices every month to make the most of the money we have, and make sure we are financially secure for the future. With the financial doom and gloom in the media at the moment, you need to know that you CAN make a difference to your financial situation with some behavioural change.

Here are some of the top tips to help your with the finances:

  1. Put aside 10% of your income (before bills) every time you are paid. It doesn’t matter how much this is, but put it aside into a “Cash – don’t touch” account. It will build up and you can use it as a basis for investment. You also have a buffer for tough times and unexpected situations.
  2. Be aware of your spending. Try keeping a budget and record receipts, even just for a week. If you add up those coffees and lunches out, you will see how much you are spending. There are some great free tools and information for budgeting at this site http://www.secretbudget.net/about/about/budgeting-tips.html
  3. Declutter your life and sell it on eBay. Be ruthless and go through your stuff. Do you really need those clothes or the clutter in the garaage? Go through it all and sell what you can, and give the rest to charity. Put the money from the sale into your 10% account for investments. Warning: do not browse the For Sale at the same time as selling!
  4. Get educated about finance and investment. If you don’t know anything about money, except that you need it, then you need to do some reading! I recommend “Rich Dad, Poor Dad” by Robert Kiyosaki as a good start to understanding money – or “Why we want you to be rich” by Kiyosaki and Trump.
  5. Don’t watch adverts or become a victim for specials and sales. You will spend money you don’t need to because it sounds like a bargain. This tip and 27 others can be found at http://www.marcandangel.com/2008/07/17/28-unique-bits-of-financial-brilliance/

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