Posts Tagged ‘Wealth’

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? 

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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?

When do you want to retire? Australians propose age 75

September 1, 2008

It was reported in The Australian last week that Seniors want to raise the age of retirement to 75
http://www.theaustralian.news.com.au/story/0,25197,24253126-5013871,00.html

For an aging population, there were some comments that must be noted:

  1. By 2030, more than half the population of Australia will be over 50 years old
  2. “the issue of aging ..is a greater crisis than climate change”
  3. Australia is wasting the talents of millions of older people
  4. “we cannot economically sustain a retirement age of 65”

This is an important issue for all developed countries where women are having fewer children later, if at all. The boomers are also wanting to continue their lifestyles without being pensioned off to watch TV all day, and want to continue to work and add value to companies and meaning to their lives. A discussion of age policy is also critical because governments just can’t afford to pay the age pension when the working population will be so few compared to the retired within this generation.

So how does it affect your working life – which is what this blog is all about?

These decisions on policy will affect everyone, and it will not just be Australia. With the economic crises in the US and UK, similar discussions will be had.
A friend commented the other day how fast her life was flying by. Suddenly it is September 2008 – where has the year gone?
When will you be 75? The years will fly by, and you don’t want to be on the non-existent government pension then. So start now by reviewing your financial situation, and looking forward – even just a few years.

Chapter 8 from the free workbook also contains questions and diagrams to help with your financial situation, http://joannapenn.com/free-e-workbook-plus-chapter-1-of-the-book/
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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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Australia 2020: Turning knowledge into wealth

April 21, 2008

Increase wealth with innovation

 

One of the focuses of the  Australia 2020 Summit is the productivity agenda. This link contains an overview and also a downloadable PDF.

http://www.australia2020.gov.au/topics/infrastructure.cfm

 

This agenda targets the changing nature of the workforce and the economy and how ‘innovation’ systems can be used to improve productivity across these areas. The economy needs to adapt to an aging population, the problems of climate change and a new economic landscape which focuses more on China and not just the US.

 

One of the innovation messages is to “turn knowledge into wealth” and improve commercialisation of science and research. This productivity agenda also features improvements in early childhood education. These two are intertwined if education and the economy are considered as whole.

 

People exist on the continuum – starting in education and ending up in the economy.  

 

Currently the education system is focussed around modules of knowledge that don’t necessarily relate to real world situations.  They do not apply directly to turning that knowledge into wealth.

One of the major missing components is teaching children and young people  about money, entrepreneurship and creative innovation
.

Science is taught in a vacuum, likewise literature and other areas of knowledge. I am not suggesting that these lessons are left behind – but that there are also modules that help students to turn their passions into profits. The commercialisation of science, or the arts can also be taught alongside how to use the internet to build a business, how to sell and how to account for the profits legally. The expansion of programs like Young Entrepreneur are needed. There could be more competitions that encourage participation and innovation, rather than viewing from the sidelines like a reality TV show. Seed money for young start-up ventures could be sought from angel investors. This should be encouraged as part of mainstream schooling and not just for the geeks or the super intelligent. Young people need to understand that they will need to earn a living so being taught the value and reality of money early on will help them later. If this had been encouraged for my generation, the credit crisis may well have never happened.

 

Some might say that it should not just be all about the money, and I agree that learning should also be undertaken purely for the pleasure in learning. But the practicality of what children are taught and how this will be used in the workplace must be examined. One of the graphs in the PDF shows how the number of people in management, admin and professionals has increased and the number of tradespeople has decreased. This means a huge number of people who work in offices, and not enough tradies to fix their plumbing or do their roof. I know, as I am one of the office workers who finds IKEA furniture difficult to put together!

 

To address this, education needs to start valuing real world skills as important to learn from an early age. Indulge children who want to bang nails into wood – maybe they will turn into builders instead of IT consultants – and probably make more money that way. Has the exit of male teachers from early learning meant that these more ‘male’ skills have been neglected in favour of softer skills? Teaching needs more innovation, less blame and a better PR job. It is often not portrayed in a way that encourages young people to enter teacher training currently.

 

For the rest of us, increasing wealth with innovation is exactly what we need to do. Changing the paradigm from one job or one career to multiple streams of income, investments, and self education for life.

 

Jim Rohn says “Formal education will make you a living; self education will make you a fortune.”

Individuals needs to embrace this attitude and start learning about the new economy and the impacts of technology, China and climate change.

Stop complaining about the oil decline and invest in sustainable energy stocks. Buy property on the outskirts of the city and save the change for your investments. Read books instead of watching TV. Listen to audios on self development instead of music all the time. Learn a language (Mandarin?) on your commute. Learn some practical skills. Take some evening classes.


And then turn this knowledge into your own wealth.