According to a number of polls taken in recent years, roughly 56% of the people recognised that they would be financially better off by next year. This optimism is great to see across the country, but not even a bucket load of optimism will pay the bills.
Feelings and emotions do not always turn into facts; therefore we need to base our financial decisions on financial facts to ensure we continue to keep the optimistic momentum. We all want chunky bank accounts so here I’ve compiled a list of free financial advice from billionaire investors, LinkedIn career advisors and the regular Joe on how to avoid secretly losing money and how to put a stop to it.
Blooper: Budgets are Boring
Solution: Budgets are the financial version of a healthy diet. The same as you would identify empty calories in your diet, you need to acknowledge empty spending if your lifestyle. If you can honestly say right now you don’t know how much you spend per month on average, saving will be almost impossible for you. Start today by monitoring every expense you make for the next three months, record it on Microsoft Excel if you have to. Kevin O’Leary, one of Shark Tanks billionaires said, “Spending habits can only be seen over a 90-day period.” After completing the exercise, understand which purchases are sucking money every month and eradicate them accordingly.
Blooper: Laughing in the Face of Debt
On average, one in five people believe that carrying over credit card debt from one month to the next is a responsible way to manage their finances.
Solution: O’Leary mentions in his book ‘The Cold Hard Truth on Men, Women & Money’, “If you’re growing your credit card debt at an interest rate of 16 to 21%, you’re screwed.” The best thing you can start immediately is paying off the credit cards with the highest interest rates. On average it will take around three years to bring your balance back to zero. Ways to accomplish this can be to stop buying lunch during the week and potentially treat yourself on Fridays, whilst lunch-boxing the rest of the week.
Blooper: Buying Cheap, Not buying Smart
Many Australians love to try and buy things cheap, but sometimes they ignore the smarter purchase (I addressed this in a previous post for anyone interested).
Solution: Friends of yours may have nicer cars, more clothes etc., but this doesn’t mean you need to buy that extra tee or get that extra jacket to compete. There is a high probability that you only regularly use between 10-20% of your wardrobe. This means the remaining 80-90% has been spent on things that have devalued in money. Rather than splurge / waste money during the sales, take some tips from this clever clothing / wardrobe technique to improve your style and stop wasting money on clothes you wont ware very often.
Blooper: Money + Relationships = Argument?
Solution: Relationships have been drawn into many a battle over money, with apparently over 70% of marriages resulting in divorce with no assets, compared to couples with $10,000 in assets or more. In my experience, discussing short term goals such as holidays and long term plans like retirement allow you both to understand each others financial strategies. Hiding debt from one another is poison within a relationship; eliminate that threat by nipping it in the bud.
Blooper: Delaying Repayments
Solution: $20 is not a great deal of money and repaying it late might not seem a serious offence, however an amount as little as this can lower your credit rating by as much as 100 points. This again isn’t the end of the world, but those late repayments will be marked against your name for the next seven years by financial institutions. This could end up costing you thousands. A poor credit rating results in higher interest rates on cars, loans and mortgages. If you need help managing your repayments, there are plenty of mobile apps, which you can set reminders on so you never miss a repayment again.
Blooper: Losing Money at Work
Solution: The economic crash has certainly rammed home the point about how having a job makes us lucky, but don’t let employers take advantage of this. LinkedIn career advisor Nicole Williams said: “Money always trades for money, you deserve a raise if you’re saving or making a company money.” If you believe its time for a raise or a promotion, make sure you provide optimal performance for a minimum of 30 days before raising the conversation. Use stats from your performance, but also understand that raises usually lie between the 2-3% mark, whereas changing jobs could realise a 10% raise.
Blooper: Investment Adversity
Solution: The notorious Warren Buffet once stated “Investing is laying out money today to receive more money tomorrow.” A good rule for investing is researching investments thoroughly; don’t follow what everyone else is doing because that means you’re already too late and your investment will be limited. Buying shares in Google or Apple now wont make you a millionaire, but researching the next Apple or Google just might.
[Warren Buffet's advice to anyone on investing]
Blooper: Give the Kids what they want
Solution: Every purchase big or small affects the family budget whether it’s a big purchase such as a PlayStation or a small purchase such as toys from Toys R’ Us it all adds up. A good thing to do is explain to your kids about the family’s bottom line and put things into perspective. The cost of a PlayStation for example could fund a short family holiday to Paradise Country on the Gold Coast.
Blooper: Don’t plan on having a rainy day, Why Save
Solution: Financial problems can come with little or no warning, a broken limb or a redundancy can really hit home if there is no money saved to see you through the tough times. A great solution can be to try and save 10% of your salary every month in the hope that by the end of the year you will have at least enough to cover you for a month or two.