So, you’d like to be rich?

So, you’d like to be rich?

I hear you!  Like many, the lure of ‘enough’ in the bank is strong.  And ‘more than enough’ is even better!  That’s rich!!  But if you’re living in a developed nation, chances are you’re already wealthy.

Oxfam tells us that just 1% of the world’s population hold 48% of the worlds’ wealth!

But let’s get real, rich and wealthy certainly don’t mean the same thing.

Some might consider wealth as the amount of money you have in the bank, or your net worth when looking at the balance sheet.  But, others consider wealth in its many and varied ‘other forms.’

Do you have a roof over your head that you can afford?  Food available every time you open the pantry or fridge door?  Are you surrounded by happy, healthy loved ones?  Is affordable health care within reach?  Do you have enough, even too much ‘stuff?’  Are you able to afford transport costs, TV, a phone and wifi, along with little luxuries like movies, a night out or special entertainment treats now and then?

Some consider true wealth to be measured by what you have left if you lost your material possessions.  And it happens.  Australia especially is a nation dominated by extremes like floods, famines and fire.

Would you still have a loving family and fulfilling relationships if all else was lost?

From a very young age, marketers have bombarded us into thinking that we never have ‘enough.’  That last year’s fashions, bags, sunnies and possessions are so out of date and that we are continually told we need more… newer and better.  But as many find, striving constantly for the latest, and chasing labels is hardly the key to happiness.

Working out what makes us happy is a huge step forward in unlocking how we can discover wealth.

Do your children’s smiles light you up?  Do you have a hobby you find fulfilling?  Does your faith hold you steady when times are tough?  Is there one friend or partner you always enjoy spending time with that ‘fills your cup?’  Does holding a fulfilling job mean a lot to you?  Chances are when you work out what it is that truly makes you happy, you’ll find you’re pretty wealthy after all.

 

Diana Princess of Wales  “They say it is better to be poor and happy than rich and miserable, but how about a compromise like moderately rich and just moody?”

 

Mindset Matters

Mindset matters.  If I’ve learnt anything from my trips to Africa with The Hunger Project and helping people in abject poverty to turn their lives around, it’s the importance of our mindset.  Mindset drives every part of our lives from our wealth and happiness to achievements and relationships.

If the words ‘financial planning,’ ‘budget’ or ‘money and finances’ leave you feeling bored or disengaged, it’s time for a change of mindset.  You are the one who can change your financial future.  I’ve met many professional and successful people who put ‘money’ on the back burner and hope it’ll take care of itself somehow.

But, only you can decide to become interested in your finances.  It’s the first step in making any progress and can happen as quickly as you decide to become interested.

And it may not be suddenly being interested in ‘finances’ but again, working out what makes you happy.

If an annual holiday where you can ski, dive or relax with a good book in a hammock is really important to you, you will find ways to make it happen.  If paying down the mortgage or getting rid of credit card debt is important, then setting goals and taking an interest in their outcomes if the first step.

Goals based financial planning is much more effective as it’s tied to outcomes.  You’re getting to set the goals and constantly achieve them.  It’s much easier to give up a night on the town or drinks with your mates if you know that the $100 you spend now, will be a dive on your trip, or ski hire for a day.

Setting our intentions is paramount.  ‘I want to save $5, 000 for a week in Thailand or $10,000 for a driving trip down Highway 1 in the USA by this time next year means’ we have become very clear on what we want and when.  ‘Someday’ and ‘one day’ don’t cut it when planning.  Attention to detail helps us to reach our intentions.

Depending on our upbringing and thought patterns, money or the thought of it, can trigger emotions.  If the thought of doing a budget or having a certain amount set aside makes you happy, then great!  But if you are getting knots in the stomach at the thought of sitting down to examine your finances, it might be time to examine your thought patterns more closely.

If you do feel that you trigger a particular emotion when dealing when money or react to something when the subject comes up, take time out to examine your reaction.  Is what you think really true or could there be other possibilities?  Learning to insert ‘thoughts’ between triggers and emotions can take time.  Seek professional help if you’d like to understand more about your triggers and thought patterns and feelings.

Some are brought up to believe that ‘money is the root of evil’ yet the original text states that ‘the love of money is the root of evil.’  There’s a very clear distinction here between ‘having money’ and greed.  It may be worth examining some other strongly held views.

If debt is a problem, the same theory can apply.  “I want to eliminate my credit card debt entirely in the next two years” helps us to focus on an outcome that will make us happy and feel much more content.

What’s a goal that you’d like to start working towards today?  And when would you like to achieve it by? I’d love to hear from you!

Saving for the Kids’ Education

Preparing for higher education

Like most parents, you want your children to have the best education possible, yet school and university expenses and fees are undeniably costly. The money you spend on your kids’ education could be one of your family’s biggest expenses.  Depending on where you’re based, it may be right up there with your Mortgage repayments.

Not that many of us begrudge the spend, viewing it more of an investment in our children’s futures.

Some will need to decide whether 12 years of formal schooling will be undertaken in the private space or whether just the high school years will be funded.  Others are also happy to help with University costs and some allow Fee Help (formerly known as HECS) to pick up that tab.  Whatever you choose, there’s costs attached and it’s best to be prepared.

Once you’ve worked out your family’s preference, starting to save early will help your children have a high-quality learning experience.

It pays to do your homework.  Research what schools in your area charge each term so you have an understanding of what is required.  Will you need to move to be in the catchment area of your preferred school?  Do you know other parents or students of the school you can ask for testimonials about their experience there?  Do you need to register your child years in advance to get into your preferred school?  Knowing your costs early will give you greater time to save and help avoid disappointment.

The decision to send your children to public or private schools and then to university will determine just how much you need to put aside to start saving.  Despite your wishes, it’s also hard to know whether your children will want to go on to University until they’re some way into their academic career and begin to form some idea about what they’d like to do for a living.  Will a gap year needed to figured into the equation with money for travel?  Or will they fund that by working a part-time job from when they’re able.

What will you need?

As an example… if you send two children to private high school for six years each, which costs around $20,000 a year for each child, by the time they graduate you’ll have spent $240,000 on school fees. And that doesn’t take into account any extras like school uniforms, textbooks, trips and excursions, tutoring, extra-curricular activities, sporting clinics and the like.  This could see costs closer to $275,000 by the time they’re through.

If you only wish to save only for high-school years, you’ll have around 11 to 12 years to save for each child.  If the figures seem out of reach, you may need to rethink what you have to put aside, or review the schools your child will attend.

Public schools are much cheaper but there’s still no such thing as ‘free education.  There are extra fees for textbooks, uniforms, trips, stationery and school camps to pay for. These can easily add up around $1,000 per annum.

Trade Colleges are dearer than public schooling but for those looking to enter trade’s or take over dad’s business, these can be a great option for later high school years.  Often they’re around $4 – $7,000 and only two years is required.

The cost of going to university or college can also vary. If your child is eligible for HECS-HELP (a government loan available to tertiary students) they can choose to defer payment of university fees until they’re earning a living.  Entering the work force with large student loans may not be ideal, but in many cases is unavoidable.

Even if you (or they) aren’t paying upfront tuition fees, there’s still books, textbooks and materials, union and sports fees, lunches, accommodation and transport costs. Contact the university or college and find out how much each of these things will cost each semester, so you have an idea of how much money you will need to save.  And if you’re thinking ahead, don’t forget to allow for inflation too.

The earlier you start saving for your children’s education, the better. Education costs are usually a long-term goal that can take more than 5 years to achieve so stashing early is your best bet.

Then, once you’ve got a ballpark figure in mind to reach for, work out where you’ll put that money.  Are you happy with high interest, web based savings accounts and term deposits or want to invest in education funds or bonds for the longer term?  With interest rates at historical lows, it’s hard to find good returns on conservative styles of investments.

If there’s a top tip to getting set for education costs, it would be to research, plan, track and manage your savings goals on the go.  And be sure to review on at least a half yearly basis to make sure you’re on target.

Managing a Financial Windfall

We’ve all got that dream – we’ll have that massive lotto win, Great-Aunty Betty will die and leave us everything… or even that a spectacular tax return or bonus will come our way.

Although they’re aren’t regular occurrences, financial windfalls can come our way now and then… so instead of blowing it all, what’s the bet way to take advantage of a bonus or extra dollars that come our way?

The temptation to splurge can often be overwhelming, but your future self is hardly likely to thank you for replenishing a wardrobe or buying more “stuff” that is likely to end up in a charity bag in a year or two.  So what are some eminently sensible and grown-up ways of making that money work harder?

Here’s a few ways to spend this money that will give you long-term benefits.

  • If you have debt, especially non-deductible debt like credit cards or personal loans, pay them down first, followed closely by long-term debt like your Mortgage
  • If you’re really not sure what to do and everyone is putting their two cents worth in and confusing you ever more, put it in a high interest savings account until you can do some research and be comfortable with your decision
  • Can you put a bit extra in your super?  Retirement might be a long way off, but that means you have the benefit of long term compounding interest in your favour
  • Is there enough for you to start investing?  It may be worth kicking off a portfolio of shares, property or managed funds if there’s enough.
  • Getting financial advice can be of great benefit.  Financial professionals often have access to funds and research that are unavailable to many and they can ensure that you invest in line with your risk profile, not putting ‘all your eggs in one basket.’
  • Have you put off personal protection strategies like income protection, trauma cover or health insurance?  It may be worth investing in looking after yourself
  • Have you considered taking time out and learning new skills?  Maybe it’s time to invest in yourself and do that course.  Who know’s a career change might be just what you need!

And if you’d really like to still blow just a little of it – set a limit – maybe 10 – 20% and knock yourself out.  Have that splurge, but be smart too.

Do something that your future self with thank you for.

 

Financial Things to do Before You Die

While it might not be as exciting a list as Bucket List inclusions like:

1. Head to Base Camp;

2. Dive the Great Barrier Reef;

3. Have a Champagne at the top of the Eiffel Tower;

4. Stay in a yurt in Mongolia;

5. or sleep in an Igloo under the Northern Lights… it’s definitely a very loving legacy to leave behind for those you care about.

Unfortunately, I’ve had to assist in unraveling affairs of those who instead leave behind a financial mess for their family to navigate.  On top of grief, it’s a bitter pill to swallow when your financial affairs have not been left ‘in order.’  I know I’ve covered this issue before, but it’s so important to have finalised.

And I understand, it’s not a popular question to ponder and is likely hard to imagine, but what if something were to happen to you? Would your loved ones be taken care of or would they face a tough financial future?  Do they know what your wishes are?  Do you even have your important documents sorted?

The greatest gift you can leave your family and loved ones, is having your affairs sorted out before you go.  Please don’t think of this as something morbid… it might seem like I’m backing up the hearse and asking you to smell the roses here… but this isn’t about you, I promise.

If you have made plans, do your loved ones know where to find them? Would they know what assets you have, what insurance policies are in place or how to access your superannuation or life insurance?  Have they met your trusted advisers and know who to get in touch with if something were to happen?  Have you kept them in touch with what your wishes are?

Here are some simple steps you can take to protect the important people in your life:

  • Consolidate your assets and sort your bank accounts out
  • Ensure your life insurance is adequate based on your current circumstances
  • Make sure beneficiaries have been nominated (where possible) on your superannuation and insurance policies
  • Chat with your partner about what you’d like to have happen in the event of the unexpected
  • Ensure your Will is current – circumstances can change quickly!
  • Have your arranged for an Enduring Power of Attorney or completed an Advanced Health Directive?
  • Make sure those who need to know are aware of where your important documents are stored

Not everything will pass through your estate, so it’s wise to ensure you understand what forms estate assets and what stays outside.

Work through the list steadily and once it’s done, make sure it’s reviewed regularly.  Your loved ones will be glad you did.

Embracing Minimalism

Living a simpler and less cluttered life is gaining fans around the world. Here’s some key trends.

1. Tiny living

Rapidly growing global populations mean homes are getting smaller – from micro apartments, re-purposed shipping containers to tiny houses.  But, living small does not have to mean living in a cramped space, with designers increasingly focused on maximising every inch of space.

Sydney architect Spencer Jones says today there are many design elements that can be used to maximise space.

“In cities like Paris where living spaces are very small, people often have made-to-measure, full-height joinery to store as much as they can and leave the rest of the floor empty.

“Designers are also taking inspiration from caravan or boat architecture, using spaces for multiple functions. We are seeing more bedrooms that double as living and dining spaces, multi-function furniture and the use of mezzanine floors in smaller spaces.”

2. Mindful consumption

Australian consumers tend to have high consumption habits. Yet research by Santander Trade also finds we are increasingly concerned with our health and the environment, which is helping to drive a trend towards more mindful purchases.

If you are aiming to become a more mindful consumer, here are some tips to get started:

  • Shop for locally produced and made products instead of imported goods.
  • Buy secondhand from charity shops or online listings. Older or vintage items are usually better quality and will last longer.
  • Choose eco-friendly goods made from recyclable materials.

3. Decluttering

According to blogger Joshua Becker, of lifestyle blog Becoming Minimalist, there are many benefits to owning fewer possessions – less to clean, less debt, less to organise, less stress and more money.

One method Becker recommends to declutter your home is the ’12-12-12 Challenge’. Find 12 items to throw away, 12 items to donate and 12 items to be returned to their proper home.

Summary

Our living, shopping and lifestyle habits have moved on considerably from the 80s and 90s when conspicuous consumption was the norm. Today’s consumers are discovering that living with less can not only help the environment and our pockets but can also help to reduce our stress levels too.

My Top Financial Tip

If there’s one tip I’m constantly asked for, it’s what’s the best way to get on top of your finances?  And for me, that’s easy to answer – “Live Within Your Means!”  Good money management boils down to harnessing the cash flow and getting on top of debt – with the biggest gremlin being credit cards.

If the word ‘budget’ annoys you and has you running for the door, try ‘spending plan’ instead.  A budget/plan should be divided between fixed regular costs (those you MUST meet) and discretionary spending (the WANTS and nice to have stuff.)

Work out first what it costs for mortgage or rent payments, food, clothing, utility bills and loans.  This means you’ll have a much better idea of where you stand and how much you are spending on fun stuff like entertainment and non-essentials.

Losing the credit cards should be a top priority.  Learning that if you can’t afford it now, you can’t have it, is a great skill to take through life.  That’s not to say lay-buy or payment plans can’t work, but we need to move on from the ‘I want it now’ mentality.

Learn what you’re capable of when you’ve got less commitments like interest payments for items you’ve forgotten that you’ve even bought.  You may be pleasantly surprised at what you can achieve with better spending and saving habits.

Did you know, that if you’re 25 and have a nest egg of around $5000 and you’re able to save $50 – $75 a week at around 7% average interest (compounding over the long-term) you could have yourself a cool $1 million by retirement at 65?  It might be a while off, but it does highlight the opportunity cost of spending around $200 to $300 a month on eating out, movies, drinks and ‘stuff.’  Add that to your compulsory super and that’s not a bad way to enjoy post-work life.

Most however don’t really start thinking about retirement until they’re 40 plus and suddenly realise they’re half way through their working life and have been wasting the ready for over 20 years.  It’s time to analyse those poor financial habits now!

Reducing debt and saving as much as possible is imperative if you want to maintain a certain standing of living both now, and when you retire, and living within your means makes life a lot easier.  Life without ongoing financial stresses also helps you sleep easier now. Chances are, the Centrelink age pension will be harder and harder to come by and eventually disappear.

It’s up to us to take charge of our financial future, and the sooner, the better.  Living within your means from now, is vital.  Are you?