HOW TO MANAGE YOUR MONEY RIGHT

how to manage your money

How you manage your money is 100% about behaviour rather than income. If you have poor financial habits, then regardless of how much you earn, those poor habits will cause you too always be broke.

It is because of poor behaviour that 80%+ of people live paycheck to paycheck. This statistic is scary!

manage your money the right way

So, if I was to ask you a question like. How do you feel about your current financial position?

How would it make you feel? Frustrated, scared, perhaps a little bit anxious?

What if something were to happen with your employment? How long could you last without that income? If the answer is less than 3 months, let me be the first to tell you. Your situation is bad!

Now bad does not mean irreversible. All it takes is some action and the right process.

When I say you’re not alone, I mean it.  8 out of every 10-ppl stress about how they are going to pay bills when they become due.

So whatever your feelings are about money & your financial situation. It is time for you to take control of your life! Your income is irrelevant, be it $40,000 or $500,000. You need a plan to manage money or your money will manage you.

Money management is not stressful if you have the right tools to help you. All you need to do is follow these 3 simple Money Steps:

3 step money management

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STEP 1. CREATE A BUDGET

A budget is you taking control of managing your money rather than wondering where it all went. Now, if you’re just sitting there hoping for the best that you will have enough money left over at the end of the month. Beware, that you’re going to find yourself short.

You need to sit down with your partner and structure your budget at the beginning of each month. Yes, some months will remain the same, but quite often you will find little ways to save a bit more if you review it each month. By doing this you are giving yourself accountability.

You will also give yourself momentum to reach your financial goals. If you don’t do this you’ll just be a hamster on the wheel, spinning like crazy & getting all tired, for no financial gain.

Why budgeting works

Let’s not overcomplicate how money works. There’s three things you can do with it.

  • Spend it
  • Save it
  • Give it away

Now hoping that you don’t give too much away we are left with 2 options. To spend or save. With a budget, you can control each of these components.

The reason bugeting works is that it puts YOU in the drivers seat. Not your parents, not your friends or the credit companies. It allows you to decide how your money is going to be spent.

It gives you peace of mind that you’re not playing dice with your bank balance each month & worrying about your debit card being declined at the grocery store.

Budgeting allows you to pursue your dreams and goals.

What’s a zero based budget?

Basically, a zero-based budget is when all incomes and expenses have been allocated. It’s a record-keeping method that you tell every dollar where to go. Whether that be spending, saving, investing, gifting.

so if you earnt $7000 for the month you would fully allocate that $7000 so that there was zero left.

The idea is that you live below your means, then the surplus money is allocated to savings or investment to improve your retirement goals.

Setting a budget is one thing, you have to follow through with it. Ever heard the saying, it’s not the idea its the implementation? The same goes with budgeting, if you don’t implement it you won’t see the benefits.

STEP 2. GET ON A MONEY MANAGEMENT PLAN

Now financial goals are great, and they are absolutely needed. Whether you want to retire on $100k a year or $200k. Perhaps it’s paying off your credit cards, saving for a wedding… Knowing what you want is important.

However, what is just as important as that is the money management plan that will get you there.

The good news is that we have put together what we call the 7 Steps Of Freedom. Regardless of your financial journey these steps will work for you.

7 Steps of freedom

  • Freedom Step 1: Create a budget that’s below your means
  • Freedom Step 2: Save $1500 for emergencies
  • Freedom Step 3: Payoff all debt (except your house) with the debt smash method
  • Freedom Step 4: Save 3 months expenses in an emergency fund
  • Freedom Step 5: Invest 15% of your income for retirement
  • Freedom Step 6: Pay your home off ASAP
  • Freedom Step 7: Build wealth to your retirement figure

The beauty is that when you start small and focus on one goal at a time you can make really fast progress and it helps to create forward momentum in your money management plan.

Following the Freedom Steps it will help you stay on track and stop you from falling back into the debt cycle again and helps keep you focused on what is important.

Now you’re going to have to trust me when I say that you can’t skip steps. These steps are designed this way because they work. Investing while you still have consumer debt is like filling a bucket of water that’s littered with little holes. Just don’t do it.

Also, remember that this is simple. We aren’t reinventing the wheel, sometimes the best things in life are the simplest. The same can be said for this method. Follow it through it’s logical process and I guarantee you that it will work.

STEP 3: INVEST AND SAVE FOR YOUR FUTURE

Once you get to this stage it’s pretty exciting. You now want to look at money management for the future.

You’re debts are cleaned up, you have a foundation of 3 months of emergency funds. Time to invest.

Did you know that 1 in 3 people don’t have anything saved for retirement? That’s straight on the pension in retirement. ouch!

Also, remember it doesn’t matter how much you have to start. Starting from scratch? Great! Already got a nest egg? Great. It doesn’t matter if you’re 20 or 55 years of age. What is important is that you start NOW.

Your retirement is coming, Are you prepared? If not then start preparing.

So you ask how do i go about investing for retirement? Well here’s how you can go about making sure you’re putting away enough to be comfortable in your golden years.

Invest 15% of your gross income

You should be getting close to 10% super contributions from your employer. Now, just to be clear the 15% does NOT include your super – this is ontop of this amount. I recommend kicking in another 5-10% pre-tax (depending on your limits).

This will reduce your taxable income so you will pay less tax and you can take advantage of the tax beneficial investing platform through the superannuation scheme.

Now, I always recommend creating wealth outside of your superannuation, this gives you more flexibility in your pre “retirement age” life.

The remaining 5-10% invest your after tax money into managed funds / ETF like vanguard. Low cost index funds can be a really good way of diversifying your investments into the market so that your returns resemble the average of the stock market. These will return 10% + per year over time.

GET HELP MANAGING YOUR MONEY

Are you ready to be the boss of your finances but just a bit unsure of where to start? you can complete the below subscription form and we can give you a list of next steps based on your current situation.

Now, if you’ve already started to invest and save money it’s time to get in touch with a professional advisor to ensure you’re on track.

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Andrew Mitchell