The way you manage your money underpins your ability to build wealth. It is difficult for most people to effectively achieve their future goals without managing this well. The choices you make when spending your money will influence your current and future lifestyle.
Money Management underpins your ability to build wealth
It is human nature to favour short-term gratification over longer term rewards, so it’s common for more emphasis to be placed on immediate wants. This is the driving force behind impulse buying.
Have you ever thought how much does it cost to be you? It’s important to understand how you spend your money so that you can make informed choices to balance your present needs and wants with the impact on the future.
- Here are some everyday scenarios that highlight when we aren’t managing our money well.
- You get a pay rise but it doesn’t seem like you save any more than you previously did.
- You don’t know where your money goes.
- You regularly put savings into a savings account but draw on these to top up living expenses.
- You have a rolling credit card balance, meaning you don’t pay it off monthly.
- You have more debt than assets.
Often people feel that they are too busy to take control of their money, or it’s too hard to start and sometimes people just don’t want to know.
How we help you become better at Managing your Money
To begin with we will never tell you how to spend your money. There are however, a number of things we can do to help you become better at managing your money.
Budgeting is about setting goals which break down into targets. We look at how much you want to spend and whether this is manageable and realistic.
We help you create a banking structure that works for you. Your bank account structure is a physical representation of your budget. We categorise and automate your transactions and use a bucket strategy which means one bank account for one purpose
We use ongoing reporting that shows how your actual cash flow matches your targets and how you are progressing towards your goals.
Protecting cash flow
As we all know life can be difficult to predict. There will always be unforeseen challenges and changes that limit your ability to earn an income and this can impact your cash flow in the short term and in some cases long term. It’s important to protect the lifestyle of you and your loved ones by transferring the risk to your cash flow with insurance including life insurance, income protection and trauma insurance.
An ‘emergency buffer’ of cash is also important because many of the things that impact our ability to earn an income are immediate, as are expenses. We help you work out the right buffer for your circumstance, usually about 3 – 6 months of cash.
Managing debt effectively
For most people debt is part of building wealth. The important thing is to understand the difference between good debt and bad debt.
Good debt, helps you purchase, wealth creating assets that have the ability to create an income or grow overtime. Some examples are, a home, investment property or shares. In some cases this good debt may also be tax deductible.
Bad debt is often associated with buying assets that don’t earn an income, will likely fall in value and aren’t tax deductible. For example, using a personal loan for a holiday or your credit card for a new wardrobe.
Understanding the difference between good and bad debt will help you make better financial decisions.
Correct loan structure
It’s important when borrowing money to ensure that the loan is structured to accommodate your interests and needs. This includes selecting the right product for you and then ensuring the features of the loan are the ones that best reflect your particular needs.