Spend less than you EARN!
I mentioned in my previous blog article that you need to Spend less than you Earn. This may seem cheesy and simple but how many people do you know who live way beyond their means?
The book The 4 Laws of Financial Prosperity tells a simple story of a struggling family, stealing from Peter to pay Paul, with the not unusual problem of bills exceeding income. There are four lessons to be learned and practiced, let’s explore them further:
Lesson 1: Tracking – the First Law of Financial Prosperity
Funny thing how you can get to the end of the week, have no money, and even more troubling, have absolutely NO idea where your hard earned cash went to. Sound familiar?
The very first step to getting into a better place is to track. How do you do that – well here are a few ideas.
- Document a budget – and this is not a guessing game – this is looking through your previous months and years of expenditure, writing it all down and working out what it will look like for the coming months. Check out some of our Budgeting Tools online.
- Plan your expenditure – some time ago we made the decision to operate 3 bank accounts.
- We have a “Direct Debit” account where we run all the known expenses – mortgage, electricity, loan repayments, insurances and school fees.
- From the Account we also transfer fortnightly a planned spending amount to our “Family Spending Account” which is what we have for Groceries and any entertainment. If it is not in here we don’t do it.
- We run a Business bank account for doTERRA income and all business expenses with the keen eye of our accountant now checking over this one. From the doTERRA account, we now pay Superannuation for Tess monthly – to give her the maximum super deduction annually ($25,000 deductible contributions) and we pay Tess a fortnightly “salary” for personal use.
- What is left all goes to a mortgage offset account – the plan – debt free in 4 years! By 50 (or sooner) we will have a paid for home and no other debt.
- How do you do this planning? Well for the past 10 years or so, we have used the simplybudgets.com.au software to track and record all income and expenditure. My biggest problem was budgeting for fortnightly, monthly, three monthly and even yearly expenses – it became a real cash-flow nightmare!
So if you are that Young Professional (in your 30’s and 40’s), then this is the time to focus on building wealth by investing some of your income and getting on top of your loan repayments. As such, your financial challenges will be centered around:
- setting financial goals
- investing surplus income
- reducing tax
- building your investment portfolio
- adding to your investment property portfolio or purchasing an investment property
- managing your debts and borrowings
- protecting your income
- having adequate life insurance
- making sure your superannuation is in order
Getting the right financial advice and using your income efficiently to build wealth is vital at this stage of your life. This will allow you to invest and grow wealth whilst enjoying your current lifestyle.
The sooner you start planning, the more likely you will achieve your financial goals and the better off you’ll be in the future.
To start growing your wealth complete the 5 Minute Health Check now and one of our Financial Planner will be in contact to discuss how to help you.