Finance and ...

Few things in life attract as much energy and intensity than money. Some people pride themselves on how much they can get and others pride themselves on how little they need.  Within the two extremes there is every area of grey imaginable. FOr some people, owning is a source of guilt. For others it’s a source of significance and others it represents power, influence, freedom, control, safety, security or shame.

There is no handy universal scale to tell us how much money is enough. Many people live their lives as if no matter what they earn, it still isn’t enough. More is better is the catch cry.

The first step to managing your finances in a healthy way is to know where you stand with them. Guesswork isn’t going to cut it. Financial management is about awareness of the way things are, and then deciding if they need to change.

If your strategy up until now has been to ignore the finer details of your finances, it’s time to create a new strategy. The chances are you’re spending all or more than all of your earning and failing to save under the old strategy. There’s also the probability that the situation won’t change until you face the reality of the choices you’re not wanting to make.

Step One:

Calculate your earnings and expenditure

Where are your finances at?

Monthly earning:

Monthly expenditure:

Saving

Mortgage/rent

Rates/water

Tax

Electricity

Phones

Car registration

Car expenses

Food

Going out

Clothes

Loans

Other

Monthly expenditure

Net:

Step Two:

Calculate your net worth

What is your net worth? Be honest with yourself here. Don’t inflate the numbers under assets to feel better. You need to know exactly where you stand with your finances.

Assets:

House/Property

Car/ Vehicle

Investment Properties

Insurance Policies

Equities/shares

Investment clubs

Antiques

Jewellery (Only 50% of receipt)

Savings

Furniture (only 25% of receipts)

Other valuables

All Assets

Liabilities:

Mortgage

Business loans

Private loans

Credit Card debt

Hire purchase

Overdue bills

Other Depts. Loans

All Liabilities:

Total Net Worth:

Step 3 Three

Decide where you want the previous two sets figures to be.

If you are looking at sets of number that explain exactly why you are in debt or don’t have the net worth you had told yoursefl you have, make the decision to change them. Make a commitment to yourself to act in a way that will assist you to bring about the change you want. This is not the time to wish, wait and hope. You must commit.

The amount I am aiming to be earning by (insert date) ___________  $____________________

The amount of my net worth by (insert date) ______________  

$__________________________

Step 4

Stop the credit card madness

It seems so easy when we want something and we buy it by putting it on the credit card. It’s like “free” money… for a time. Then the pain sets in because we have to pay back the money. And the pain gets stacked in the form of interest payment if we find we can’t repay the entire amount. And we feel that pain for months after the impulse to buy is gone.

It maybe no sense, yet it’s a pattern repeated time and time again. If you are in their cycle, then it’s time to take a stand. Stop using your credit cards now. It will means you will have to live within your means, and one of the keys to success with finances is as simple as spending less than you earn.

Commit to only paying cash for the next three to six months as you obliterate your credit debt.

Step 5

Spend less than you earn

Spend less than you earn, and save the difference. This means you need to pay yourself first. Not with whatever might be left over, but first.

At least ten percent of what you earn each month need to go into savings and investments, so  no matter what, you have a nest egg that is growing.

How I am going to guarantee I spend less than I earn.

Step 6

Make the most of compounding

Make the most of compounding. Whatever you earn in the form of interest payment, dividends, return on investments, bonuses… all earnings above your expected monthly amount… gets rolled over into your investments.

COmpounding is a chance to create wealth by investing in other people’s talent. You must become an investor. When you invest money, don’t spend it, and the growing amount experiences growth.

For example, imagine having a bet with someone about who will win twenty games of tennis. You decide - for fun - to double the bet each game, starting with twenty cents for the first game. Sounds like not very much, until you do the maths, and then you might decide it’s time to get really good at playing tennis!

The first game is worth twenty cents, the second forty, third- eighty, fourth - $1.60, fifth -$3.20, Sixth - ( and this still looks pretty cheap for a bet) - $6.40, seventh -$12.80, Eighth -$25.60, Ninth- $51.20, tenth -$102.40, eleventh -$204.80, twelfth -$409.60, thirteenth -$819.20, fourteenth (and now it’s starting to count) -$1,638.40, fiftheenth -$3,276.80, sixteenth -$6,553.60, seventeenth -$13,107.20, eighteenth -$26,215.40, nineteenth -$52,430.80

How much is the last game of tennis worth? Over one hundred thousand dollars.

In the early days the growth looks insignificant, but as you continue the growth explodes. Start out with $10.00 per day at 10% return and invest it for forty years you will have over $1.8  million in your saving. This is the power of compounding.

The secret is, no matter when you’re starting or what the amount, you must get started now.

If you put $100.00 a month away at around 15% return, they will have $110,000.00 by the time your children is ready for college. Start now!!

Step 7

Make the decision to be in control

If you think money doesn't buy you happiness, you are right. All it can do is give us choices. Not everyone wants more choices, so not everyone will be happy having money. If you want choices, the one way to have these choices is to have the finances to act on them.

Do to this you need to make the decision to be in control of your finances, instead of hoping it will all work out. It isn’t enough to wish and wait for a better tax system or old age pension system or a windfall. You must decide to drive your own bus of destiny.

Start a saving plan

Save for a holiday

Keep to your monthly budget

Monitor your finances and look for new ways to invest and save

Spend within your means

How I will know I have made the decision to take control of my finances:

Step 8

Align your beliefs with those of people who have earned the amount of money you want to earn

Whatever amount you want to earn and have as your net worth, someone out there has already achieved it. Find out where these people are - they are in clubs, wealth clubs, share clubs, women’s networks, giving talks, - and ask them how they did it.

Keep asking questions, Be curious about how other people do it. The only thing separating you from someone who has already investments of over one million dollars is they had a plan and then acted.

There is nothing charming or inspirational about poverty. I perfected poverty in my twenties, earning less in a month that I now earn in one hour. Earning more money means I am now in control of my own financial destiny.

The beliefs of people who earn the amount I am aiming to earn:

The choices of people who have the net worth I aiming to achieve:

Step 9

Separate needs from wants

You needs might be to own house, own a car, have a classic wardrobe, an annual holiday and give a certain amount to a charity.

Your wants might include a plasma TV, an overseas holiday, an adventure trip and the latest fashion shoes.

Separate the two and know that the wants will wait. The more you hold off on fulfilling your wants the faster you will be able to pay yourself. When you indulge in the wants what you are really doing is paying someone else rather than yourself.

My needs

My wants

My commitments to myself and my financial: (new beliefs, new attitudes, now financial strategies etc)

COURAGE =

DOUBT + COMMITMENT + ACTION