Money goes to heaven – How to combat unnecessary spending.

This moneys gone to heaven_Glass Wealth Planning_Financial Adviser Brisbane

For many people, financial struggles are due to them not bringing in enough money, for others the problem comes from not wisely spending the money that they do make. Arguably that might be everybody’s problem.

In this article, we take a look at 6 ways you can start better handling the money that you earn in order to help you reach your financial goals. Additionally, we let you know how to take that money you haven’t spent and use it wisely to build your future wealth.

 

1. Knowledge is Power – Track your Finances.

Before you can start figuring out how to spend your money more wisely, you first need to understand where it’s going. Make a budget and track both your income and expense. Everyone says that they would like to do a budget, but it’s too tedious. Their right, but you have got to, it’s crucial to form the understanding of where your money is spent. Once you do this you can start looking for opportunities where it can be better spent.

 

2. Think – About the long-term benefits and drawbacks of purchases you are making.

Once you spend a dollar, it’s gone to money heaven, it isn’t coming back.  Far too many purchases can be impulse decisions to buy something that you don’t need, purchases for short-term happiness or to impress someone else.  It’s okay if its a dollar chocolate bar at the grocery store it’s a little bit larger problem when you’re out there splashing forty thousand dollars on a car trying to impress friends or neighbors. Soon as you drive it off the yard you lose 15% on depreciation, your money literally disappears to money heaven, instantly. Bye!  Before you buy something think about how it will affect you in the future.  How long is it really going to last?  Is it really going to put you in debt that you don’t need and is the value you are going to get over its lifetime really worth the cost. These are questions you have to figure out the answers to when deciding whether something worth buying.

 

3. Credit Cards – Use like Vegemite – sparingly.

Only put purchases on credit cards that you can afford to pay off every month, in full.  If you don’t pay off the balance every month, the interest can accrue and spiral out of control quite easily.  A good idea is to bundle your fun money, cap it, even take it out in cash, put it in an envelope and once that’s spent for the month it baked beans on toast from there on.

 

4. Stop trying to impress people with your Spending.

I’m not impressed, people don’t care if you have a new shirt, shoes or spent 300 bucks on a super lit night out. That’s not cool, and again your money goes to money heaven never to return. The average person spends far too much money merely maintaining an image, fancy cars, brand name clothing, nightly restaurant dinners. Much of what we buy has more to do with impressing people than purchasing something we want or enjoy. Keeping up with the Joneses is an expensive, oppressive, unnecessary pursuit. You have to buy things you enjoy, but don’t fall prey to the feeling that you have to spend money to impress other people.  I was working with a lady who was so sad, a single mum, two kids, she bought a brand new car just so she drives her daughter to school in a car he daughter wasn’t embarrassed by. Financial sabotage I call it.

 

5. Figure out what habits are draining your budget.

After you start tracking your finances you can look deep at the facts and figure out what habits are draining your budget dry. These habits could be expensive hobbies, eating in restaurants too much, spending too much on new clothing, you’ll figure the drains pretty quickly.  Once you figure out which habits are eating up a large portion of your income then you can evaluate whether these are really necessary, that’s where again envelopes with cash can really help you get a grip of where that money going.

 

6. Learn to value savings over products.

Some people are natural at saving money and draw enjoyment from growing their wealth, for others money is something that is spent as soon as it gets in their hands and anything else feels like a wasted opportunity. If you’re in this second camp you’ll best achieve success when you adopt a mentality that values saving over products. In the end, money invested or money saved is always going to benefit your life much more than products that will wear out or become uninteresting in time.  Here’s the thing, you want to start focusing on what you can make on the money you are saving or your never going to save it. That’s where learning how to invest becomes so important, if you can make 15 to 20% a year on your funds, saving money becomes quite interesting. If your only making 2%, why not just spend it.

 

Once you get the bug of holding onto your money and investing it to generate a higher rate of return, not spending it becomes a lot easier.

 

Start Investing NOW

Start investing as early as you can, get your kids doing it early too. Spending your money wisely isn’t just about spending on unnecessary purchases, it also requires you to take the money you save and get it into things that will help you reach your financial goals.  There is no such thing as investing too early, to old or investing too little or too much, you can always start investing.  Learning how it works and getting comfortable with the risk-reward dynamic of saving and investing is your best self-education.  It doesn’t matter how young or old you are putting money into a quality portfolio and adding to it regularly over an extended period will reward you for your good choice and patience.  Even if you don’t want to invest straight away, just save, save, save and you will be ready and hold great bags of money to invest in this market eventually crashes. (2018 or 2019?). We don’t have a crystal ball to refer to on that, but what we do know is that when it comes to money, spending money on unnecessary items sends your hard earned to money heaven, never to return. Saving and purposing it toward future security will set you up for life.

 

Saving for a home deposit – A Financial Adviser perspective.