It is not rocket science
For the vast majority of us, looking after our finances should not be difficult from the perspective of being overly technical or complicated – It merely involves getting the simple ‘stuff’ right.
But the truth is that most of us find looking after our hard earned money very hard. What makes it so hard is that it’s a slow process, it requires patience and discipline. It requires planning and dedication. It requires us to swim against the tide of instant gratification and competing with the Jones’……. it requires common sense and a long-term focus. It requires us to develop a financial maturity to control our own behaviour and habits.
Most people have good months/years and bad months/years in terms of earnings, yet they very rarely save anything during the good times and almost always land up resorting to using credit cards in the bad times. This is a pattern that is repeated time and again and some of the most common habits exhibited in all of these instances include:
i) No budget so no idea where the money really goes
ii) No discipline or attempt to avoid temptation and instant gratification
iii) A strong desire to keep up with the “Jones’” or the perception of wealth
iv) No real concept of the opportunity cost of their spending habits
Perhaps some of the things we should be contemplating on our way to getting the simple ‘stuff’ right include:
Disciplined spending – forgo the instant gratification of the consumer driven world in which we live. Spend less on clothes, buy a cheaper car, eat out one or two fewer times a month. Of course if you have no idea what you spend your money on, it just seems to evaporate each month, you should consider drawing up a budget and monitoring your expenditure. The extra cup of coffee when you are out or making your own lunch to take to the office or quitting that hectic smoking habit all fall into the category of doing it smarter.
Disciplined saving – pay yourself first each month. Put money aside as part of your non-discretionary expenditure – that means rank it as high as food on the table and a roof over your head. If you wait to save from what is left over each month, chances are you will find nothing left in the coiffeurs. If you put it away via debit order at the start of each month you will probably find that you make ends meet on the lower amount and your savings ticks up nicely before you know it.
Saving is contagious by the way. Once you start to make it your mission your habits tend to change and you are driven to do better. All manner of savings become apparent like getting rid of memberships you do not use, cancelling subscriptions you don’t actually read, seeking out the best cell phone options, being more price conscious at the super market or bottle store, making sure you are on the lowest fee option at your bank and when your insurance expires, shopping around for more competitive quotes.
Avoid short-term debt and live within your means– If you have store and credit card debts you need to pay them off as a priority. Learn to live within your means. Spending more than you earn each month is mathematically unsustainable and will eventually catch up with you. You need to consider what and where to cut back if you land up living off credit cards at the end of each month.
Focus on the Long-term – compounding of real returns over long periods is what will ultimately generate wealth from your investments. Unfortunately this means you will have to accept some downside risks in the short-term to capture greater upside returns over the long term. Remember that money you spend today has an opportunity cost associated with it too – not only do you not have that money to spend in the future but you will lose out on the potential compounded returns you could have earned had you saved and invested it. Sacrifice now will pay dividends long term….literally.
So it becomes clear that our financial well-being or ‘destiny’ is inextricably linked to the behaviour we display each and every day. Try to be more aware of your thoughts, your actions and your habits with respect to money matters as these form your character or behavioural patterns and ultimately determine your financial well-being.
Change your habits & change your financial destiny: The 2014 savings challenge
Change your money habits and get rewarded next Christmas.
Become conscious of what you spend and prepare a budget if you don’t have one. Set up goal – I would suggest start small. Think of something you really want but can’t go out and buy for cash right now. Keep it in the region of R1200 to R10000 and make it the Christmas present to yourself in 2014, should you reach your target.
Stop wasting, identify and change some of your worst habits, show some more discipline, get motivated and put away a little extra each month. It might not make you wealthy over the next 12 months but it should help you to begin the journey to better financial management and a brighter financial destiny.
Please contact White Investments if you would like to learn more about the ways in which we can partner with you to a more secure financial future. E-mail: firstname.lastname@example.org