Budgeting 101: Finding your money mojo (1 of 3)
This is the first part of a three post series written by a fantastic writer called Sam Robinson. Be sure to look at the ways in which you can read more of her writing at the bottom of this article, we love her writing and think you will also!
Budgeting, saving, investing, superannuation contributions… they’re all things you know you *should* do, but given Australian credit card debt is at an all time high , it’s abundantly clear we aren’t necessarily acting in our own best interests.
Are you getting tired of reading articles about how bad everything is in the current financial climate? Well let’s look at how to get in financial shape and not focus on those negatives for a little while.
Turn that frown upside down though, because if you’re in a dire financial situation all you need is to find your Money Mojo, and it’s as simple as:
- Understanding why money stuff is important so it’s more than just this vague idea that it’s something you’re “supposed” to do and give yourself real cause for change
- Know you’re not alone
- Realise that being financially independent is completely within your reach
Why Bother?
So, why should you care about money and your finances? I’ve often heard people say that “money isn’t important to me” or “you’re greedy/selfish/materialistic if you think about money”. Everyone has things in life they want to achieve – dreams, hopes and aspirations. Here’s the deal, if you want to spend more time with your family, see the world, give to charitable causes that are important to you, learn another language, not rely on someone else to support you in retirement and educate your children, then put simply, you need money. In fact, if you don’t want to *worry* about money you most certainly need to think about it.
As one of my schoolteachers used to say – if you fail to plan, you plan to fail. Despite the myth that many people perpetuate – saving and budgeting are not pastimes for martyrs that secretly enjoy self-deprivation. Refusing to save and budget is actually depriving you of achieving many of the things you want in life.
Setting yourself goals and actually determining what you need to achieve them (both fiscally and resource-wise) will give you something to shoot for and a reason to care. For example, knowing how you want to spend the biggest holiday you’ll ever take retirement will help make it seem worthwhile to put a bit of money aside each pay day.
Like living a healthy lifestyle, being financially fit is a habit that requires cultivation. Starting early not only gives you more time to cement these habits, but also to enjoy the power of one of the great wonders of the world – compound interest.
You’re not alone
Even prior to the current economic crisis, Australian consumer debt was at an all time high. Despite having bigger salaries than ever, we’ve clearly suffered from ‘lifestyle inflation’ – always spending more than we earned. In fact, according to the Reserve Bank of Australia:
“…over the last 18 years the total amount of debt owed by Australian households rose almost six-fold. At September 1990 the level of household debt was almost $190 billion, increasing to around $1.1 trillion by September 2008 in real terms (i.e. adjusted to remove the effect of inflation).”
This can also be illustrated in the below graph, which depicts the Household Debt to Household Assets ratio. (Source: RBA Bulletin Statistical Table B21)
Numbers aside, what does this mean? It means that even though you might be in a pretty damn dire financial situation, chances are your neighbour, your best friend and the person sitting in the next cubicle at work are all in the same position. What’s important to realise is that this does not make it okay. One of the reasons it took me so long to actually do something about my debt, horrific budgetary circumstances and lack of savings was because I had normalised it. Glamorous people on TV talked about being broke due to an expensive footwear habit, people at work made remarks like “thank god it’s payday tomorrow!” and fellow commuters on the train would say they had maxed out their credit card again.
As my dad used to say, ‘if so-and-so jumped off a cliff, would you do it too’?
It’s Not Hopeless
Whether you got yourself into lots of debt, are living payday to payday or you’re 50 and haven’t got a cent of savings to your name the important thing to remember is that it didn’t happen overnight and you’re not going to be able become fiscally fabulous overnight either. However, you can definitely change your circumstances and direction by tomorrow.
In fact, it only takes a short amount of time and a small amount of money each day to get yourself achieving the things you want.
For example, did you know that $10 a day invested in something as conservative as a term deposit returning an average of 6% over 20 years will give you more than $68,000 in interest? Similarly, for a home loan of $300,000 over 25 years, even at 5% interest (in the current market) just by paying an extra $50 a month off your loan, you’d save a whopping $13,800 in interest and pay off your loan 1 year and 4 months earlier!
No matter what your circumstances are, there’s a way to turn them around. All you need is patience and conviction. Remember, if you don’t like what you’ve got, you won’t like what you’re going to get unless you change what you’re doing.
This is part 1 of 3
In my next post for Savings Guide, we’ll troubleshoot your budget. If your budget isn’t working, make sure you catch this post for a sure-fire way to fix it!
About the Author
Sam Robinson is a reformed spendthrift and a rockstar budgeter, having learnt the hard way how important it is to develop fiscally sound habits early on. In two years, she did a complete about-face to pay off almost $40,000 worth of consumer debt and save enough for a deposit on a house. Now, she’s committed to helping others learn and understand how to budget successfully, invest and save without feeling like you’re on a crash-course diet.
You can read more of her stuff at;
Money Penny: http://www.moneypenny.me
Twitter – @moneypennyme
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