Some people are born savers, others have to work at it and the rest need to be scared into it! If you belong in this last group then it’s time for some tough love to get yourself out of debt and start saving money today.
Shock #1 – Figure out exactly how much you really earn
Ever thought “I just don’t earn enough money”? well you may be right, you may not earn enough, that is, enough for your current lifestyle. If you’re broke before your next pay cheque, then you need to take a good look at how much you’re actually earning – as you could be overestimating.
First, work out how much money you make in your hand. An $80,000 a year salary sounds great but take out Superannuation, Tax, HELP/HECS debt and you’re left with a lot less, specifically $27,713 a year less! So your take home income is actually $52,287 a year or $25 an hour in a 40 hour week.
Work out your ‘in hand’ income by heading to paycalculator.com.au to type in your salary and whether you have a student loan to see your actual income.
Read more on how much money you actually need in life to get a better understanding of what you actually need.
Shock #2 – Learn how much money you’re actually spending
All of a sudden that $100 coat and $100 Saturday night out means you’ve had to work for a whole day for a piece of clothing and a meal – scared yet? If you need a shock to help you save money or get out of debt then this is a great one.
For each ‘luxury’ purchase, work out how many hours/days you have to work in order to pay for it and then make the decision whether it’s worth it or whether your long term goal is more important.
Wouldn’t you rather be credit card debt free or have a deposit on a house? Know how much you REALLY make, set some goals and make sure you are spending your hard earned cash on what you really want long term.
Shock #3 – Understand the lies you to tell yourself
“My credit card is only for emergencies” – and other lies you tell yourself.
Have a look at your last two credit card statements, now name three emergencies? That’s what I thought. Having to use your credit card to pay your mobile phone bill is not an emergency but a sign your budgeting needs to be reviewed.
Flights to a friend’s wedding is not an emergency but a sign that you’re not setting or consequently reaching your savings goals. Think about the purchases on your credit card carefully – this is borrowed money and therefore, borrowed time – that is, you need to work longer to pay for the added interest on these purchases. If you’re using your credit cards to earn points but you’re unable to clear the debt each and every month, then the interest will outweigh the cost of that bullet juicer your points will get you.
Shock #4 – See what a professional financial planner thinks of your finances
Have a good hard look in the mirror, how old are you? Chances are you think you have all the time in the world to pay off that debt, buy a house or retire but in reality time will tick by and you’re still in the same financial situation or worse.
It’s time to visit a financial planner who will take a good look at your money situation, debt, budget (or lack thereof) and Superannuation. They’ll be brutally honest of where you’ll be in five years, let alone come retirement, so it pays to take some tissues along to your meeting.
A Financial Planner will paint a scary picture of how much money you’re losing to interest and how you’ll be living on beans come retirement, good news is, they’ll also put together a plan of attack so your future doesn’t become so grim.
It can be scary coming to terms with your financial situation and yes, it’s easier to continue on spending everything you earn but in the long run it won’t be easier. It’s important to evaluate how much you’re actually earning, how much you’re spending and even endure a financial shock from a professional, as it could just be the kick in the butt you need to start saving.