The road to Taking Control of your Finances starts with this…

The amazing thing about life, and truly the most important thing about being human, comes down to one thing I believe. It comes down to the hopes and dreams we all share for the future…

What does that do with taking control of your finances you ask?

What if I told you that every dream, every hope, every desire and want, comes down to how much money you have and how you control your finances!

Money is simply a tool, much like the sword/plough was a tool in the middle-ages, used to take/till so that dreams could come true.

One of the biggest dreams in Australia and the US is to own your own home, to be able to have something and call it yours, so that you can sleep soundly at night and protect your family.

Another, especially within Australia, is to travel and to see the world, to see more and experience more…

All of this costs money, and it always has, but now we live in a time where we can accrue more money in a year than any of our predecessors or ancestors could even dream of.

We live in a pretty golden era, that is for sure, but with all that money, we can also lose sight of what we truly want, giving in to entertainment and gluttony.

We are only human after all, and not everyone looks to the future all the time. We either live in three phases, the past, the now or the future and the majority of us, based on multiple studies, live mostly thinking about the now and the past. We do not look forward all too often, due to everyday stresses and the fast pace of Western society.

Which is why we need to create a system that can keep you on track and create security around your future.

That system we call a budget!

But, budgeting can have bad connotations, it leaves a sour taste in our mouth, because generally we think budgets are restrictive. But like a bad diet, if you have a too restrictive budget, you will never be able to keep to it.

We are only human after all…

Hence, to set yourself up for success, the best way to start a budget is to look back into the past. Let me share with you a simple system I have created to budget, which takes a bit of effort and time to set up, but once it is done, you can set and forget or you can spend 10 minutes a week/fortnight if you want a bit more control completing it.

Step 1: Write down your Goals/Dreams

You need a reason to create a budget in the first place, if you want to achieve something, you need to write it down, speak to your partner about it and truly understand what you want.

Of course, this is easier said than done and I will be writing a later blog this year on how to ask the right questions to understand what you want and where you want to go.

Step 2: Look to the past and learn from it!

The scariest part about a budget is probably learning something about yourself. I realised pretty early on, after doing my first proper tax return, that I was a bit of a spender. I spent $10,000 in one year on eating out and take-away…

Now there is nothing wrong with that, except I had only earned $60,000 for the year, meaning I had spent almost 17% of my income on eating out!

I was amazed and felt a bit guilty, but I knew that I would never let my spending habits take control of me again.

It may be scary and you may not like what you find hidden in your bank statements, because it truly does reflect a little bit about yourself, but if you can get through that, you will also learn why a budget is really important too, as I did.

Therefore, we need to print out 3-6 months worth of bank statements and, using an excel spreadsheet, fill out what you have spent over the last 3-6 months.

To attain the excel spreadsheet I use, simply fill out the form below and put in the Subject: I want to Take Control of my Finances!

Once you have done this, you have done all the leg work needed, but it is not the hardest part, not by far.

Step 3: Work out how much your goal/dream is going to cost

Understanding where you want to be, now that you know where you are currently and where you have been in the past is paramount.

Therefore, a bit of research is generally needed, depending on what your goal or dream is.

Want to save a deposit and own a home, you need to understand how much you want to spend, you need to know what your partner is willing to contribute and how you will work together to do so. That is one example, but this is the fun part, talking about your goals and dreams with a partner or friend, researching and truly working towards what you want!

Step 4: Once you have a figure, you can work backwards.
Let’s say that you want to own a home and you want to spend the median house price in a suburb you want to live in, which comes to $700,000.

You want to have at least a 15-20% deposit, 20% means you will not need to pay lenders mortgage insurance, which is dead money anyhow.

Therefore, lets use the 20% deposit. Simple math says that $700,000 x 0.2 = $140,000

If you already have $20,000 in savings, you know that you will need to save $120,000.

Step 5: The final step, how much can you save and how quickly can you save it?

If you earn $80,000 per annum and your partner earns $60,000 per annum, after tax for simplicity sake.

You will need to look at your budget and work out, how much you are saving currently, let’s say currently it is not weekly or fortnightly and you just put money in the savings account when you can. Based on the 6 months, you have saved $10,000.

That means that you will need to save for 5 more years, before you can even think about going for a house. But you want to do it quicker, this is where things get hard and difficult conversations need to be had.

Rather than say you can be in your own home in five years, lets make it 2 years. That is $50,000 per annum, or $962 per week.

Your main living expenses come to $1,200 per week based on the budget you completed earlier, but you generally spend at least $1,108 per week on incidental things.

Hence why you have only been saving about $385 per week. ($10,000/26 weeks = $385)

Between you and your partner, you need to make up $577 per week in savings, which means you need to stop going out as much or going on less dates and sacrificing a little bit in the short term.

But that means you can still spend $531 per week on discretionary things, like eating out, dates, shopping etc.

Once you have worked out the figure you need, you need to simply create a savings account purely for that goal, whether that is a house as used in the example above, or for any other goal/dream and each week you take out that $962 out of your pay and put it into savings.

I would also highly suggest that you put the $531 per week in a different transaction account, with a new card, so that way you can split up your discretionary spending like eating out with your non-discretionary spending like bills and fuel.

And that is it, that is how you budget, of course it is a bit of time and effort. But if you truly want to take control of your finances and you truly want to achieve the dreams/goals in your life, it requires a little bit of time and effort.

Once you have done it though, it is so easy to either set and forget through creating a recurring transfer in your bank account or to sit down and do the transfers yourself once a week or fortnight depending on when you get paid.

Budgeting does not have to be about restricting yourself either, because truly you have control of when you want to achieve your goals/dreams by. Therefore, if you want to live it up a bit more, you just don’t save as quickly as the above example.

It all comes down to what you want and when you want it by!

Until next time,

Take Back Control

New Year brings New Achievements!

Every year I will sit down and reflect, however, that is only one part of the process that has helped me to Take Back Control of my life, business, finances, relationships and health.

On Monday, my wife and I sat down to plan out our goals for 2022, which is an integral part of being able to Take Back Control.

The first phase of understanding what you want to achieve is understanding where you are right now and knowing what your dreams are.

There was a phrase I learnt from the great Tony Robbins that is a four step process used to creating achievements and it went like “Dream-Goal-Plan-Action.”

You have to be able to have a dream and vision for what your future will be like, then you must write that down to become a goal and set a timeline for it, create a step-by-step plan to achieve it and then take action on the plan. Seems pretty simple and it really is, although there is one more step that needs to be added to the process which becomes pretty important from my experience…

That step is being able to reflect on where you have been, what you have achieved and what you have learnt, adding the reflection process in with Tony Robbin’s four steps to achievement process is much more effective and is quite similar to the SMART-ER goal principles for creating goals.

SMARTER goals means “Specific-Measurable-Achievable-Relative-Timely-Evaluate and Re-assess.”

Now, you don’t need to know all of the theory, but understanding that this stuff truly works and is really simple to follow is imperative to creating success, taking back control and achieving more from life.

On Monday, when my wife and I sat down to map out our year for 2022, we utilised the processes above in a very simple way.

We sit down and jot down the main categories that we need to grow in each year to feel fulfilment and purpose in life, you don’t need to just do these five, you could add more if you like, but here they are;

1. Relationships

2. Health

3. Education

4. Career/Business

5. Finances

Under each of them, my wife and I will talk about what we want to achieve in each of these main areas in our lives for the year and write down our goals and when to achieve them by. However, my wife and I have discussed at length what we want to achieve together and know pretty well where we want to take our lives.

Becoming clear on what your lifestyle will look like together in 5, 10 even 20 years from now is just as important to creating your goals. Which is probably a conversation you should have with your partner, or having a conversation with a friend if you are single, to get a bit more clear on what your lifestyle and dream for your life will look like. (If you need help on getting clear on what your life will look like, have a read of one of my first few blogs here )

Your dream/aim for your lifestyle does not have to be exact, it just has to be a vision of what it may look like and that is when you can start breaking down how to achieve your dreams.

My wife and I do this through reverse engineering, or essentially taking backwards steps from the dream. Let me take you through a quick example of one of our goals.

We want to move into our dream family home, as one of our goals is to start creating a family of our own. The goal required extensive research, financial planning and much more. Thankfully, I am studying to be a financial planner and a mortgage broker, which made that side of things a whole heap easier, and we have also bought a house before as well.

Ps. With experience and knowledge we have been able to make quick and calculated decisions through planning and taking action, that is why you should seek advice from a professional and leverage their knowledge to make the goal seem attainable. Which has led us to be able to make quick decisions like we did for when we bought land and found a builder for our dream home to be built by mid-2023.

First and foremost, we have a dream of creating a family and having a four bedroom home for that family. Once we have the dream, we set a goal pertaining to achieving the dream, which for us was a few different goals under different categories.

Under relationships, my wife and I placed “Start trying to have a baby by December,” under Finances we placed “sell house” and “save $20,000 by end of year.”

Under career/business, my wife decided her main goal was to “remain consistent in her job,” and for myself it was to “start working as an associate planner part-time once we sell the house.”

As you can see, once you have been able to create your dream, the goals are just stepping stones towards it, the goals become your plan and all you need to do is take ACTION on that plan/goals.

Goal setting is imperative to Taking Back Control of your Life-Health-Wealth and using the start of the year to evaluate and adjust goals as needed is an important part of that process.

You could even evaluate your goals every six months, or even every three months. The last two years have shown just how quickly things can change, which means your goals may need to change along with the world as well.

To summarise on how to start writing down your goals you need to;

1. Get clear on your dream/lifestyle for the next 5, 10 or 20 years

2. Reverse engineer how to achieve your dream (Ask a professional or someone who has done it before, they can help here.)

3. Write down your stepping stones (goals/plan) and make them SMART-ER.

4. Once you have the goals and your plan, purely and simply take Bold Action!

Use the above to help you get clear and if you need any more help, write a comment below and I would love to get back to you on how you can truly Take Back Control.

Until next time, where I will be getting back to the beginner investor series for the last two blogs!

See you then,

TBC

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