Smart money habits: 5 ways to kickstart your wealth in 2018
According to recent data from Mortgage Choice’s Evolving Great Australian Dream whitepaper, 21 per cent of respondents said they did not consider themselves ‘money smart’.
A further 28.8% Australians couldn’t find the time to improve their financial knowledge, while a further 11.7% said they would simply rely on their ‘friends and family for financial advice’ and 15.2% said they just weren’t interested in building their financial knowledge and happy to be complacent when it came to their finances.
Rather than being complacent in 2018, the best way to become money smart is through habits. Thomas Corley spent 5 years researching the daily habits of 177 self-made millionaires and discovered that “habits are the cause of wealth, poverty, happiness, sadness, stress, good relationships, good health or bad health”.
Here’s 5 money habits you can use to supercharge your wealth in 2018:
1. Create (or review) your financial plan
We study all manner of things in high school – languages, mathematics, literature, physical education, music and drama.
So most of us know random details and facts about things like World War II, Shakespearean plays and algebra theory, but no-one ever teaches us about financial planning and money management.
In fact, even as adults, most successful business people haven’t made the time to formulate a clear financial plan. You must plan so you can achieve your goals, dreams and ambitions – and it doesn’t have to be a chore! You have your own unique set of goals and life circumstances so you need a financial strategy perfectly tailored to suit you and your family’s needs.
Our tip: educate yourself on money issues – read financial publications, take a money or wealth management course online and spend a few hours each week reviewing your current financial position. Better yet – sit down with an experienced financial adviser and work with them to get ultra clear on your financial goals and how to achieve them (Ah-hem, like us).
2. Understand your money habits (and change the bad ones)
The way you think about money and your finances can have a big impact on your financial position and your ability to achieve your life goals.
We’d all love to cultivate better money and spending habits but sometimes these habits and beliefs are ingrained from a very early age.
A lot of what you learn about money comes from your home life and your parents, experiences at home, whether good or bad. How you think about money affects your entire future.
Research shows we automatically favour what is familiar to us — even if we know it’s not to our benefit. The biggest challenge is in creating a ‘new normal’ which means you need to change your behaviour and be consistent with your habits.
To forge better money habits, you need to understand what you spend but also why you spend the way you do.
Our tip: Take the time to examine your money habits and see if you need to rejig your mental game too. If you think money is the root of all evil or there’s enough of it, you’re likely to stay in the same money habits and thinking patterns. Without getting too ‘woo woo’ on the subject, mindset is everything!
3. Leverage technology to automate your finances
We’d all love to exercise rigorous self-discipline on a daily basis (and some of us do!).
But if you’re like me, it comes and goes like 90s boy bands and weird fashion fads. Sometimes a glass of wine seems far more appealing than the gym or, you book that holiday on your credit card on a whim when funds are low.
To counteract the lack of self-discipline, the American American Institute of Certified Public Accountants recommends using technological tools to “automate your savings and spending plans.”
By automating these processes, you don’t have to remember them every time, and this will help increase your chances of success.
Our Tip: Pop your financial plan on autopilot so you don’t forget to save and make payments. For example, link your bank accounts, so that money from your wages goes straight to your super fund or your selected savings account of your offset account. Or ask your HR department if you can direct deposit a portion of your salary payments every month into a savings account. You can’t spend what you never see!
4. Do a budget and track your spending
OK, this may seem like super simple, 101 kind of stuff but you’d be surprised at how many people don’t track their daily, weekly and monthly spending habits and fix a budget for each pay.
If you want to get on top of your finances, a good budget is the way to go. The more detailed your budget is, the more successful it will be.
You can map out your anticipated income, fixed outgoings (mortgage or rent, car payments, child care, etc), your savings budget and what is left for everything else that you want to achieve in life and in business (holidays, lattes, new shoes, tennis lessons, charity donations, world domination, etc).
A detailed budget will highlight any overspending and show you where you need to reign it in. It will also help you set your savings goals for 2018 (which by the way should be SMART – Simple, Measurable, Achievable, Realistic and Timely.
New York Times bestselling author, David Bach, came up with the concept of ‘The Latte Factor’, which is based on the simple idea that all you need to do to “finish rich” is to look at the small things you spend your money on every day and see whether you could redirect that spending to yourself. The key takeaway: you can’t build wealth if more money is leaving your wallet than coming in, so you need to track your daily expenses.
Our tip: Try using apps to help you budget such as Money Brilliant, TrackMyGoals, Expensify or Pocketbook. We also love to use the MyProsperity – it’s a great platform to help you streamline, track and manage your financial world. Or simply pop your expenses in a good old fashioned Excel spreadsheet or record your spending on your iPhone notes.
5. Pay with cash
Mortgage Choice’s CEO, Mr Favell, says that while cards are a convenient way of spending, “you can easily lose track of your spending and in some cases, rack up debts.”
“If you don’t trust yourself to spend within your means and find it easy to lose track of your spending, it might be worth considering using cash to buy everyday items such as groceries, says Flavell.
Our tip: Withdraw money from an ATM that does not charge you fees and set your spending limit for the week. Use the old-school envelope system if you have to!
Becoming money smart just takes a few small adjustments to your habits and daily activities. The path to financial wellbeing is about building your confidence and financial literacy by taking small steps towards your dreams each day, week, month and year. Get smart and make the decision to make 2018 your best year yet.