There’s been a fair bit of talk in the media lately about how much you need to earn in order to make ends meet.
A topic always guaranteed to stir up a bit of debate, the most recent discussion centred on the case of “Phil”, a 31-year-old IT sales and development manager who said “life would be impossible” on anything less than his $300,000 annual income.
With a portfolio of eight investment properties and an admission that if he wants something he will buy it, Phil’s experience is not exactly one most people could relate to.
But the general scenario – of balancing your lifestyle with your financial commitments – is something that can trip anyone up, regardless of their income level.
Financial success is not about having a high status job with a high salary, or having lots of money in the bank. It’s about knowing how to make the most of what you have.
In particular, there are three key areas where people often go wrong with their personal finances.
Full disclosure folks – I’m definitely not a car guy.
I currently drive an eight year old Holden that has been well used by three small children, so as I’ve previously written, I’m not exactly the type to rush out and splash a whole chunk of cash on the latest and greatest.
That doesn’t mean I’m telling you not to spend your hard earned money on cars – if that’s a priority for you, then go for it.
All I am saying is that car loan repayments can make up a large chunk of your disposable income. Before you rush out to buy that shiny new SUV or the latest model muscle car, take the time to consider the impact those payments will have on your ability to meet other financial commitments and priorities.
No spending plan
When most of us hear the word ‘budget’ we either immediately recoil, or simply switch off. It conjures up images of sacrifice and discipline. Of going without. The opposite of fun.
That doesn’t have to be the case. Budgeting isn’t about spending nothing, it’s about not losing track of where and when it goes.
With the increase of technology and the move to payment systems such as PayWave, it’s easy just to ‘tap and go’ and worry about your finances later. But failing to plan is planning to fail, and not having a plan for your spending can leave you overextended and financially vulnerable.
Of course, the reverse is also true. A spending plan will ensure that you prioritise your money, covering all your major expenses and commitments, while still being able to allocate funds for entertainment and fun, and have money left over to save for the future.
If you don’t know where you’re going, you’ll never get there. A spending plan can help provide the signposts to steer you towards a brighter financial future.
Lack of motivation
Having a plan is a good first step, but the chances of following through on the plan are low if the motivation is lacking.
Most of us are either running away from, or running towards something. What is your financial motivation? Is it to save for that overseas trip you always wanted? Is it to avoid the financial mistakes that your parents made? Maybe it’s working towards financial freedom so that one day you can make work optional.
Fear and desire are great motivators. You simply need to harness those feelings and use them to keep you on track as you head towards your financial finish line.
At the end of the day, when it comes to making ends meet and reaching your financial goals, it’s not about adding a certain number of zeros to the end of your pay check. It’s about knowing your numbers and understanding how they work best for you.
I’d love to hear your thoughts. What’s your best tip for making the most of your money? What’s the secret to keeping your personal finances in check? Comment, send me an email, or hit me up on social media.
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