By Jason Andrew
Busting the top 5 myths about sorting your finances
Wondering where all your money goes is common: no matter how much you earn, it seems like there’s never enough and it just seems to vanish. Research shows that 86% of Australian’s do not know where their money goes each month. So, if this sounds familiar, you’re not alone.
It can be an overwhelming feeling, often not knowing where to start. Let’s bust a few myths about getting your finances sorted, to put your mind at ease.
1) “I don’t earn enough money to save”
This is a common belief and it’s just not true. A study into wealth by two economic professors from Dartmouth and Harvard Universities showed that the biggest factor in wealth isn’t how much you earn, it’s what you do with the money you have.
The study found that income explained as little as 5% of wealth dispersion. The single biggest factor in wealth creation was simply how much people chose to save: ‘the differences in saving choices among households with similar lifetime earnings lead to vastly different levels of asset accumulation.’
2) “It all just sounds too complicated”
Wrong. Getting your finances into shape isn’t about devising complex strategies or schemes. It’s about finding out what’s coming in and what’s going out. It is as simple as that. When you know where your money is, you spend less time and effort chasing around after it.
3) “I don’t need a financial advisor because I can do it myself”
Some people are great self-motivators, can get up at 6.00am and do all the household chores before going to work. The rest of us need some help. It’s always easier when you have an expert guiding you, motivating you and giving you advice. It doesn’t just make the process a more rewarding experience, it has been proven to bring better results.
Another study looked at the impact on saving of seeing a financial adviser. It showed that people with an adviser saved an extra $1,590 every year compared to those without. Over time that adds up to thousands of dollars more, simply by seeing an adviser. If sporting stars like Roger Federer and Serena Williams have a coach to help them with tennis, which they know how to do. Now you can have a coach to help them with their finances.
4) “It’s too late to start now”
Is it really too late to have more available cash? Getting help in organising your finances can quickly pay off. The study that showed people saved more with a financial adviser showed that someone who started an additional saving plan with an adviser at age 60, would save an extra $29,000 by the time they retired at 65.
5) “I won’t be able to enjoy life”
Getting your finances sorted isn’t about suddenly stopping all spending and sitting at home being miserable: it’s about setting clear goals about what you want to achieve. Plus, it means that when you do splash out, you’ll know what you can afford. You won’t blow a hole in the budget and then feel guilty. Managing your cash well means enjoying what you do have, instead of worrying about what you don’t.
We recommend starting slow and building up habits over time that don’t crush your lifestyle straight away. That way your changes will be more sustainable. Like a crash diet versus slowly changing your eating habits
Find out more:
Collins Financial Planning has a specific program designed to help you get your finances sorted so you can save and invest to meet your life goals.
To find out more call 03 9680 1000 or email financialplanning@collinsco.com.au.
Jason Andrew is a Financial Adviser at Collins & Co Footscray.
