February 21, 2019 Four Telltale Signs That You Could Be Better With Money
How good are you with managing your money? And don’t worry – it’s not a trick question.
The reason I ask is you’d be surprised at how many people make it well into adulthood without learning the basics of good money management.
In Australia, we’re talking almost half the adult population, according to the Australian Bureau of Statistics. Meaning, around 45 percent of Australians consistently spend more than what they earn. Interestingly, though, we rank pretty highly in terms of financial literacy, with Australia sitting at ninth globally. Go figure.
Back to my original question, let’s dig a little deeper…
Do you know how much money enters and leaves your account each month?
If that’s a firm ‘no’, you’re perpetually running the risk of overspending and, in turn, racking up unnecessary ‘bad debt’. In other words, not good. If you don’t have complete visibility over your income and expenses at any given time, you could well be setting yourself up for a fall.
How much bad debt are you carrying right now?
By that, I’m talking credit card debt. Any debt that attracts a high-interest rate and isn’t helping you build wealth or your assets has the potential to spiral out of control and cost you a ton of interest.
Does money stress you out?
And I’m not just talking week in, week out and those emergency expenses that spring out of nowhere – a costly trip to the mechanic, for instance. You might be stressed about where you’re at on the road retirement and not putting enough money away to ensure you can maintain your lifestyle. Whichever, being consistently stressed about money – or feeling like you don’t have enough – isn’t a good sign.
Does the idea of investing freak you out?
Investing your hard-earned money can feel a little overwhelming. In saying that, investment done right can reap far more than you could ever earn by leaving your money sitting in a lowly savings account or, worse, a transaction account.
How’d you go? Okay, great.
For context, the purpose of my questions is pretty simple – they’re a great litmus test when it comes to ascertaining someone’s financial habits and where they’re at. As much as we like to think we’re on top of everything in our busy daily lives, sometimes we’re not as good with money as we might think. There are no right or wrong answers, obviously, but the above exercise is great for honing in on where we need to improve in terms of money management.
For me, good money management’s all about mindset. Get that right, and you quickly start to realise it’s actually not that hard to manage your cash better.
My advice on how to save money? Keep it simple. You don’t need to overcomplicate things. At a minimum, you simply want to spend less than you earn. Your rule of thumb should be this: the bigger the gap between your income and your spending, the better.
If I had to name the simplest, easiest tip to getting started on the road to managing your money better, it’d be this: automate your cash-flow. In other words, set up a savings account that’s not linked to a card and a direct debit out of your main transaction account. This way, it’ll be in your dedicated savings account before you have a chance to spend it.
Disclaimer: all information contained within this article is of a general nature. It does not take into consideration your personal financial circumstances. Please consult a professional financial adviser (just like us 🙂 ) when making a financial decision.