The tune is still ringing in my ear, especially the line when Liza Minelly sings “Money makes the world go round, the world go round, the world go round…”. Even if you haven’t heard the song, most people are familiar with the saying and sometimes attach their own meaning to it, depending on the circumstances.
The temptations of the consumer society are great, the products and services we can buy in Australia are generally of good quality, and we are bombarded with advertising everywhere we go to remind us to buy the next big thing.
I have no problem with advertising per se, I think it’s a necessary tool to make the money go round, and let’s face it… becoming financially independent has money at its core, money we need to life the life we want, or more money than we need, so we can start giving back to the community, because we have enough.
The trick in all this is to manage your own wants and desires, and make rational decisions about how you spend your hard earned money. Well, from money to accounting for income and expense figures is an easy stretch, so here it comes. The magic word is budgeting! And I mean not just figures on a piece of paper or on your spreadsheet, it’s about connecting the figures to the right bits of expenditure, to make it real. So how can you achieve this?
1. Refer to your goals
When you decide what you want to spend your money on, think about your long term goals. If you don’t know what they are, click here to read my article on how to set goals, and do it now, before you go any further. Without goals you are at risk of spending without thought.
2. Assess your current net worth position
Take stock of what you have or how much you owe the bank or other creditors. If you love your spreadsheets, then I have a special gift for you: a comprehensive Budget & Savings Planner, complete with formulas and illustrative charts to give you an instant financial position. Please go to www.RobertBauman.com.au where you can request your personal electronic copy.
3. Document your current expenses
Collate all the invoices, bank statements, receipts and dockets you need to establish all of your expenditure, from rent or mortgage payments right down to the grocery bills.
4. Take stock of your spending behaviour
Monitor your expenditure for a month and try to record everything you have spent at the end of the day. This is one of the most critical steps, as it will open your eyes to your spending behaviour, and more importantly, where you could make some savings that could help you achieve your goals.
5. Determine your financial goals
With the information you have gathered up to this point, you are now in a pretty good position to set targets, and they will be different for everyone, because people have different life goals and aspirations, therefore the monetary requirements to fund the desired lifestyle can vary greatly.
6. Develop new spending planner
This is where you start directing your income towards the budget priorities you have set… and if you’re an impulse buyer, why not determine a maximum amount for that in your expenditure plan so that even here you can stay in budget. In any budget, no matter how big or small it is, there are opportunities to be found where savings can be made that can be used to make investments in your financial future, to achieve your life goals and live the life you want to live.
7. Keep track and stay on plan
Once you have set up your expenditure priorities, set up your regular tracking stations. Refer to your goals regularly and check your financial position to ensure that you are staying on track with your budget plan.
I hope that I have inspired you to start working on your financial future right now, no matter what your budget plan is designed to pay for, be it that old dream of giving the kids access to the finest education, owning your home or taking that luxury cruise when you’re retired.
If you need more help to get you started, click here to get a copy of 5 Steps to Financial Independence, a practical working guide to help you navigate your way to financial independence and success.
Copyright © 2011 Robert Bauman
Disclaimer: This information (including taxation) is general in nature and is for Australian residents only. It does not consider your individual circumstances or needs. Do not act until you seek professional advice and consider a Product Disclosure Statement. To find out more about services provided by Foundation Financial Services Pty Ltd please visit my website.