|
We all accept that part of building a structurally sound, solid, lasting building is that the building is established on strong foundations.
Similarly, we would all acknowledge that any well run club, organisation or business is likely to also be built on strong foundations. Given that we can see the benefit both literally and figuratively of building on strong foundations why don’t we apply that same mentality to the crafting and maintenance of a sustainable household budget? I believe that the answer lies at least in part in that many of us don’t really understand “the rules of the game” so to speak. Let’s look at some examples;
I could continue with the examples but now to my point (Honest self-appraisal is the key here);
I have established Empower Money Management to help with providing my clients with proactive educational initiatives around taking control of their existing financial situation. At Empower Money Management I have 32 years finance industry training, experience, insight and industry contacts behind me that I can use to assist my client base to understand “the rules of the game”. I can help you to build strong foundations and a lasting structure with your own financial wellbeing. As my vision states; “Empowering people to make sound financial decisions on their own behalf, and enjoying the financial peace of mind that flows from good decision making”. To become an Empower Money Management client contact Leigh today. leigh@empowermm.com.au www.empowermm.com.au 0407 439 827
0 Comments
I have heard both of these statements countless times during the past three decades I’ve spent working in the finance industry.
The number of times I’ve heard these statements is part of the reason I have established Empower Money Management. Whenever I hear a client make these observations about their own financial affairs I often reflect on the “why?” behind this.
What needs to change for these statements to change? Wouldn’t it be great if the statements became;
It is possible for your own observations around your financial affairs to be positive. Change can be made – you just need to commit to making the change. Let your emotions around managing your financial affairs become positive. Contact Leigh at Empower Money Management to make the change today. www.empowermm.com.au leigh@empowermm.com.au All of us have things we love to do, and also things that we don’t like doing. Some of us are lucky enough or skillful enough to turn our love or passion into our work. I would argue that you are in the wrong job if you don’t at the very least enjoy what you do for work. Furthermore, if you don’t enjoy what you do, and you actually dislike what you are doing I would suggest it’s time for a change right now.
You might be wondering what your workplace has to do with the world of budgeting and money management. Let’s look at it like this;
Clearly the examples could go on, however now to my point.
As with my workplace examples from above, it is a simple reality of life that different tasks best suit different people. When required, we engage the services of the expert in the needed field. An expert who has the skills, experience and most importantly the passion to ensure a good outcome is reached from the engagement of their services. At Empower Money Management I have 32 years finance industry training, experience, insight and industry contacts behind me that I can use to assist my client base. I have established Empower Money Management because I am passionate about providing quality finance coaching that will help to deliver financial peace of mind for my valued clients. To learn more or to become a client of Empower Money Management contact Leigh today. www.empowermm.com.au leigh@empowermm.com.au One of the realities of contemporary everyday life is that we live in a very commercialised, consumption based society.
That commercialism often conditions us to believe that our place and importance in society is defined by what we possess and consume, rather than how we live our lives. By taking a moment to think about this, we can all instantly relate to how pervasive the nature of modern marketing and commercialism is in our day to day lifestyle. I would argue that we all fall victim to the commercialism of the modern world at times – Peer pressure, advertising (either traditional or via social media), the abundant availability of credit etc., etc. How many of us could honestly say that we have never fallen victim to the relentless nature of society’s push to consume. As individuals do we ever stop and take a moment to think why? …………… Why have I purchased a new pair of shoes when I already have 10 good pair of shoes in the closet? Why have I purchased a larger flat screen TV when I already have a large flat screen TV? Why have I accepted my bank’s offer to increase the limit on my credit card when I can’t pay the current balance owing in full each month? One of the goals I have for Empower Money Management is to help my clients to challenge themselves as to the reasons why they make the financial decisions that they do. Often my clients are able to learn from their past financial behaviours that consumption for the sake of consumption does not necessarily equate to happiness. The skill of learning how to control and moderate your spending within the structure of a manageable budget is often the most liberating financial experience you can have. To learn how to live more while buying less contact Leigh at Empower Money Management today. www.empowermm.com.au leigh@empowermm.com.au M. 0407 439 827 One of the struggles that many people have expressed that they face with the battle of day to day budgeting is that they never seem to have any spare cash.
Given the shortage of cash that is often the result of either poor budgeting or no budgeting; how is it that I would then expect people to be in a position to pay for fee-for-service budgeting help? I believe the key here is in providing simple, easy to understand, good quality information that empowers people to make an informed choice on their own behalf. My initial consultation with any prospective new client is free of cost and obligation. It is simply designed to be an open and honest chat where you decide for yourself if you see any value in engaging my services. Assuming that you do see a value in engaging my services you then sign a Letter of Engagement that sets out the specific goals you have engaged me to assist you with. From this point on I then charge a client $100 per hour of my time. To portray this in further detail I will use a hypothetical example; Client A engages me to assist with creation of a monthly budget that details current fixed income, current fixed expenses, current levels of discretionary expense and current capacity to save. Client A also engages me to review their current portfolio of loan and bank accounts with a view to suggesting where any further monthly savings may be created. It would depend upon the level of complexity in the income and expense scenario above, however typically there would be around 3-4 hours work for me to analyse the scenario outlined and to prepare my report for my client. Therefore, in this example the cost to my client would typically be in the range of $300 to $400. Furthermore it is important to note that this is a once only expense. It is obviously not possible to provide a specific answer to the level of savings that may be made in each individual budget, however I don’t think it is unreasonable to suggest that savings in the area of $3000 to $5000 per year could typically be achieved for most wage earners through adopting a more disciplined approach to setting and then following a monthly budget. If you then choose to maintain the budgetary discipline year on year the value for your initial outlay just continues to improve. I believe a key in setting a budget that you will stick to still includes making reasonable allowances for discretionary expenditure that you don’t want to live without. Obviously this is different for everyone but these are the types of issues I talk through with my clients to ensure that the budget we set remains both achievable and enjoyable. As I state on my website; “My coaching program is designed to empower people to develop a capacity to make better financial decisions on their own behalf; and enjoy the financial peace of mind that can be created with appropriate levels of planning and control.” For further information or to arrange an obligation-free consultation contact Leigh today. leigh@empowermm.com.au www.empowermm.com.au M. 0407 439 827 In my recent article “A sustainable monthly budget – And achieved without the fun police!” I pointed out that with a few simple lifestyle changes to a hypothetical household budget I had achieved a decrease in expenditure (and thus saved) $3680.40 over a year.
The list of changes I made was certainly not exhaustive, and in fact I’m sure I could have come up with more savings had I chosen to go through every category of household expenditure. You might be wondering why I’m mentioning that again here. I’m raising it again because it relates directly to what I’m talking about today. I’ve often had people say to me that they can’t be bothered with, or it’s too hard to budget. Alternately they may claim that they never have any money left over each week, fortnight or month that they can save. My answer for most people is - I think that you can’t afford NOT to save. The reason that most people think they can’t afford to save is that they don’t have the structure of a well-defined budget that outlines what their monthly income and their fixed monthly expenses are. If you don’t understand what your cost of living actually is, then of course you will never have the capacity to save. However, the value of a budget that helps define your monthly cost of living then also informs you as to what you have the capacity to save each month. Expenses such as school fees, utilities bills, insurance premiums etc. DO NOT fit into the category of unexpected expenses. You know that they are going to occur each year, so you build an appropriate allowance into your monthly budget for each of these expenses. The savings that can be generated each month then form the basis of your “rainy day” fund. Unfortunately we all have some genuinely unexpected expenses from time to time, so the “rainy day” fund is then what can be used to assist you with those genuinely unexpected expenses. The further value of proactively budgeting like this is that it lessens the stress and anxiety that inevitably occurs in a time of unexpected expense, but it also lessens the actual financial cost of servicing this expense. By funding the expense from your own resources, you have then not had to rely on short term funding from your bank. What this means is that you haven’t had to rely on your credit card (most likely at interest rates beyond 20%), or applying for a personal loan (again, further set up costs, interest payments, time and anxiety) to get you out of a short term financial dilemma. Proactive management of your household budget can in fact by very empowering. To learn more contact Leigh at Empower Money Management. leigh@empowermm.com.au www.empowermm.com.au 0407 439 827 Most people don’t associate the words budget, and fun, together - more often than not you can usually see their eyes start to glaze over the moment you mention the word budget to them.
For a lot of people terms like “budgeting” and “saving money” imply missing out on things they want to do and/or buy, and therefore missing out on some form of fun. I believe that with just a small degree of planning and control being brought to a monthly household budget the fun police won’t be preventing you from doing all the things you still want to do. Let me use a few very common examples to illustrate my point; 6 pots at the pub on a Friday night after work = $30; Taxi ride home = $20 Then, multiply the above equation by 4 to represent the number of weeks in the month. In total a Friday night after work drink has cost $200 for the month. Alternately a carton of 24 beers (six each week for four weeks) will cost somewhere around $45. You have had the same number of beers per month, but have saved $155. 1 purchased coffee a day = $4. If you buy 1 coffee a day for each work day you have spent $20 a week. Using the coffee from the work kitchen costs nothing. Saving $20 each week equates to $80 each month. You have had the same number of coffees each month, but have saved $80. Pay your utilities bills by the due date. I will use my own current electricity bill as an example. I get billed monthly for my electricity usage. The current bill offers me a pay on time discount of $31.70. It’s a no-brainer – paying the bill by the due date means I have saved $31.70. I recently purchased a new pair of casual trousers. The tag on the trousers showed a full retail price of $90, however because they were on sale the price had been reduced to $50. Through buying the trousers when they were on sale I have saved $40. (P.S. Why does anyone pay full retail for any clothing item now? – They are almost always on sale.) I believe another significant area of saving can be something as simple as making a list of only what you need when you do the supermarket shopping. Make the list, stick to it, and only go to the supermarket once a week. Think of the amount of money saved through the reduction in waste if you purchased only what you needed on your weekly list. Clearly I could go on with the examples, but I’m sure you all get the point. Using my examples from above, and clearly this is not an exhaustive list I have saved $306.70 for the month. If I can replicate just these savings each month, I will have saved $3680.40 for the year. Imagine the potential for further savings by looking at all areas of household expenditure – How much more saving might be made? In my example I have still done everything I wanted to do – the fun police haven’t needed to stop me because I couldn’t afford it, and at the end of the year I have at least $3680.40 that I wouldn’t otherwise have had. My point is that wise usage of your own money needn’t be boring. Clever use of your own money can be very empowering. To learn how I can help you to empower yourself contact Leigh at Empower Money Management. M. 0407 439 827 leigh@empowermm.com.au www.empowermm.com.au My working life has been spent in the finance industry. Over the past 32 years I’ve worked in a broad variety of roles, and seen significant change in the way financial products and services are marketed and delivered. I’ve been employed in management roles with a range of banks, and I’ve also worked as a self-employed mortgage broker.
Primarily through advancements in the use of technology, the delivery of financial products and services has changed significantly during this time – However the one constant with the delivery of financial products and services has been, and will always be that they are delivered with a view to maximising the profit for the provider of the product or service. To illustrate my point I will use obtaining a home loan as an example. Whether you deal directly with your lender or you choose to use the services of a broker, the product being provided to you will generate a profit margin for the lender. Furthermore, the remuneration of the person providing your advice is often tied directly to the sale of the product being provided to you. Most bankers now days will be set with sales targets they must achieve, and brokers are only paid based on what business they introduce to lenders. As the consumer you are not necessarily getting a bad deal – but are you getting the deal that is best for you? Do you even know how to recognise what will suit you best, and if so how to ask? Let me be very clear here – I’m not suggesting that bankers and/or brokers are ripping borrowers off. I’ve sat in the banker and broker chair for many years myself. I’m simply pointing out that I think things can be done better from a transparency point of view. One of my primary motivations for starting Empower Money Management was that I thought that consumers could benefit from the provision of better education with regard to managing their own money, and making best use of their own banking facilities and arrangements. The commercial reality of the provision of banking products and services is that the provider is making money out of the product/service being provided to you. Philosophically I have absolutely no problem with that; that is the nature of the capitalist system that we live in. What I think can change significantly for the better is the understanding that people have of the financial products and services they use. How can you be sure that you are getting the deal that suits you best if the primary motivation of the provider is what profit margin they generate from the transaction, and how many additional products and services they can sell to you? At Empower Money Management I DO NOT SELL products and services. I am not remunerated by selling an additional financial product or service you didn’t ask for, don’t need or don’t understand. As a consequence of NOT being remunerated based on the sale of a product or service I can provide a genuinely unbiased comparison service for my clients, where I can help you to understand the range of benefits a product or service may offer. Through education and understanding you are then in a much better position to be able to make informed choices with regard to the purchase of a financial product or service. I provide fee-for-service coaching and education on the better use and understanding of your own money, including coaching that covers how to ask your banker or broker for a better deal on your existing or proposed facilities. I am happy to sit down with my clients and help you to analyse where you can make savings on your existing arrangements, and empower you with the skills to make positive money management decisions a part of your day to day life. To make a positive difference for yourself make an appointment with Leigh at Empower Money Management. M: 0407 439 827 leigh@empowermm.com.au www.empowermm.com.au Recent statistics show that rates of household debt are at all-time highs in Australia. Given that mortgage interest rates sit at all-time lows it is critically important that all mortgage borrowers understand the fundamental difference between what your lender will allow you to borrow, as compared to what you can comfortably afford to borrow.
To illustrate my point, as a general rule of thumb your lender will consider the following points (not an exhaustive list) when assessing your loan application;
The critical learning here is that your lender is obligated to make their assessment of your borrowing capacity based on your current financial circumstances, and current market interest rates. From your lender’s perspective, your maximum borrowing capacity is therefore based on your current financial circumstances, plus a margin (the calculation will vary from lender to lender) that theoretically allows for future interest rate rises. The lender’s initial affordability calculation doesn’t consider the following – How many times during 30 years might your financial circumstances change? Mortgage stress will generally occur as a result of a change in a borrower’s income circumstances and/or as a result of increases in the interest rate on your loan. Some of the common examples of a change in household income and/or expense levels include;
Borrowers need to understand that not only do you have to be able to comfortably afford your loan repayment at the commencement of the loan; it can potentially take 30 years to repay your home loan. In my opinion it is very important when committing to a home loan to recognise that home loan interest rates currently sit at all-time lows, with current owner occupied variable rates sitting somewhere around the 4.00% to 4.50% range. To clarify my point, please refer to the following table;
As can be seen from the example above, if over time there was a 2.50% increase in the variable rate it would lead to an increase in minimum monthly repayment of $397. A potential adverse change in a borrower’s income circumstances, along with a potential upward change in loan interest rate will often lead to a case of mortgage stress. Obviously no-one has the ability to be absolutely certain of their future circumstances, however in my opinion the critical question around housing affordability becomes – Can I afford my home loan both now and into the future, whilst maintaining the lifestyle I wish to lead? A wise home loan borrower will generally consider both their existing financial position, and their likely future capacity to remain financially comfortable when entering into such a large and important financial commitment as a home loan. To learn more about the effects of interest rate changes on your borrowing capacity, and also to get help to build a sustainable budget that can withstand other potential negative influences on your financial wellbeing contact Leigh at Empower Money Management today. M. 0407 439 827 leigh@empowermm.com.au www.empowermm.com.au As with most things in life children model their behaviour based on what examples are provided for them. That being the case, what example do most of us provide to assist with the development of the financial literacy of our own children?
How do you model sound financial habits to your children, if managing your own financial affairs is often a struggle? I believe the “cashless” nature of most contemporary financial transactions is one of the greatest challenges parents face in helping their children to develop an understanding of the real value of money, and where money comes from in the first place. The “cashless” nature of contemporary financial transactions often leads to adults having their own struggle to manage the monthly household budget. I have witnessed countless examples of people who struggle to pay the outstanding balance in full on their own credit card/s each month. If that is the case, how do you model good money management to your own children? For example, modern technologies like tap and go payment systems are great for convenience, and reduce the need to carry sums of cash, but on the other hand reduce the opportunity for children to see and understand how much money needed to be earned to fund that transaction.
To make an obligation free appointment contact Leigh today on 0407 439 827, or leigh@empowermm.com.au Also see www.empowermm.com.au |
RSS Feed
|
Contact Leigh: 0407 439 827 |