Financial Success in 2016 – part 3

So far you have written down the goals you want to achieve and established what your net worth is. Next is to see what money you have to work with.

Step Three – Finding money to save and invest

The next step is to keep track of your income and your expenses for a minimum of a month. Write down what you and others in your family earn, and then your monthly expenses.

There are a plethora of resources available to help you do this from free tools to some where you pay a small subscription fee. Some options are:

-       Free tool from Sorted https://www.sorted.org.nz/calculators/money-planner

-       Free tool from the Federation of Family Budgeting http://www.familybudgeting.org.nz/get-budgeting-advice/budgeting-resources/

-       The banks have a range of tools from online money management systems to free articles and calculators

-       NZ based online money management software. Some good options are: www.financial.me, www.pocketsmith.co.nz and www.cashcontrol.co.nz

Whilst it may seem a little overwhelming looking at the various options it will be a good use of your time to find something that you feel comfortable using. This exercise is about tracking your money for a month so you can see exactly what you are earning and spending. However tracking your money a regular basis will be one of the most useful things you can do to achieve your financial goals and achieve financial success. The key is to find a system that you can commit to using on an ongoing basis.

One of the most common questions people asks a financial advisor is ‘How do I invest my money?’ If you already have a lump sum of money then it is relatively easy to answer as that’s what they specialise in. However many people are still in the process of saving and investing to build up their money and the challenge is that if they don’t know how much they have to regularly save and invest the question of “How do I invest my money?’ becomes a challenging one to answer, simply because you do not know what you have to work with.

Doing a budget is an excellent exercise for everyone to do no matter how much you earn and what your financial position is. It creates awareness and awareness enables you to make smarter decision, and after all it is very challenging to be financially successful without being smart with your money! If you are spending all your income, and never have money to save or invest, you’ll need to look for ways to cut back on your expenses. When you watch where you spend your money, you will be surprised how small everyday expenses that you can do without add up over a year, two years, three years and so on.

We live in a consumerism society with temptation in the form of constant advertising surrounding us. Think carefully before you spend any of your hard earned money. Ask yourself ‘Is this the best use of my money?’ If you are an impulse buyer, make a rule that you’ll always wait 24 hours to buy anything. You may lose your desire to buy it after a day.

The key to this exercise is to understand how much money you have available to save and invest on a regular basis. It doesn’t matter how small the sum is - just start. Over time as you get smarter about your spending choices you can build up the amount you save.

 

Lisa Dudson is a bestselling author and Registered Financial Advisor with over 15 years industry experience. Lisa offers financial advice through www.acumen.co.nz and co-owns the New Zealand's leading property investment agencies www.ifindproperty.co.nz & www.propertyladder.co.nz

Catch up on the previous posts:

Financial Plan 1

Financial Plan 2