Getting back your financial control

When I was growing up, things were never easy – my parents worked very hard across multiple jobs to ensure there was a roof above our heads, food on the plate, and clothes to wear.

That was when I learned how important a deep understanding of your finances and having control of them was.

Fast forward to today, and I see many who take their finances for granted as they are consumed with the idea of ‘perception’ – where people tend to spend more to keep up with the perception others have about how they should be.

There are many common mistakes we make which I would like to share and how we can help you address these issues so it doesn’t affect your financial well being.

It is very important that you take the first step to look at your finances, seek out assistance, and get financial control back – I can speak from experience, it does give you a great sense of security in many aspects of your life.

Not having a financial snapshot

If you don`t know where you are, how will you create a road map to get to where you want to go?

Start by looking through your balance sheet, your bank account statements, your superannuation statements, your investment account statements, and your insurance records – basically any assets, liabilities, income, and expenses.

It is important to have a budget estimate so you are aware of how much is spent on your necessary expenditure (mortgage, rent, utilities bills, rates, insurance), how much on regular discretionary goods (food, petrol, drinks – basically lifestyle consumption), and non-regular discretionary goods (holiday, car repairs, donations, medical etc).

You should then see if your cash flow is in a healthy position.

If you are seeing a negative number, your top priority should be to achieve positive cash flow. This could be accomplished by reducing the amount you spend each month and increasing the income you receive each month.

Once you have a positive cash flow, it is important that you do not adjust your lifestyle to absorb the extra money. It is critical that you invest the leftover cash for the future.

Not having well-defined goals

If you don’t know where you are going, how will you know when you get there?

We cannot stress the importance of this strongly enough. Unless you have well-defined objectives with a specific timeline, you have a dream, not a goal.

We are able to help you better when you have a defined goal that we can work towards.

For example, if you would like to go to London, we would teach you how to fly to London and not how to drive to Melbourne.

Not only must you have specific objectives with a timeline, you also must write down these goals and review them periodically.

It is recommended that you review your goals on an annual basis and make alterations. Minor adjustments are easier to make throughout your financial life than it is to make major leaps shortly before you retire.

Not considering risks

Risks and financial returns go hand in hand.

Although volatility can characterise investing, the greatest risk is failure to act. Assuming that you are willing to take the risk of action, certain risks must be built into your plan.

These risks include but are not limited to inflation risk, interest rate risk, market risk, and economic risk.

Not understanding the value of time

In this era of instant gratification, the mentality of many people is, how can I double my money in the quickest way possible?

This is not the right mentality to have when you start investing as there are many factors that affect the movement of your portfolio – it is important therefore to have a defined goal and work towards it.

Then, you move the goal further and work towards the targets again. One should invest for the long term. Long term has been defined as investing for three years or longer.

In short, it is a process that involves a lot of patience and learning but it is an enjoyable process – you will learn more about yourself and build on a solid knowledge on how to better manage your finances which in turn gives you greater control of your life. After all, life is complicated, but your finances don’t have to be.

Please contact us for a one-hour complimentary financial review – mention that you saw us on “Star Observer” and we will offer you a concessional review which will be discounted at one-hour of our time.

Karam Singh, Authorised Representative of Madison Financial Group Pty Ltd ABN 36 002 459 001 AFSL no. 246679.

He can be reached at [email protected] or 1300 193 136.

This information is of a general nature only and neither represents nor is intended to be specific advice on any particular matter. We strongly suggest that you seek professional financial advice before action. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc. as at the date of issue.