I talk a lot about building financial muscle and for good reason.
Why? Because some people today still don’t have their money working for them and they’re making dumb decisions when it comes to managing it effectively.
My concern is that when these people decide around 65 – 70 years of age that they would like to retire – they’re going to struggle!
Why, because they’re going to have nothing to enjoy their retirement years with, as they’ve spent everything they’ve earned along the way.
Financial muscle as I bang on about constantly, is making sure firstly that you’re hard earned money is working for you and not your bank’s.
And secondly, it’s about having something put away for “just in case” which “just in case” comes up a fair bit during our lifetime.
So how nice would it be to know that you’ve got money and it’s working to your advantage when you need it.
Here are 7 steps you need to know when it comes to building financial muscle and they are:
1 Looking at your spending habits. What are you spending your money on each and every payday? Are you spending it on things that are worthless and while short term makes you feel good initially but then when it comes to paying your bills you haven’t anything left to pay for them?
My guess is, this is when you start to feel stressed out and your life becomes very overwhelming.
The quickest and easiest way to get a handle on what you’re spending is to look at doing a budget. For the first month, you write down everything you spend and then deduct what you earn by what you’ve spent for the month.
More often than not, you’ve used credit to help get you out of a bind, but it’s not working and you’re getting further and further into debt.
2 Next, once you’ve worked out if there’s any surplus, you’ll want to make some adjustments in your spending to put away a small percentage around 10% of what you earn into a savings account.
Now 10% is not a lot of money, but you’ll need to do this first at payday before you pay any bills or use some of your income on other expenditure.
Once you’ve put away 10% or even $20 or $30 into a savings account then put on autopilot, where every payday money goes from your pay into this account. I guarantee you’ll start to think about your money a little differently.
Something magical happens when you know you have some money saved and you start to feel a little more confident and less stressed and it gives you a greater sense of security.
3 Ok the third area where you’ve got to be strict with yourself is to open another savings account, one that is too hard to get access to and start building on your emergency fund.
You’ll need to get your emergency fund up to at least $2000 as quickly as possible.
There are many ways to get this account up to $2000 and the first is to look around your home. What could you sell online that’s sitting around in your garage or shed that’s gathering dust?
The emergency fund is the 3rd most critical aspect to building financial muscle because it takes the pressure off you and your money when those unexpected things arise like your hot water goes on the blink or your fridge packs up.
The emergency fund is for exactly that emergencies that make life very difficult if they’re not fixed or replaced.
Ideally, the emergency fund needs to be at a balance where if you lost your job or you couldn’t work for 6 months, you would have enough money to be able to pay your bills until you get back to working again.
4 The major stress for most people is their ever-increasing debt, whether it be from overspending on credit or the mortgage on your home.
I can’t stress enough that when you finally become debt-free life is going to be a whole lot more fun. Things that used to stress you out are suddenly gone and all the pressure of working at a job that you probably don’t like now gives you the power and choice to look at whether you continue working there.
If you’re not working to pay down all your debts as fast as you can – you’re just throwing away good money to the banking institutions that are funding your poor money habits and making them richer while you become poorer.
Map out who you owe, how much you owe and then start with one debt at a time and pay that down until it’s gone. Once the first debt has been eliminated, then use the money that you paid the debt down with to double up on the next debt.
5 Ok, so the next step in building financial muscle is to stop and do a quick financial health check.
A financial health check will look at quite simply if there are any areas within your money that you need to work on, or get more information on, to get you back on track and retiring comfortably.
I have a 5 min financial health check that you can download HERE to get you started.
6 Now you’ve got money being saved, your debts are being paid off, it’s now time to look at your wealth-building strategies.
Your wealth-building will consist of two parts:
Investing and
Protecting
Let’s talk about investing first.
Investing is about growing your money through facilities like superannuation and other investment options.
Superannuation is a way of saving for retirement.
Essentially your employer in Australia is putting away a percentage of your salary into a fund of your choice that invests the money until you retire.
It’s a forced type of saving but brilliant to help those in particular that are not good at saving and will see you have some money at the end of your working life.
This is a big topic that’s too big to cover off in this post, so I will write a post on this and explain in more detail shortly, so keep an eye out for it.
Other investment options for wealth building during your working years could consist of investing in shares, managed funds or property to name a few.
I would encourage anyone looking into wealth building to seek a financial adviser who is qualified to provide advice on what assets or which investment vehicle is best for you and your personal circumstances.
There are many out there so be careful and take the time to ensure they have your best interest at the forefront of their advice giving.
Next, I want to talk about protecting your money. This is a very important topic. Today, I’ll give you a brief summary but like the topic on superannuation, I’ll be writing more about this in another post.
But for now, let me explain why it’s important to have a Will or good Estate Plan.
A Will and Estate Plan are there to make sure your wishes at the end of your life are carried out and distributed properly.
A Will is a legal document that states what you would like to happen with your assets when you die and forms part of your Estate Plan.
An Estate Plan, on the other hand, records exactly what you would like to happen with your assets upon death and includes documents such as your Will, a testamentary trust, superannuation assets and may contain powers of attorney or other such documents that in the event of you being unable to make decisions, someone appointed by you will act on your behalf.
So as you can see from the brief descriptions above it is extremely important to make sure you are protecting what you’ve worked long and hard to build.
If you die without making a Will it means you die intestate and this causes a lot of heartache and headache for your loved ones left behind.
What actually happens here is that your estate is left to deal with either from the Supreme or Highest Court, depending on which state you live in Australia, who will appoint an administrator.
The administrator’s job is to arrange the funeral and distribute any leftover assets after paying any debts and taxes. Sometimes there are fees associated with an administrator taking care of your details which means your loved ones may not receive the full inheritance you had planned on leaving them.
So make sure you have a current Will your priority today because nobody knows when our time is up.
7 And lastly, the 7th step to building financial muscle is to get yourself ongoing financial education and support.
Just like a sporting team, they all use coaches to help them and guide them to their sporting greatness.
Financial coaching is much the same, an experienced coach who knows sound financial education can make the difference between living with financial stress or living your life the way you’ve always desired – happy and stress-free.
If you’ve read to the bottom of this and you’ve followed the steps outlined above then congratulations as you are one who is committed to living a financially comfortable life.
Why not continue with your financial education by working with me on a monthly basis.
I offer several options, but the first is the most preferred as it’s inexpensive and extremely supportive towards you achieving awesome financial health.
When life suddenly throws you a curveball whether the signs were there or not and you haven’t prepared yourself for what’s about to come, it can send you into a spin and see you experience massive stress and anxiety.
Financial & Relationship stress go hand in hand and it’s still the number one trigger point for most.
When a relationship breaks down and you’re left to sort out where to go and what to do – money stress is ever-present.
Not only are you dealing with the emotional stress of the relationship breakdown, but you’re now having to deal with where to live, how to survive and then there’s the issue about money which is about to get very messy.
Then if children are involved a whole other issue about custody arrangements and financial support start coming into play.
It’s like you’re in the middle of a soap opera and left emotionally drained.
When an event like this is triggered a person will feel a whole bunch of overwhelming feelings like sadness, anxiety, or even experience panic attacks.
What happens next is that our body goes into one of the “fight, flight or freeze modes” and our heart beats faster and our senses go on high alert. Also our brain stops some of its normal functions to deal with the threat we may be feeling or experiencing.
If this has happened to you or you can see life is about to dramatically change then get some help.
Firstly, find someone who is unbiased and independent and someone who doesn’t know you or the situation that you’re about to experience.
When people are feeling overwhelmed and stressed out they sometimes don’t make decisions that are in their best interests or health.
If you know of someone or you yourself, are feeling any form of stress then get some help. You don’t have to do this alone. There are people and organisations that can help.
Be on the lookout for the SYMPTOMS that stress can produce:
PHYSICALLY
Tiredness, headaches, accidents, tightness in neck and shoulders, restlessness, ulcers, hypertension, respiratory problems, diarrhoea or constipation, chest pain, back pain, upset stomach, skin problems, weight loss or gain.
If stress is experienced for long periods of time it can result in physical, mental and emotional exhaustion or ‘burnout’.
STAY CONNECTED
We need to look out for one another, stay connected and ask if we’re ok.
If your gut is telling you that you’re not ok or that someone close to you is not, then make sure you’re there for them. More often than not they’ll say they’re ok and will remain silent while living with their pain.
SUPPORT
Here in Australia, we have an organisation called Lifeline which is a national charity that has been providing assistance to Australians experiencing difficulties for over 55 years.
If you’re reading this and not in Australia then seek out your country’s support network to ensure you get help and are not dealing with this alone.
In Australia, you can call Lifeline on 13 11 14 anytime as they’re available 24 hours a day.
WHAT TO DO NEXT
I have created a tool kit to help you identify when you’re feeling overwhelmed about what to do.
Other resources I have available is my monthly coaching program which is a fraction of the cost than other coaching programs at $37 per month and with no lock-in contracts. You can exit whenever you choose.
Also, courses teaching you money management skills and how you can build financial muscle. You can check out what’s available HERE.
In the meantime, here’s to your financial health, wealth & happiness.
Changing a money habit is NOT merely a matter of saying… yep, I’m not going to spend everything I earn this payday or I’m not going to overspend on my credit card this month from impulse buying.
Poor money habits I believe come from a deeper concern than just spending on meaningless stuff. Stuff that half of the time we don’t need or even use.
So where do these money habits come from?
Well before I answer this. I want to remind you what an actual habit is.
A habit is a behaviour that is learned when we regularly keep doing the same thing over and over again without even thinking.
Money habits are no different than the habit of brushing your teeth when you first get up in the morning or after breakfast. It’s a behaviour that becomes ingrained in how we treat and respect our money. One that we are fully aware of the consequences that follow if our habits are from poor money decisions.
Is there a cure for our poor money habits?
Yes, I believe there is. However, it takes time, discipline, awareness and mental strength in order for anyone to break this habit.
How long can it take to change a habit?
According to psychologists, while it may take approximately 21 days of conscious and consistent effort to create a new habit, it takes far longer to break an existing habit.
From personal experience in working with clients who want to change their poor money habits – it takes a lot longer.
You see there are deeper issues at play why some of us have poor money habits that can at times border on addiction. Just like any addiction, it’s more often than not about something that’s happened in the past.
A habit is not necessarily an addiction, though the two are strongly linked. A habit is any conscious behaviour you do on a routine basis.
Addiction is more about the behaviour to an excessive degree whereby someone feels unable to stop or control it.
Our self worth is often tied to our poor money habits. Our poor money habits can come from the messages we heard growing up and from the examples, we saw when we were younger.
Some of us spend when we feel low or unhappy to give us the kick “or high” we hope to make us feel good about ourselves. The hope that is supposed to fill the void we’re so looking to fill.
When in fact it’s much like the high you get from either an alcohol or drug addiction. Feels good at the time but hell when coming down from the high.
What’s the price of not changing our money habits?
There’s a high price to pay and that comes in the form of massive debt, poverty, unhappiness, envy & jealousy and often health issues.
So how do you move from poor money habits?
What are some of the ways to transform a poor money situation?
3 ways you can change a money habit is to:
1. First, acknowledge that you have a problem. A problem that you’re spending more than you earn, A problem that sees you with credit card debt, personal debt and other debt that you have no hope in paying off anytime soon. Being aware that you’re deep up to your elbows in debt and it’s time to get out, this is the first step.
2. Get help. Get the support you need to help you move forward. Having someone who understands and willing to help you means you’re not alone. It also gives you someone you can be accountable to. Someone who has a vested interest in seeing you succeed and live a better life without financial worry or stress.
3. And lastly, find your purpose – YOUR why. The reason you want a better life and one that doesn’t include massive debt or poor money habits. Set some goals. Write down how you want your life to be. What you want for your life and keep this at the forefront of your mind.
Writing down your dreams, goals and desires keeps you focussed and helps you work towards the bigger picture and what you want in life.
Breaking a habit takes a lot of willpower and motivation.
Ending the cycle of poor money habits is generally easier when it’s something you want to do rather than something others say you should do.
For anyone looking for coaching, support, education and help in moving towards their goals, then check out my “no lock-in contract” monthly coaching program.
The MONTHLY COACHING PROGRAM provides you with the support you require throughout your financial journey for a fraction of the price for $37 per month.
I’ve just opened up this program, as I’m getting a lot of questions asking if I have a monthly coaching program for a small cost.
People today are using their homes as piggy banks. Taking the equity out and re-financing their ever increasing personal debt.
The sad part of this, is that unless these people get control of their debt – their debt will take control over them and never allow them to get ahead financially.
These people will forever be in financial stress and that really saddens me!
Poverty consciousness is very real. Some of us were raised by the worst financial planners in the world – our parents. I’m sorry if I offend some people, it’s not my intention and I am not finger pointing – it’s just not their fault.
Financial education is not taught to any magnitude at school. What we are taught is the fundamentals on how to work for money and how to get a good job. We are not taught what to do with our first pay check once we receive this and how money can work to our advantage.
With every person that earns an income they should be paying themselves first!
What do I mean by this?? Well some of you may have learned this concept from a very old book “The Richest Man in Babylon”. Or some of you may have heard it from wise Grandparents or Parents. I was fortunate to learn this lesson in life from my parents. When I earned my first dollar many years ago, I was “strongly encouraged” to put 1/3 of this into a savings account.
The book “The Richest Man in Babylon” talks about paying yourself, or putting away 10% of your salary and letting it grow until it can be used to buy investment opportunities. Now that’s making money work for you!
You see it’s hard to help the poor if you are one of them.
MONEY IS UP THERE WITH OXYGEN!
They say, money doesn’t make the world go round, well I have to disagree with whoever said this. Whether we like this statement or not, without money life is extremely challenging and not as much fun!
Understanding money, how to keep it and how to grow it is essential to our life, relationships, happiness and future.
Your hard earned money should work for you and not you working for it!
The wealthy and comfortably abundant people have figured this out.
Embark on the journey with us at Financial Management 101 and acquire a greater understanding of how money working to your advantage will be life changing in all areas of your health, wealth and wisdom.
