22 Oct Financial Planning: The Secret To Wealth
Have you ever caught yourself thinking “if only I earned more I would be able to buy that new car, take that dream holiday, or send my kids to a private school.”
Well, allow me to let you in on a little secret. Becoming wealthy is not a matter of earning more money. The secret to wealth is better management of the money you already have.
1. Spend wisely and enjoy the benefits of saving
The first step on your way to building wealth is spending less than you earn. Yes, this sounds simple, but it’s hard in practice. If it were easy a lot more of us would be wealthy people. So what makes it so difficult for us to live within our means?
Well, behavioural scientists have shown that it’s human nature to seek instant gratification. This makes us much more likely to spend money on things that make us feel good now, like coffee with friends or magazines, rather than doing something that’s better for us in the long term, like saving some of our money to buy a house or go on holiday. You can identify where you need to start saving in one of our financial planning strategy sessions. Your financial planner will help identify your bills, your necessities and your desirables like that sports magazine.
2. Make a budget and stick to it
To start saving for the things you want in life, such as your children’s education or starting that business you’ve always wanted to, you need a budget. Even if the majority of your money goes towards essential items such as mortgage repayments, groceries and school fees, it’s usually possible to find savings by making small changes to your budget. You could try:
- Reducing your spending on non-essential items
- Consolidating small debts so you’re only paying one monthly fee.
Getting control of your budget can sometimes be very difficult and if you dont know where to start, investing in a financial adviser might be beneficial. Once you have your budget under control, it will be much easier for you to keep some of your hard-earned money in your own pocket.
3. Start a savings plan
Your financial planner might suggest starting a regular savings plan. A savings account is one of the simplest and easiest ways to save money. Your savings are kept in a separate account to your everyday spending account, so you won’t be able to spend this money as part of your weekly expenses. It will also attract a higher rate of interest, which if left to accrue in the account will help you get your goal of wealth creation underway.
The more you save, the more you will earn
Regular investing also gives you the chance to boost your savings by taking advantage of compound interest. Compounding, or earning interest on your interest can make a significant difference to the value of your savings or investments over time. The longer you save, the greater the effect of compounding.
Let’s look at a simple example that shows the power of compound interest. Say you had savings of $20,000 and each month you put away $500. In just 10 years that $20,000 would have grown to $110,074, assuming the interest rate on your bank account was 5%. Of that, $30,074 would be the compound interest that you’ve earned along the way. Compounding interest is just one of the smart tactics to helping achieve your financial dreams.
Master Your Money Now
So as you can see the secret to having wealth is to have goals and to have a financial strategy for those goals. Master Your Money Now are a dedicated team of financial planners and advisors who can help develop your strategy and make sure you are getting the most out of the money you are making. You don’t have to be wealthy to need a financial strategy you just need to be thinking about your wealth if you would like to discuss how to budget or develop a comprehensive financial strategy book in to see us today.
If this is a topic that you would like to discuss in more detail, please go to www.MasterYourMoneyNow.com.au/getstarted to book in your complimentary 30-minute strategy session.
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Disclaimer: This information is general information only. You should consider the appropriateness of this information with regards to your objectives, financial situation and needs. Past performance does not guarantee future returns.
Chris Carlin is an Authorised Representative (No. 1235031 for financial services and No. 514748 for credit) and Master Your Money Now Pty Ltd ABN 65 627 229 681 is a Corporate Authorised Representative (No. 1265677 for financial services and No. 514747 for credit) of Infocus Securities Australia Pty Ltd ABN 47 097 797 049 AFSL and Australian Credit Licence No. 236523