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Unlocking the Benefits of Working with a Financial Coach

Your Financial Coach Jessica Skene
Financial Coach, Jessica Skene

There are so many people we hire to make our lives better and save us time. We hire psychologists to help us tackle the challenges of life, we hire gardeners to make our lawns look beautiful and cleaners to help save us time so we can have more time for the things we enjoy doing. One thing that many of us may not know about, or may not have thought about hiring is, someone to help support us with our finances.

Financial Coaching is a fairly new service and one that you might have never heard about. If you have or haven’t heard of a ‘Financial Coach’ and are curious as to how they might be able to help you when it comes to your finances, here’s some info to help you get to know a little bit more about what a Financial Coach is and what they do.

What is a Financial Coach?

A Financial Coach is an accountability partner and soundboard, to support you with making financial decisions, to be there to guide you through those unexpected financial issues that always seem to pop up out of the blue, and help you set and achieve your financial goals sooner!

What’s the Difference Between a Financial Advisor and a Financial Coach?

A Financial Advisor and Financial Coach may seem like they do the same thing but they add very different value to their clients. 

A Financial Advisor will work with their clients to help them plan for their financial future. Some of the things they can help their clients with are; investing, insurance, taxation, estate planning, and retirement planning. They help their clients with selecting the right investment products and asset allocations for their risk tolerance and work with their clients to build the retirement they desire.

A Financial Coach is focused on helping their clients with their day-to-day money management. They are an accountability partner that’s there to help their clients identify their financial goals, make a sustainable plan for their money and help their clients follow through on those goals. 

Financial Coaches are there to strategise and problems solve with you as life throws new financial obstacles at you (and let’s face it, these are always going to come up).

What Can a Financial Coach Help You With?

A Financial Coach can provide judgment-free support and be an accountability partner that can help you with budgeting skills, paying off debt, saving money, setting up systems to manage your day-to-day finances, learning new money habits, building a positive money mindset, goal-setting, and planning ahead with your money. They can help you:

  • Gain clarity over your finances so you know where your money is going each paycheck
  • Create a plan for your money that is sustainable
  • Set up easy-to-use systems to help you keep track of your finances
  • Resolve financial challenges you are experiencing 
  • Identify your financial goals and help you achieve your desired results faster
  • Pay down debt and understand the reasons you are going into debt so you can stop the debt cycle
  • Find extra money in your budget to contribute to your retirement fund
  • Change your money habits 
  • Identify your money values so you can spend your money with more intention and create your ideal life
A lady working at her computer in deep thought

Why Should I Hire a Financial Coach?

Money is the #1 cause of stress in Australia (Medibank May 2022 survey). Money stress can have a hugely negative effect on people in all facets of their lives. Financial Stress doesn’t end at your wallet and limit itself to impacting your finances alone. The ripple effect caused by money stress can affect other many areas of your life such as your sleep, health, relationships, parenting, and quality of life.

Your finances can be a difficult or uncomfortable thing to discuss with your spouse, family, friends, and colleagues. You might not know anyone in your personal circle that you can turn to for a judgment-free discussion around money.

You may have tried to discuss finances with someone close, but found that their responses were unhelpful or that they have their own financial money blocks or negative views about money. You might walk away from that conversation feeling more confused or frustrated at responses like “oh we’ll always be broke” or, “things will only change if we win the lotto”. 

You might have been struggling with your finances for some time and are starting to feel hopeless about getting ahead, not knowing who can help you turn your financial future around.

This is where a Financial coach can help you. A Financial coach is there to help you talk about your financial challenges, goals, and dreams in a safe, supportive, and confidential space.

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What Are The Benefits of Financial Coaching

Improving your finances, will certainly help your finances, but Financial Coach has many benefits outside of more dollars in your bank account.

By removing roadblocks and financial challenges, many different areas of your life will improve, some that may not seem like they have anything to do with finances! But when you look deeper at your financial challenges you will start to see how much financial stress can impact other areas of your life.

A Financial Coach can work with you and help you to:  

  • minimise or eliminate stress around money
  • sleep better 
  • spend your money in alignment with your values
  • minimise impulse spending
  • strengthen your relationship with your spouse 
  • feel more confident with financial decisions
  • be a more present parent as well as, set an example to your children with good money habits 
  • build your ideal life so you can do the things you always dreamed of and
  • create more happy memories with your family and friends
  • feel financially healthy 

Why Should I Hire a Financial Coach When There is so Much Free Info Online?

Having all this information can be helpful for some, but extremely overwhelming for others. Not everyone has the time or patience to figure things out slowly. Plus the trial and error can take years and when we tackle a goal, most of us need to see progress very quickly to keep us motivated to keep going. If we don’t see that progress almost immediately we might give up before we’ve made any long-term changes to our financial habits.


I know when I was starting my business, for the first year I was determined to figure it all out myself. I didn’t want to spend money as I wasn’t ready to see the value in investing in my education. I watched endless youtube videos, read blogs, listened to podcasts and joined business Facebook groups, and consumed as much free information as I could. This was super helpful but didn’t quite get me as far ahead as I had hoped. There were so many gaps I needed to fill and I really just needed someone I could ask that could guide me in the right direction.

Within 12 months, I found myself not closer to where I wanted to be in my business, I felt like I was spinning my wheels. I needed someone to take all the information for me and put it into a structured plan I could follow and knock out those action steps so I could make progress more quickly.

I finally took the leap and invested in myself and purchased a course I had been considering buying for months. Immediately I felt a sense of relief that someone else that has done all the trial and error themselves and was going to give me the tools and know-how, that I needed to move forward with my business. I can’t imagine how much further behind I would be if I had just kept on struggling and not allowed myself to spend money on something that was going to add value to my life.

If you’re busy and short on time, you may not have the time to research and find the right financial tools to make progress with your finances or figure out the best plan of action for you. If you don’t see yourself moving forward and getting results with your finances after trying to on your own for so long you may lose the motivation you had at the start and end up not making any progress at all. 

When working with your Financial Coach you will be in good hands, they’ll be there as your accountability partner to help you stay the course with your financial goals.

A Personalised Approach

Financial Coaching is not your one size fits all approach like some of the financial expert’s advice out there. If finances were just a ten-step plan that was straightforward forward we would all be debt free, retiring early and rolling in money right?

Personal Finances is so much more than just simple steps. It is personal! Each person’s financial journey is different. If you ignore the behaviour, habits, and don’t get to the crux of what motivates you and why this is important to you, you may struggle to move forward with your financial goals.

Your coach will take the time to get to know your financial dreams, personal challenges, and goals and help you to overcome those roadblocks stopping you from getting you where you want to be in life. You may have tried different financial tools to manage your finances before but found that they didn’t work for you. A Financial Coach will be there with you as new financial issues arise to help you strategise and brainstorm new solutions and find the right tools and systems that work best for you.

Finding the Right Fit With a Financial Coach

Financial Coaches are not a one size fits all. Many have very specific niches in order to help people with very specific goals. Often in areas that they are passionate about, or have walked through themselves so you know that you are in good hands as most likely your coach has been where you are before.

A Financial Coach might exclusively work with engaged couples to help the couple set themselves up for a happy financial future with their new husband or wife. Others, work with teenagers to help set them up with the financial skills they need to navigate their steps into adulthood or exclusively work with divorced men and women to help them with their finances to build their new life after a divorce.

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Can I Afford to Hire A Financial Coach?

It can be difficult to make the decision of hiring a Financial Coach when you are trying to pay off debt and save money. Paying for Financial Coaching can seem counterintuitive at this stage right?

But the decision to delay or not seek help if you are facing financial challenges may result in you ending up prolonging your financial challenges. The cost of inaction when it comes to your finances may result in a much higher cost than the investment in working with a Financial Coach. You don’t want to delay taking action with your finances and delaying your financial progress. This is especially true if you are planning to take advantage of Compound Interest! The sooner you pay off your debt and get investing the better for future you!

The best investment you can make is in yourself – Warren Buffett

Investing in yourself can be the best use of your money and something many of us are reluctant to do. Why are we so reluctant to spend money to invest in ourselves – afterall, we are our most important investment!

Hiring a Financial Coach will benefit you in the long term and lead you on a path to spending your money on things that truly matter to you. It will also allow you to start your financial journey & achieve your financial goals sooner, making stressing over money a thing of the past. If you’ve hired someone to help you before with anything, whether that be gardening, painting, or cleaning, have a think about how awesome it’s going to be hire someone that’s able to not only help you move forward with your financial goals, but is going to cover their fee many times over by saving you money over your lifetime!

If you see the value in hiring a Financial Coach but are not sure if you can afford one, the great news is you’ve got a budgeting expert who will be there to help you with strategising your budget options so you can find a way to afford to hire a Financial Coach without you having to put your financial goals on hold. 

This is a perfect example of how a Financial Coach can help you move from a negative money mindset permeated with feelings like; ‘I can’t afford it’ to a more positive money mindset, where we can come from a more inquisitive mindset and turn that language on its head such as replacing language like ‘I can’t’ to ‘This is important to me, how can I afford it?’. Think of the amazing things you can do in life when you learn how to make the things you want to do a reality!

How Can I Work With a Financial Coach?

If you are interested in learning more about the benefits of working with a Financial Coach, click the link below to book your complimentary Q&A session with Financial Coach Jess to discuss your current financial goals and challenges and see how we can help you achieve your most important financial milestones.

Financial Coach Jess is here to help you spend your money with intention so you can create your ideal life. You can learn more about Financial Coach Jess and her services here.

Budgeting

5 Financial Mistakes I Made in My 20s That Changed My Financial Future

We often look back on past and present financial mistakes with shame, embarrassment, and annoyance. We can judge ourselves harshly for stupid financial decisions we have made, whether that be taking on debt, throwing away money on things we can’t even remember or any other financial mistake you can come up with.

Just like skipping a day at the gym, there is no positive benefit to beating yourself up for making a financial misstep. The best thing we can do for ourselves is to get back it the horse, to reflect on the behaviour, habit or lack of knowledge that led to that financial mistake, and try and make more intentional and informed financial decisions going forward, armed with our past experiences to guide us.

Now, well into my 30s, I often consider the things I wish I knew as a young adult and ponder how much it could have changed things.

Would I be further ahead financially had I done things differently?

Could I have reached FIRE (Fire Independence Retire Early) by now, or much sooner?

Would I have started my own business years ago? Could I have helped people sooner?

Could I have travelled more or started to live a more meaningful life earlier?

Don’t get me wrong, I am extremely grateful to be where I am, but I feel reflecting on my past financial mistakes is always a good way to remind me of my financial principles and where I started. And hopefully will be an opportunity for me to pass on valuable lessons in my life to help you avoid making the same financial mistakes I did.

Here I am reflecting on 5 Financial Mistakes I Made in My 20s That Changed My Financial Future

5 Financial Mistakes I Made in My 20s That Changed My Financial Future

1. Only Saving What Was Left After Spending

When I got my first full-time job at 21, I very quickly became accustomed to my paycheck. I went from working part-time to full-time and completely changed my lifestyle to align with my new larger and more consistent income.

During the first six months of working full-time, I adopted a spend first, save last financial philosophy.

I was bringing home just over $3000 a month as an Assistant Accountant. I was still living at home at the time, just paying $100 a week in board plus my own bills. Somehow I still could only save a measly $100-200 a month. Just over 5% of my income when I had barely a financial care in the world as I was living at home still. 

Each month I would do my savings transfer of what was left in my account. I soon realised, that each month I felt a huge sense of guilt when I logged into my account to see that I had only a small amount left over to save of my paycheck. I know that having some savings still sounds like an accomplishment, but I was a born saver. This wasn’t really an accomplishment to me. It was a failure in my eyes.

Thankfully within 6 months of getting my first full-time job, I realised that something needed to change. I didn’t want to keep spending my money without knowing where it was going and leaving saving to an afterthought.

I set up automated savings transfers to transfer my savings on my payday so that I could still spend my money, but there would at least be a boundary set to give me a spending limit. It also took the work out of it for me as the transfer happened automatically so saving became easier overtime, and soon enough I adapted to my slightly lower spending allowance. I was actually surprised how easy it was to adapt after I got used to it over a few weeks.

By adjusting how I did my savings to ‘pay myself first‘, I was able to pay off a $5,000 car loan, $11,000 in HELP Debt as well as save up a deposit for my first home within three years of starting at my first full-time job! 

And this one long-term change I implemented into my finances, sparked by this one financial mistake I chose to learn from has set me up financially for life. Since then, armed with my financial principle to ‘pay myself first’, my husband and I funded a Wedding, our Honeymoon in Europe, paid off over $40,000 in Student Debt, paid off a huge chunk of our mortgage and funded travel all over the world!

It’s just one example of how one small change to your finances, made as early as you can, can compound over the years and change your financial future!

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2. Not Planning Ahead

When I was 20, I had about a thousand dollars in savings and felt like that was a pretty good position to be in. This view all came crashing down when I opened the mail one day and found two bills addressed to me.

I ended up with two bills totalling $1300 for my car registration and Greenslip Insurance (medical vehicle insurance) that I had completely forgotten was coming up.

I remember thinking at that moment how much I had royally fucked up. I was annoyed at myself for being so forgetful that the bill was coming.

I wasn’t able to borrow money from my parents so I had to completely deplete my savings to keep my car on the road and get to work and find a few hundred dollars to fill the gap in order to pay those two bills. Thankfully I was able to take on some extra shifts and managed to put enough together by the due day to pay the bills.

But that left me short for paying for my rego check or any repairs to my 1994 Camry so it would pass rego.

I ended up having to borrow $50 from my mom to tide me over until I got paid again so I could pay for a rego check and new wiper blades. If I had needed more expensive repairs I would have been in trouble. I hadn’t borrowed money from my mum in a long time and had always felt proud by that, but now felt like a bit of a failure having to do this. I just knew that I didn’t want to have to borrow money from anyone else ever again I wanted to make sure I would be prepare next time and could stand on my own two feet financially! 

So I made a mental note to myself to always save up for repairs and car expenses in advance.  

This experience taught me a very valuable Financial lesson in planning ahead for bills. Something that was such a pain in the butt at the time stuck with me all these years and taught me some very important financial principles.

In the 14 years since I have never once forgotten to save up for an annual bill. 💪

Over the years, this lesson has saved me so much anxiety and stress around money. I always know that if something comes into my inbox (we’re back to 2021 now hehe), I’ve prepared ahead for it financially and I’m not going to have to live off two-minute noodles for the next couple of weeks or put something on my credit card until I can find enough money to pay for it. It’s already taken care of 🙂


3. Buying a House With No Emergency Fund

At 24, along with my boyfriend at the time (now husband), we bought our first home. We had worked hard over two years to save just enough for a 10% deposit on a small home and had a bit extra to buy some furniture and to cover the solicitor’s fees.

But anything else that was thrown at us financially, we weren’t really going to be prepared for. And we were so lucky!

A decade later – with my 30-year-old hat on, I now would highly encourage anyone before buying a house to make sure that you have a 3 to 6 month Emergency Fund built up for your peace of mind (especially while we’re in a pandemic!). Owning a house is expensive and it is going to try and break you financially at some point just to see if you can hack homeownership.

I remember one year, we had a hail storm and our roof was leaking as a result. We had to pay a $500 excess to claim repairs through our insurance. No big deal…

But then after making the call, I walked outside to check on our cars and realised that my windshield had been cracked by the hail as well as having other hail damage. My husband’s car also had hail damage. Great! It ended up costing us $2,100 in insurance excesses that day just to repair the hail.

Not three weeks after this happened our water heater died which set us back another $1,300!!!

It was just one of those moments where it really opened my eyes to how expensive homeownership is, and how important it is to make sure you have savings for when the shit hits the fan. Because at some point, it will, and sometimes it’ll hit that fan three times in a row.

So if you’re a homeowner, just hold on to your hat, strap in for the ride and build up your Emergency Fund to 3 to 6 months expenses quick smart so when the weather or whatever goes wrong, you are ready to go with some savings! 


4. Not Investing Sooner

One of my most costly financial mistakes in my 20s was that I didn’t invest! I first started investing outside of my superannuation when I was in my early 30s! Which isn’t the worst thing, I still have plenty of time to make up for lost time, but when it comes to Compound Interest, the sooner you start, the fast your money can grow!

Initially I figured that my Superannuation was taking care of my retirement plans.

No one I knew at that time was investing so I didn’t really have anyone to talk to about it or ask advice. Plus I had $42k of Consumer Debt to repay, and wanted to save up a 3-6 month Emergency Fund before I tackled any other financial goals!


Then I came across a blogger, Mr Money Moustache and discovered the FIRE movement. I realised that I didn’t know if I really wanted to wait until 60 to access my retirement savings. That was 30 + years away. Was I really going to stay in my job until my 60s?… It didn’t sound like the greatest plan for me, personally.


And so, I started to educate myself about investing. I watched hundreds of Investment videos on Youtube and read as many Finance and Investing books as I could get my hands on. 

 
If there is one thing I could do, I would go back to my early 20-year-old self and tell myself to invest my money and take advantage of compound interest even earlier!  If you want to get started investing money, I recommend you find a flat fee, licensed financial adviser who can help you get started with your investment goals.


5. Spending Money Without Intention

Like many of us, in my 20s shopping was a hobby for me. It was a way to spend my weekend, to catch up with friends, a way to pass time if I was bored, a way to reward myself for all my hard work and probably filled some void in my life I wasn’t quite aware of at the time. I remember whenever I finished my University exams, the first thing I wanted to do was to go straight to the shops and finally have the time to go shopping. That seems a little sad to me now, but that’s what I was feeling at that moment.

This led to a lot of impulsive and unintentional spending in my twenties, to the point whereby my mid to late 20s, my home was extremely cluttered and causing me stress and anxiety.

It took a while for me to put two and two together; that my Shopping habits, in fact, weren’t bringing me happiness and that I needed to be more intentional with my money, my time, and my home. My home was supposed to be my sanctuary, not an area to store clutter.

When I first caught onto how my spending was becoming an issue, I has about 60 pairs of shoes, 50 dresses and had managed to fill up a 4 bedroom house with seemingly endless amounts of clutter. That now seems pretty crazy to me!


After decluttering about 70% of mine, and my husband’s possessions, my eyes were opened to the lack of intentionality I’d had previously when it came to spending. And to be fully transparent, it was mostly on my part. 

I set about making some gradual lifestyle changes including adopting a more minimalist lifestyle which benefited my physical, mental health, and financial health.

I stopped shopping as a hobby.

I stopped browsing or shopping without a list.

I started this blog and made sure to spend my time doing things that added more value to my life.

I tried different spending bans to get on top of wasteful spending and implemented wait times before I could buy things to make sure I was buying them for the right reasons and not out of boredom, on impulse, or just because something was on sale.

It’s now been a good 7 years since I’ve made these changes to my shopping habits and the amount of money that I have been able to save as a result is truly amazing! It has allowed me to pay off over 1/4 of a million in debt and helped me to create a more meaningful life. You can read more about how this change positively impacted my financial future here.


These are 5 Financial Mistakes I Made in my 20s That Changed My Financial Future. They taught me some valuable lessons and helped me to adopt new financial principles that allowed me to live a more meaningful life. 

Remember – there’s nothing wrong with making financial mistakes, we’ve all made them!

We just need to make sure that we turn those mistakes on their head and reflect on them so that we can learn from our past mistakes when it comes to money and allow those financial mistakes to help us change our financial future for the better.

Question: I would love to know, what financial mistakes did you make in your 20s and how did it serve you to change your financial future?

General Advice Disclaimer: The information on this site is of a general nature. It does not take your specific needs or circumstances into consideration, so you should look at your own financial position, objectives and requirements and seek financial advice before making any financial decisions.

Budgeting

18 Tips to Help You Break the Debt Cycle

Being stuck in the debt cycle can seem like a treadmill of stress and struggle to try to keep ahead of what may seem like never-ending repayments. Once you add a mortgage, car loan, a few credit card repayments, and some BNPLs to your budget finding any spare cash can become increasingly difficult and make it harder to break away from debt and get back on your financial feet.

If you are constantly making purchases with your credit card and not paying them off in full the following month you are going to eat up a lot of your hard-earned income in interest payments. Money which could be better utilised whether that be; saving for a new home, saving up for your child’s education, putting away for your retirement or having some spare cash for enjoyment such as holidays or seeing your favourite band in concert.

No matter where you are on your journey to financial freedom, there are methods to help you get on top of your debt. Even for anyone with significant amounts of debt, their financial story isn’t over and they can potentially have the most options for action in terms of retraining their habits and living within their means. No one needs to live under a cloud of debt indefinitely. There is a way out!

18 Tips to Help you Break the Debt Cycle

1. Think about the Interest Rate

It can be so easy to forget that the price tag of the item you are about to swipe on your credit card is not the final price you will pay if you don’t pay your credit card off in full when the bill comes.

If your credit card’s interest rate is a whopping 20% or more, every purchase you make on that card that is not paid in full will attract hefty interest charges.

That $99 dress that was 50% off that you just charged will cost you a hell of a lot more over the years if you don’t pay off your credit card balance.

And it doesn’t stop there, that is just one purchase – imagine that interest on every purchase you make! That sale price doesn’t look as good now does it?

2. Cut up your credit cards

If you are the kind of person that can’t resist a good deal and you don’t pay off your credit card in full each month, it is time to cut those cards up! Stop spending money you don’t have. It sounds harsh but really is that simple. If you can’t show restraint, take the easy step of grabbing a pair of scissors and cutting up that card. It will only take you a few seconds and save you a world of stress and hardship in paying off any extra debt. Don’t let your debt keep spiraling out of control. You can get out of this and you can start today by cutting up those credit cards!

If you are buying everyday purchases on the card and are not paying them off in full at the end of the month you need to reconsider your income and expenditure and spend less than you earn. The only reason to use a credit card is to have it as a tool to keep track of your expenses, to earn rewards points on everyday expenses, and only if you are paying it off monthly! If you are disciplined enough to do this you can save yourself some serious money by keeping your day-to-day cash in your mortgage offset account or in a high-interest savings account. Otherwise, get those scissors out!

3. Stop trying to impress others

A lot of people get caught up in looking at other people’s lifestyles and attempt to keep up with them. I guarantee no one ever asks the same people they are trying to compete with – how much debt do you have? Yeah sure, Joe down the road might have your dream car but he probably also has a $200 weekly car repayment to make for the next 7 years which probably isn’t as appealing to your green-eyed monster.

Yet so many people go out and buy new cars, bigger homes, or brand-name designer fashion to fit in with others without a thought for the struggle that is going to put on their finances, such as affording the basic needs of food, shelter, medicine, or their education. Break the debt cycle!

Do you feel the need to buy the latest fashion and accessories? You might be surprised to find that other people are probably not that interested in what you are or aren’t wearing. People are too worried about their own lives to focus on your daily outfit choices or the fact that you only spent $50 on your handbag rather than $300.

I have often had handbags under $50 and constantly got compliments – no $300 designer bag necessary! I remember my friend’s 21st, I asked her where she got her amazing dress from and she said a second-hand shop! You don’t have to spend big to have nice things in life!

If you are surrounding yourself with people who expect you to meet some kind of designer brand level of outfit choices, your probably need to reconsider who you hang out with or reassess if those friends even really care. Maybe it is your own standards you are trying to keep up with.

4. Avoid shopping without a list

Stop going shopping unnecessarily! You’d be surprised how little you’d spend if you didn’t step foot in the shops at all or open the latest sales email. If you have endless emails from clothing shops or stores that tempt you constantly, unsubscribing from them can help remove that urge to buy.

Make a goal of only going to the shops when you need to and go with a list of what you need to buy and from where that you have built up over a week or more. Don’t walk down the makeup aisle if makeup is not on your list. This alone can help you resist unnecessary purchases as most spending occurs when you are browsing which can end up with you buying something you don’t need and will later regret.

Shopping with a carefully prepared grocery list can go a long way to saving money on your weekly shop that can be redirected to paying down your debts faster!

5. Take advantage of new credit card balance transfers

If you want a leg up to pay off your credit card balances, you can consider a balance transfer to a new credit card, some offer 0% interest on the balance for a certain period of time, usually between 6 to 24 months. This can potentially reduce the interest rate you are paying on your credit cards to 0% and help you get on top of your debt in a short space of time.

Only do this if you cut up the new card immediately otherwise you will end up back where you started. Also, be sure you will be able to pay the balance transferred onto the new card within the low-interest period. The new interest rates can be significantly higher usually starting at 19.99% post the discounted interest period so you will want to pay it back within this time frame to avoid the increased interest rates.

This can be a great way to smash that debt balance in a defined period of time at a lower interest rate. Do not under any circumstances add to the balance of this new credit card. It is not for you to spend with, but as a tool to help you get ahead and pay down that debt!

6. Ask your credit card provider for a better rate

Alternatively to the balance transfer option, call up your current credit card provider and ask for a better, more competitive interest rate. If they want to keep your debt on their books they will have to meet your request and better your interest rate. This will save you on interest charges without the time limit of the balance transfer option.

7. Always pay more than the minimum on your credit card debt

When paying off your credit cards always pay as much as you can onto them each month – avoid only paying the minimum. If you can only afford the minimum find a way to change that – cut other expenditure, get a higher paying job, or a second job to increase your income if changing jobs is not an option. Temporary pain will be required to achieve financial freedom.

By only paying the minimum repayment you can add decades and thousands in interest to the debt you are going to have to pay off. Using Money Smarts Credit Card Calculator a $2,000 credit card balance paid back at the minimum repayment of $41 a month would take over 21 years to repay and cost over $6,500. That means you will in effect be paying for those $2000 purchases three times over for the next 21 years! And for some people, $2,000 is just one month’s expenses. Imagine if this is being charged, month after month. The horror!

Never settle for only paying the minimum repayment. There should be a disclaimer under the minimum repayment on your credit card statement that reads: “what to pay if you want to be in debt forever and pay 3X the price of everything you’ve ever bought and have no desire for financial freedom”.

The only time you should utilise the minimum payment is if you are using the Snowball Method or other debt repayment options and throwing all your spare cash onto the lowest debt and slowly knocking each one to zero.

8. Ask yourself if this purchase is a Want or Need

It is important to consider what our wants are versus our needs. Every time you pull out the credit card or cash, ask yourself is this a want or a need?

If it is a want, something that you’d like but could live without, ask yourself if this purchase is so important to you that you are willing to be snowed under by debt in order to have it?

Is it worth paying potentially 3X (or more) the purchase price of the handbag or new runners over a period of years? Or would it be better just to hold off a couple of weeks or months and save up the cash?

If it is a need and you have truly considered it, go ahead and buy it, but if it is an essential expense it should be covered by your budget and not paid for with debt.

If it doesn’t seem worth spiraling into more debt, rethink your purchase. Sometimes we can become so desensitised by buying things with a simple tap that we forget to stop and ask ourselves these important questions.

Being more mindful with everyday purchases can aid us significantly to break the debt cycle!

Shops are designed to make us want to spend more money. Whether it be the loud music, the vanilla caramel-scented candle wafting through the store, bright lights, styled displays or the pushy sales staff. Take a moment to stop and assess whether buying this item is going to add to your long-term happiness or take away from it.

9. Channel your excitement into your savings

Make the decision to buy things in cash going forward. By buying in cash and saving up for highly desired items you can give yourself the time to save up money gradually for it. You will be surprised how easy it can be to save for something that you really want when you know that after all that hard work you will have that item you desire – debt and guilt-free.

When you really want something, you will know if it is worth your hard-earned money as you will be making the necessary sacrifices to get it. You might start spending less on eating out each week or skipping regular drinks nights in order to save to go on that first overseas holiday.

When you save towards something you want and work hard in order to acquire it, instead of feeling a sense of guilt or buyer’s regret, you will feel a sense of accomplishment and joy knowing that you worked hard and saved for something meaningful that was going to add value to your life and that you paid for in cash. There will be no looming debt hanging over your head for months or years to come.

I can’t imagine anything worse than going on an amazing two-week holiday and coming back to deal with the debt that remains after the fun is over. It’s going to be a lot easier to be motivated to save leading up to that amazing experience than once it has been and gone and you are dealing with the debt consequences.

10. Buy what you can afford, not what you can borrow

When we bought our first home we were surprised to see how much the banks were willing to lend us. As I did our actual budget (not the bank’s budgets they use to justify lending you a huge mortgage) we could see how borrowing the larger amount was going to be a huge financial strain.

Instead, we stuck to a mortgage that would be well within our budget which will go a long way to help us break the debt cycle. This included built-in safeguards that gave us some extra financial security in case rates went up or in the event that we had to live off one income.

Only you know your true spending habits and what you can reasonably afford to pay back. Don’t let others convince you that your borrowing power is bigger than it really is. Check out the benefits of a smaller home (and mortgage) here.

11. Don’t become accustomed to the mentality of having debt repayments

I have seen this happen time and time again with young and old alike. They pay out their perfectly good car after 5-7 years of repayments and immediately start talking about what car they want next.

Even though they have a perfectly functioning car, with time on their side to save for the next one, the thought of saving up for a car over time, or having a slightly older car is considered too painful, so they go out and get another car loan.

Break the cycle! Be weird and say no to debt!

If your car is reliable and not that old and mechanically sound, it is so bad that you hold onto it for a couple of years more and save up to buy your next car in cash completely debt-free? Paying $100 or more a week for the next 5-7 years is a big commitment and is going to get old fast!

12. Reassess what you are willing to get a loan for

Be selective with what you are willing to go into debt for. Only go into debt for purchases that increase in value or are considered an investment. Getting a degree in your chosen career can lead to a higher salary, and a house can provide a return through equity.

On the other hand shopping sprees on the credit card, holidays and a new car aren’t an investment and don’t hold their value so going into debt for items like these should be avoided.

Do you want to be paying off a shopping spree years down the track after the clothes are out of style and most likely already donated to charity or sitting in the back of your wardrobe?

If you need to get a mortgage for a house that will increase in value over time, that can be considered “good debt” but a $2,000 credit card balance for some new clothes for summer is not “good debt” and should be avoided.

13. Put every spare dollar that you can towards your debt

Most people when buying their first home are signing up for huge 25 to 30-year mortgages. If your mortgage is a 30-year mortgage, it doesn’t mean that you have to wait that long to be debt-free. Aim to pay it off as fast as you can.

Are you prepared to stay in your full-time job, particularly if it is a job you don’t enjoy, for the next three decades until you are 60 to own your house? By adding an extra $50 a week to a $500,000 mortgage you can reduce your mortgage by over four years and save $65,000 in interest. A huge saving! You may think a measly $20 a week will not make a difference with your debt, but it will! And every small bit it further motivation to add more and more and is just the start of the debt snowball effect!

Imagine what you could do if you could add $100 a week to it in additional repayments! Break the debt cycle and avoid letting your bank or credit card provider dictate what your repayment timeline will be.

14. Save up an emergency fund of $2,000

Part of the never-ending debt cycle is attributed to not planning ahead. Suddenly your car dies on the freeway and you need to put $1,200 on the credit card for repairs. The hot water system goes and again you are stuck without a leg to stand on and putting that on the credit card.

Plan ahead. Budget emergencies are just as likely as the chance of rain. Find a way to save up $2,000 as quickly as you can and keep it in an account for emergencies only. This does not include a nice handbag that is on sale or last-minute drinks with friends. This is only for genuine emergencies like a break-in occurs and you need to change the locks or you have a severe toothache and need to get it looked at. Get organised and sell your clutter if you have to. 

If you have to use this fund, you will need to build it up again. Next time you have a flat tyre you won’t have to panic and stress about finding the money and won’t even need to think about bringing out the credit card.

15. Prepare a budget and stick to it

Knowledge is power when it comes to finances. If you are aware of what your budget is you can be more mindful of your spending and more likely to break the debt cycle. If you know you have a $500 electricity bill every quarter start budgeting for it every week. Don’t wait until the bill comes and then try and figure out where the $500 is going to come from and end up paying your bill late with an added late fee.

If you own your home, be prepared to spend regularly on maintenance. Living week to week can put you in a bind when your home needs urgent repairs and you haven’t planned ahead and put away money for such events. Check out these Everyday Savings Tips to help kick-start your budget and free up some cash to break the debt cycle!

16. Learn to be content with what you have

Once you realise how little you need to be happy the desire to consume more diminishes. You no longer feel as big of a rush buying things. The thought of parting with your hard-earned cash will make you more mindful of what you are buying.

Learn to be content with what you have. This alone can go a long way to break the debt cycle.

Do you really need a brand new $35k car on finance on your $50k salary when your current car works perfectly fine?

Are you willing to pay x dollars every month for the next 60 plus months? In good times and bad – when you are unemployed, when you are trying to live on one income when you decide to cut back hours at work to study for a new career – that debt is going to still be there. Being in debt removes opportunities.

Maybe having that spare money each week could allow you to go on an overseas holiday each year, cut back your work hours to spend more time with your family or allow you to retire earlier. Sometimes more stuff is not the answer to contentment.

17. Find new past times that don’t involve shopping

If you are finding yourself constantly browsing online shops or at the mall, you may need to pause and recognise the habit and ask yourself – is there something more valuable I could be doing with my time? How often are you shopping, for how long and how much are you spending? Keep note of it.

Gradually retrain yourself to stop the automatic habit of logging into your favourite store’s site or browsing aimlessly on your lunch break. Think about all the things you could be doing instead of shopping; reading a new book, going for a walk, meeting a friend for coffee, learning a new skill or hobby, catching up with family, or seeing a new film.

If you have friends who you shop with regularly, make a suggestion to do something different together. There are plenty of things to do that are more enjoyable (and often free) that you could be doing instead of shopping and wasting money.

18. Review your credit card statements 

In order to break the debt cycle and get your finances back on track, you need to establish where you are spending your money and wracking up debt. Check your credit card statements monthly and analyse them. When you know where you are spending your money you can become more mindful and take action to stop it. Is it at Kmart on clothing and homewares? Are you spending too much on eBay or Amazon?  Are there stores you are visiting in your breaks for something to do? Is your spending occurring on the weekend because your friends work and you don’t know what to do with your spare time?

Work out where you are spending and place yourself on a ban from going to that shop or buying from that shop online for a month. Just pick one spending problem area. If your weakness is buying makeup, avoid shopping for any new makeup for that month and see how you feel after a month. Maybe you can stretch it out for two months without too much pain. Then you can add another store to the ban list until you can retrain your mindset to shop as you need things, not as a pastime or unconscious purchase.

Do You Want to Learn How to Spend Your Money With Intention?

If you want to take control of your financial future, stop stressing about money, and learn how to spend your money with intention, book in for your free Q&A call to see how Minimise With Me Financial Coaching can help you gain clarity around your finances! 

You can learn more about Minimise With Me Financial Coaching services here

What are your debt goals? Do you have a plan in place to break the debt cycle? Are you using the debt snowball method to pay down your debt? Share your goals and wins to achieve financial freedom below 🙂

Budgeting

How I Went From Being Poor to Achieving Financial Freedom

A women enjoying nature thanks to spending her money intentionally

I’ve been on this Earth now for 33 years and have picked up some financial wisdom, valuable money and life lessons along the way which have helped me to achieve financial freedom. This post is going to walk you through where I started my financial journey and how I gradually took on life lessons thrown at me to completely change my financial future to achieve financial freedom.

When I was younger, I didn’t know much about money. It was never something that was openly discussed in my family which can be a good and a bad thing. No one had ever sat me down and taught me how to handle money, how to save it, how to make it, or anything of that ilk. I did my best to pick up what money advice I could over the years from those around me. Even if they didn’t know they were indirectly teaching me.

Despite my lack of money education, I was lucky to be naturally drawn to save my money from a young age.

My first memory of money was having a large container when I was around 5 years old marked as barbie clothes, which I soon turned into a cash box to save all my coins. I remember feeling excited each time I went to count my money and see how much more I had saved and when I had enough to buy a new Barbie.

Growing up, both my parents worked full-time, I guess you would say we were middle class although money always seemed tight. We’d get a few outfits twice a year for Winter and at Christmas. We’d often miss out on school camps and some excursions and shop for clothes at Best and Less, Kmart or Op shops to save money. I never felt that we were well off, but we had what we needed and a lovely home and I was always grateful for that. Although my parents didn’t talk much about money to us, they always worked hard to make ends meet and my brother and I certainly picked up their hard work ethic.

When I was 14 my parents separated and my Dad soon moved interstate, which meant we went from a two-income family to a one-income family, and moved from a big, modern home in a relatively safe suburb to a small home in a not so safe area of Western Sydney known as Mount Druitt.

Looking back, I can only imagine the struggle my Mum faced trying to pay bills and a mortgage and raise two kids on a $38,000 salary. I am ever so grateful that my Mum was able to put a roof over our head, keep the lights and water connected, and afford basic groceries all whilst dealing with the stress of a marriage breakdown. Although we didn’t have much at the time, I knew that we had more than others and she was doing her best for us.

Given that, at 14 other than my basic needs, I was pretty much on my own financially which was quite the wakeup call. Mum had just enough money for our needs; the mortgage, electricity and water, her car and some groceries and that was about it. After those expenses, there wasn’t much left. We didn’t have an internet connection or a computer which placed limits on my studies at that time. And there were many occasions where I would buy my own dinner after work because there wasn’t much left at home to eat.

Anything a normal teenager would want or need was not in the budget. I often bought my own toiletries and makeup and if I wanted new clothes, money to see friends, a mobile phone or anything else outside the essentials, I quickly realised it was all on me. A hard reality to face for someone who had only entered their teen years, but something I had to accept and adapt to.

Soon enough, I turned 14 and 9 months and was legally allowed to start working after school. I set off with a friend handing out my resume to anywhere that would take it in my area. I got a job at my local Coles Supermarket within the month and was soon working fifteen to twenty hours a week to afford to pay for my own things: clothes, my mobile phone and have enough money to go out with my friends occasionally. I was stoked at the thought of having my own money for the first time and being able to go our with friends and not have to miss out on things I wanted.

On many occasions, I had to choose between hanging with friends or relaxing after school, attending family events and sometimes even working during exam periods instead of studying so I could earn my own money and have the things I wanted and needed. I knew that working was great for experience and my resume, but resented that I had to work for things I needed like clothes and shoes that other kids didn’t have to. Especially when I knew had I not had to buy those things for myself I could be saving up for my own car, education and other things that I needed.

My job as a supermarket cashier opened my eyes even further to the financial struggles around me that others faced.

I saw families at the supermarket where I worked have to put food back that they couldn’t afford to pay for and decide if they needed milk or bread more.

I watched a Dad once take money from his kid’s wallet to pay for his smokes and watched as that child looked on in sadness at their money being spent.

Being financially responsible for myself at 14 wasn’t necessarily ideal but it gave me important life and money skills and let me make stupid money mistakes early on, which helped me to get where I am today. I quickly learned that unlike many people around me, I had to rely on myself to get by: no one was going to fund my wants, bail me out of debt, buy me a car to drive around in or pay for my university education. It was all on me and if I wanted something I was going to have to work hard and make sacrifices to get it.

These early financial lessons helped make me who I am today and shaped my financial mindset from my teenage years until now. From an early age, my experiences and learning from those around me, made me very aware that I never wanted to have to struggle financially and I was going to do whatever it took to make sure I never had to live without my basic needs and wants.

I also want to do what I can to help other people to avoid similar financial struggles, so want to share with you how all these life lessons shaped my relationship with money and How I Went From Being Poor to Financially Free.

How I Went From Being Poor to Financially Free

These are the financial habits I developed over the last two decades, starting from a place where I had nothing, where I lived week to week and spent everything I earned almost as soon as it was in my bank account, to now, where I am consumer debt-free, can save and invest and have worked towards achieving financial freedom.

By Financial Freedom I don’t mean in the sense of I don’t have to work to earn money, or that I am rich, or even that I can spend my money frivolously on whatever I want. When I say Financial Freedom, I mean:

  • Free from stress about money, not worrying about how you are going to pay your bills
  • Consumer debt free – no repayments outside of having a mortgage
  • Being able to afford more than just the essentials and live comfortably

And my goal is to help you learn basic fundamentals of money so you can achieve Financial Freedom too, no matter where you are starting from. Achieving Financial Freedom is not something I did overnight, or even in a few years. These are money habits that I discovered, implemented and persisted with, year after year, hitting one goal at a time. Here’s How I Went From Poor to Financially Free.

I Saved Up an Emergency Fund

A long time ago, I realised that financial emergencies were just a part of life and were going to happen whether you were prepared or not. I suffered from something called financial anxiety, a feeling of worry, fear or unease about your finances. As I mentioned at the beginning of this blog, I grew up without much of a financial safety net. If I didn’t have money for my car registration or car repairs or anything else, that was on me. I wasn’t able to just ask my parents to bail me out if I needed help. And many of us don’t have that option.

I quickly learned the importance of having a savings buffer, an Emergency Fund to take the stress and anxiety out of what could and would go wrong. Whether it be a flat tyre or oil leak on my car – or whatever other emergency came up, I didn’t need to make myself sick with worry over how I was going to pay for it. I simply used my Emergency Fund and built it up again as quickly as I could.

When you have an Emergency Fund to cover these unexpected financial emergencies, there is no need to pay for things with a credit card where you could potentially end up wracking up a huge amount of debt over the years. By having a small savings buffer of $2000 in my bank account I was able to eliminate any need to go into debt for small financial emergencies.

An Emergency Fund won’t appear overnight, but a slow and consistent savings plan, along with selling whatever you can will help you build one up sooner than you might think.

Related Post: Why You Need an Emergency Fund

I Set Up Sinking Funds

When I was in my early 20s I had about $1200 saved up in my savings account which gave me that warm fuzzy feeling that kept my financial anxiety at bay. That was until I got my Car Registration and Greenslip bill in the mail and realised that I would soon only have $50 to my name until my next payday. This was the first time I realised that although I thought I had been financially responsible, even $1200 was not as great a savings buffer as I thought. From that day, I set aside enough for my car expenses plus repairs from every paycheck.

In the 12 years since then, I have never faced a situation where I didn’t have enough to cover a car service, a gift for my Mum or car repair because I made sure to also put away for these expenses in advance with Sinking Funds.

Sinking Funds, is just a fancy word for saving up for your annual expenses such as a Christmas fund, a holiday, your car expenses, medical expenses or any other need or want by taking a bit from each pay check, rather than waiting for the bill and wondering how you can find X amount of dollars in the next two weeks.

You can learn more about Sinking Funds and how they can help keep financial anxiety at bay here.

I Became Allergic to Debt

When I was much younger, I was never fully made aware of my family’s debt, but as I approached my teen years I was beginning to notice the financial stress it was causing my parents and other adults around me. This set a distaste for debt from a very young age: debt lead to stress and I didn’t like that at all.

That feeling was embedded in me subconsciously so much, that in my early 20s, I paid off any debt I took on with the ‘kill it with fire’ mentality. Making those debt repayments week after week, month after month did not sit well with me. I certainly had tried ‘to do debt’ and realised pretty quickly, that it wasn’t for me. So very quickly, paying off those loans became priority numero uno.

After that, I knew that I would never take on any more debt other than to buy a house.

If I wanted to buy something I needed to save up for it in cash, and only then could I have what I wanted. AfterPay and other payment options have come into the market and I still treat them the same – If I am not using my own cash I am not buying it. It’s a rule that has allowed me to save myself some of the financial pain that many others face when stuck in the cycle of debt.

I Adopted a Minimalist Lifestyle 

When I was in my late 20s, I discovered the Minimalists and soon fell in love with the Minimalism Lifestyle. As someone who had grown up in a family of many hoarders, this new way of life: where you simplified, and only brought into your home what you loved and what added value, quickly caught my attention.

In a couple of years, I had managed to declutter over 70% of mine and my husband’s belongings as well as taking a long hard look at my spending and consumer habits. I realised how often I shopped as a past time, rather because I needed anything but out of entertainment and boredom.

Minimalism helped me to realise how many things we had bought into our home that didn’t add value to our lives.

Over much self-reflection time, I was able to rethink my prior spending habits that weren’t adding to my happiness, instead just adding to my anxiety. Over the next few years, we donated what we no longer wanted or needed, sold our clutter and made some serious cash and cleared the excess in our home.

We became much more intentional with our spending and learned to make do with what we had.

Minimalism has provided a whole new level of financial freedom and helped me to stop chasing that ‘more is better’ attitude.

We buy less impulsively and we are more content with what we have and less concerned with impressing those around us.

Saving up for something you really want is a lot easier and motivating than paying off something you already have that has lost it's sparkle.

Stopped Bracket Creep

Every paycheck you receive is an opportunity to change your financial future if it is used with intention.

A couple of years into getting my first full-time job I set myself a spending budget and stuck with it through the years. Getting a pay raise in the past had been an excuse to spend more and celebrate, but I quickly realised that if I spent my raise as quickly as I had earned it, I was not going to have anything to show for my increase in income over the years.

Instead, I set a monthly spending budget for myself and kept it at that amount, regardless of the raises or bonuses I earned. If I got a raise, I would work out the new amount above my last pay and transfer that extra cash to a savings goal each month – whether it be to my mortgage, consumer debt, a savings account, or investing. Of course, each year there were some expenses that would go up like home and contents or health insurance and so on, so I would take out what I needed to cover those increased costs but made sure what was left I saved.

Although it may be difficult at first to stick to a spending budget, in time it will get easier as you get used to your budget. And we all work hard for our money so the more intentional we are with how we spend it the better we will feel 🙂

I Budgeted and Automated My Savings

If you have to rely on yourself to manually save money each paycheque you are probably going to find that you will struggle to save money. Some of you Savers out there might find it easy to save money, but not all of us are so naturally disciplined with money, so for the Spenders out there (And I get you, these days I fall somewhere in between both types) taking the leg work out of savings is going to remove a huge barrier to you becoming financially free.

When I first started working full-time I had no plan for my money and only saved what was leftover at the end of the month. With no plan in place for my money I was on a path to just let my paycheck slip through my fingers. And I did just that – some months I saved nothing, other months I managed to put away a few hundred dollars. After a while of just ‘winging’ things with my money, I realised that I had blown half my annual salary and had next to nothing to show for it (including 6 years of casual work before it!). I looked around at my old car, my wardrobe and the small number of possessions I had, namely a stereo, guitar and laptop and wondered where all my hard-earned money had gone.

When this reality sunk in, it bothered me. I realised that my more casual approach to finances was going to lead me into missing out on some huge financial goals, like traveling and saving up for a first home deposit. At 22 I was pretty keen to move out as soon as I could so blowing my cash wasn’t going to be something I could do for much longer if I wanted to achieve any of those goals.

It wasn’t until I created a budget and set up my automated savings transfers that I started to make progress with my savings goals. By setting up automatic savings transfers I took the work out of saving, and it also made it easier to stick to my budget as I knew what I had left to spend. My savings were already accounted for and safely in a separate savings account earning interest and working towards my bigger financial goals.

If you want to achieve Financial Freedom, don’t leave saving money, or your financial goals up to fate. Take charge today, create a budget and tell your money where to go in advance, before you spend it.

You want to ideally be saving 10-20% of each paycheck. If you can’t save that much, even a small amount from each paycheck goes a long way and will help you to build your savings muscle.

Need help with getting started with Saving Money? Check out my 52 Week Savings Challenge

I Lived Within My Means

If you spend more money than you make and use credit to fund your lifestyle you are living beyond your means. With credit so easily available today, many of us do just that. This lifestyle is all around us. It’s your workmate who just bought a brand new BMW with finance, it’s your friend who has an expensive wardrobe but only works as a cashier, it’s that friend who always seems to have the latest phone, guitar or insert whatever gadget you like here.

The reality is when you spend more than you make you are never going to get ahead financially and stunting your financial future.

So many people take on debt solely on the basis that they can afford the repayments today.

What many don’t realise is that at any moment (and an ever more real reality with the current coronavirus pandemic) you could find yourself unemployed, or have an injury where you need to take an extended amount of time off work. And in these times, those debt repayments are still going to fall due regardless of your circumstances.

Eventually in time, if you don’t check your need to have the best of everything and stay on a debt trajectory your debt will catch up with you and you may find that you are unable to make even the minimum repayments on your debt.

Once I made the decision to live within my means, reaching financial freedom became an achievable goal rather than a faraway dream. When you aren’t playing catch up week after week and paying for purchases you shouldn’t have made weeks, months or years ago you can start to use your money to achieve your not so distant financial goals.

I Learned From Other People’s Mistakes

Growing up I did my best to take in the world around me. This taught me a lot of what I know today, even though these “lessons” weren’t taught to me in any direct fashion. Here are a select few lessons that had the most impact on my relationship with money and lead me to want to achieve financial freedom as soon as I could.

  1. My grandfather passed away when I was 14 at a young 73 years old. One of the things that really hit me at such a young age, was that he had only retired from working full-time two years earlier. That really struck me and has stayed with me to this day. I knew that old age isn’t a given and I didn’t want to work my entire life and die suddenly a couple of years into retirement without any time to enjoy life. I have known that working until I die is not something I want and I was going to do anything I possibly could avoid that scenario in my older years.
  2. I had watched many people around me chase bigger houses and brand new cars and more and more stuff which came with more and more debt. I knew these people around me worked long hours and went to work up to six days a week in order to pay for these things and it never really made sense to me to have a lovely home that you never had any spare time to enjoy with your family. As a young adult, I knew I wanted to avoid being stuck working to exhaustion just to have a nice big home and a new car every few years. I saw the value in my time over what money could buy.
  3.  Growing up I never travelled with my family. I left my State, NSW for the first time when my father moved to QLD when I was 16. Other than that, apart from travelling to local beach suburbs close to home and any school excursions or occasional camps my parents could afford, I didn’t do any traveling at all. I wouldn’t travel interstate again until I was around 20 and could pay my own way.

I felt like I lost so much time in my youth where I could have travelled and explored new places. My family never had the money to travel, and never treated experiences as a priority. That was something I realised as an adult that I wanted to change when I had the means to do so.

These few life experiences stood out to me from a young age and further cemented my desire to make my life different.

  • When I was in my mid 20s I bought a house I could afford, rather than one that was going to cause me to lose sleep night after night.
  • When I was 24 I went on my first overseas holiday and have since been to over 12 countries
  • And I will do whatever I can to retire well before my 70s as my Grand Dad did.

These were just some examples of things I noticed growing up and they were always in the back of my mind and played a part in how I chose to spend my money.

I Gave Myself Permission to Spend My Money Where I Saw Value 

To be financially free doesn’t have to mean that you miss out on all the fun things in life, but it does mean that you need to be a little more selective with spending your money.

I personally love to travel and would forgo other things that didn’t mean so much to me, like having a nicer car, the latest phone or designer clothes so that I could afford to put more towards my travel budget.

And these savings don’t even need to necessarily mean that you miss out on something you want. These are some ways I have saved money to spend on things that added value to my life, like travel without necessarily having to cut back on things I want.

  • Instead of paying $50 a month or more for a Foxtel subscription, we signed up for Netflix which was only $10. We get the same experience and value from this for 1/5th of the price.
  • I made sure to research service renewals regularly rather than just paying the bill without a thought. When the insurance renewals came though I would get two more online quotes and then call up my insurer to see what was the best deal I could get from them. This didn’t take very long and had saved me money that I could spend on things that added more value to me, over lining the insurer’s pockets.
  • I researched phone provider plans every six to twelve months to make sure I was getting the best bang for my buck.
  • Instead of owning 50 pairs of shoes that I bought on the cheap, I slowly replaced my shoes with more quality pieces that would last longer and be more comfortable, saving me money and pain in the long term!
  • I spend 10 minutes a week meal planning in order to spend my grocery money more effectively, reduce food waste, and save money. As a bonus, I get to make amazing food that I love!
  • I checked my mortgage interest rate every 6-12 months to make sure I was at least getting their best-advertised rate, saving me thousands on my mortgage each year.

If you take a small amount of effort to save in the areas that don’t matter so much to you, (no one gets joy from overpaying on their insurance) and continue to build on these money savings habits, over time the savings will compound and you’ll have more money to enjoy life, pay down debt and save or invest.

These are all financial behaviors I learned and adopted over the course of my adult life that have helped me go from living week to week to living a more financially free life. I hope they will help you to find ways that you too can break away from financial stress and anxiety and achieve financial freedom.

Want to Know More About How You Can Set Yourself Up on a Path to Financial Freedom?

If you would like to learn more about how you can achieve financial freedom, don’t forget to check out my new course Financial Minimalism: How to Set Yourself up on a Path to Financial Freedom.

This week’s comment question: What is the most important financial lesson you have learned to date? Let me know in the comments! 🙂

If you found value in this post I would be super appreciative if you could share it with others who might also find value in it 🙂

Budgeting

How to Use the Envelope Budgeting Method

Budgeting Envelopes are a great tool to help you stick to your budget

The Envelope Budgeting Method is a great tool to help you with your Zero Based Budget to stay within your budget. It’s an easy method to track your spending in by category and to keep you informed of when you’ve spent your budgeted amount for a particular expense. If you are struggling to stick to your budget and finding trying to budget blind isn’t working for you, the Envelope Budgeting Method is a great way to give you some control and a birds eye view of your budget expenditure.

Cash Budgeting Envelopes

Generally the Envelope Budgeting Method uses cash that is divided up and placed into separate envelopes with an expense tracker on front of the envelope to tally up your spending as you go. Each time you spend money you would take the cash out of the envelope for the appropriate category, for example, if you were buying groceries you would take cash out of the grocery envelope, you would then note the following on the front of your Grocery Envelope:

  • Date
  • Store
  • Description and
  • Amount

You would then calculate what budget you had left over, by subtracting your total budget for the month from what you just spent and entering that amount in the Balance column. You would place your receipt inside the envelope.

I would avoid using cash envelopes to hold large amounts of money i.e. If you are using cash envelopes to save up for your annual Insurance or Car Expenses which might involve leaving hundreds of dollars around the house. For these, I would use a completely separate account for your Sinking Funds where you can put away for larger, ongoing expenses.

Related Post: 10 Easy Tips to Save Money on your Groceries Budget

Digital Budgeting Envelopes

I have hacked the Envelope Budgeting Method which usually involves a cash envelope system after giving it a go for a handful of months and created a Digital Budgeting Envelopes which I found suited me more. It is essentially the same concept except it eliminates the need to carry around lots of cash and physical envelopes in your bag. It also eliminates the issue with couples not having access to the envelope when the other partner has it.

To use the Digital Budgeting Envelope you can track your expenditure in the digital envelope file via your Google sheets which you can access from your phone at any time and share with your partner so you can both access and update the same file in real-time.

Again, if you spend money here you would note the Date, Store, Description and the Amount but this time the final balance will calculate for you in the Balance Column.

The Digital Budgeting Envelopes also don’t require you to physically set up the envelopes every month, you simply duplicate the worksheet and just change the month.

 

Setting up your Envelopes

Cash Envelopes: If you are using the Envelope Budgeting Method with Cash Envelopes you can simply withdraw your cash from your bank account and put the cash into the envelope. Fill in the Category, Month, and Budgeted amount, print off your Envelopes and glue them onto your envelope (110x220mm).

Digital Envelopes: The best way to track your digital envelopes is to set up an account that will be used exclusively for your envelopes budget. For example, if you have 5 envelopes that you want to track and that total budget is $1000 for the month you would transfer $1000 each month to an account exclusively for your envelopes. If your envelopes start on the 1st of the month on the 1st you would deposit your $1000 amount and ideally have at least $1 remaining by the 30th or 31st to show that you are in budget.

What to do with Unspent Budgeted Amounts?

At the end of the month with the Envelope Budgeting Method for both the Cash & Digital Envelopes, the final balance of each Budget Category will be totaled so you can see what is left.

For example, if your monthly grocery budget is $400 and you’ve only spent $360 this month, you could either transfer the $40 to your savings or use it to pay off debt if you have debt, or you can carry that amount across to your next months envelope. So with the cash envelopes you would move the physical $40 into your new envelope for the next month and with your digital envelopes you could just add in a line at the top of your grocery list and just adding carry over from prior month and then adding a -40 and that will add to your total budget so the following month you would actually have $440.

With the cash envelope you would deposit your $40 into your account and move it to your savings or pay it onto Debt. Or you could add the $40 cash into your next month’s envelope, it is totally up to you. If you want to take advantage of being under budget, by all means, put it to good use and save it or put it towards paying off your debt!

With the digital envelope you would simply transfer the money from your envelope bank account to your savings or pay it onto your debt. Alternatively, leave the cash in the account which would carry over to the following months envelope.

Don’t forget to note the movement on your envelopes if you carry the cash over from prior month by adding a $40 into your prior month to show that money is allocated and adding a -$40 into the new months envelope to show that amount has been added to your new months budget for that category. So in this example the following month you would actually have $440 for your groceries budget category.

Related Post: How the Debt Snowball can get you Debt Free Faster!

What if I am Over Budget in a Category?

It’s important to avoid borrowing money from the following month’s envelopes if you are over budget, this is a slippery slope and will become a bad habit you might never catch up with. Instead, borrow within the same month from other categories. In the above example, if you had $40 leftover in your Grocery fund and you wanted to buy some take out later in the month but had used all all your take out budget, you could carry that amount across to your Entertainment Budget. To do so you would add in a line in the Grocery Category: e.g. “Transfer to Entertainment” $40 and in the Entertainment envelope you would add in “Transfer from Groceries” -$40. Make sure to take the money out you enter the amount as a positive and to add it into the other category you pick it up as a negative! Double-check your balance to the right of the entry to make sure you picked up the transfer correctly!

Categories of Budgeting Envelopes

Budgeting envelopes are mainly designed to help you to control your spending in problem spending categories, those categories that aren’t always so easy to stay in budget. For example, you’re probably not going to go nuts buying excess petrol and your electricity bill might increase of decrease with the change of seasons but isn’t really going to blow out in a spending spree. But your clothing budget might and you might easily spend $800 on your groceries instead of the $400 you budgeted, so with the budget envelopes, we want to focus on the more fluctuating expense categories.

The idea is not to have 30 separate envelopes which will be too tedious and for little benefit, the goal is to stick to the main problem spending areas in your budget.

These might be:

  • Groceries
  • Miscellaneous Spending
  • Home Repairs
  • Concerts
  • Entertainment
  • Clothing
  • Kids Expenses
  • Alcohol
  • Beauty

or any other categories relevant to your budget.

Filling in Your Budgeting Envelopes

It does take some getting used to and get into a habit of writing down what you spent as you go and it can sometimes be a nuisance writing down what you’ve spent when you’re trying to battle kids and a grocery trolley through the car park, but there are ways to make the budgeting envelopes work for you. We want to make budgeting work around you, not be onerous and too difficult to maintain!

I came up with a slightly more flexible system that worked for myself with the envelopes. As I spent money, I would stick the receipt in my bag as I exited the grocery store or left the drive-through and then once I got home and unpacked everything, or had a moment spare, I’d then go and grab my receipt and fill in my envelope and record the expenditure.

Another method for people that don’t want to just fill in their envelopes 24/7 is to fill out your envelopes in smaller chunks. To do this I have a small plastic wallet in my handbag where I collate all receipts and once or twice a week I will go through those receipts and add them into my digital budget envelope or cash envelope. I will tick the top of the receipt on any that I have picked up and will also scan the receipt and save it in my Google Drive if it’s a receipt I want to keep a digital record of. Otherwise once I have picked up a receipt if it is for something I don’t need to keep I will just shred or recycle it once I have recorded the expense.

I do recommend when you first start your budgeting envelopes that you do fill them in frequently as you go, rather than chunk as you will be getting to know your budget and your budget limits and it will take a few months to get used to that and if you don’t update them as you spend you might find that you do go over budget, so until you feel confident of your budget, do update your envelopes as you go. Of course, if updating it as you go is your preference then just stick with that.

Storing your Envelopes & Receipts

With the digital budgeting envelopes I would suggest you keep one file for each year. Start a new one at the start of a new year, so you can choose whether you start that in January or July whether you want calendar or financial year. Set up your Google Drive folders or equivalent by expense category e.g. Clothing, Home Repairs, Warranty and so on so you can easily find your scanned receipts when you need them.

With your cash envelopes they will build up over time so I would suggest once every three months you take a photo of the front of any older envelopes for reference and recycle them. Then scan what receipts you wan to keep copies of, e.g. for returns, warranties, or for insurance purposes and shred or recycle the other ones you don’t need to keep like groceries, beauty expenses, etc.

And there you have it how to use envelopes for your budget. And to get you started I have a Cash Budgeting Envelope Printable and a Digital Budgeting Envelope in my store which you can check out. These come with detailed instructions for how to set up your cash or digital envelopes.

Do You Want to Learn How to Spend Your Money With Intention?

If you want to take control of your financial future, stop stressing about money and learn how to spend your money with intention, book in for your free Q&A call to see how Minimise With Me Financial Coaching can help you gain clarity around your finances! 

You can learn more about Minimise With Me Financial Coaching services here

This week’s comment question: Have you ever used budgeting envelopes? Did you find they helped you to stay on budget? Let me know in the comments below!

Budgeting

Why you need to track your Net Worth

Do you Track Your Net Worth? If you don't you are missing out on valuable information on your finances.

About a year ago, I stumbled upon J Money’s blog Budgets Are Sexy, a now favourite finance blogger of mine who openly tracks his Net Worth on his website. I was instantly amazed at how he tracked everything and monitored his families financial progress month to month, year on year.

At the time of discovering his blog I wasn’t tracking my Net Worth and hadn’t really ever given much thought to it. I figured as long as we were ahead on paying off our mortgage and avoiding adding any other debts and had enough to cover our bills each month we were doing okay. And maybe we were, but I’d seen a whole new way of tracking finances and I wanted in!

Of course I knew our rough debt and savings balances and checked our Superannuation balances when we got our bi-annual statement, but I didn’t know month on month how much our Net Worth had increased or decreased.

Since then, May 2017 I have been recording our Net Worth figures each month, and was amazed to see that over that 12 month period our Net Worth had increased by 13%! It has been a huge motivational tool for our finances as we watch our debts slowly decrease and see that Net Worth figure slowly inching up each month.

And the most awesome part of it all is it is not a time consuming process. It takes a whole 10 minutes a month! That’s it! Which is totally worth it to know where you are at financially and how you are tracking towards each of your financial goals!

If you have been considering recording your Net Worth and weren’t sure how to get started, I am writing this post for you! Check out my Beginners Guide To Tracking Your Net Worth!

Why you should track your Net Worth

Before we start any goal we need to work out our why, that is, the reason behind the effort we need to put in. So many of us go to work for forty or more hours, week after week and have no goal or plan for the money we bring home. It just slips through our fingers, somehow every last dollar is spent, often without any idea of where it went. Month after month, there is nothing left over to save or invest for your future. Retirement is something that is put on permanent hiatus until 40 or 50. Which may not seem like a big deal but you are losing a good 2 to 3 decades of growth you will never be able to get near once you leave yourself only a decade to build your wealth. The time to start building wealth for your retirement is now, or as soon as possible.

By tracking your Net Worth your spending habits are right in front of you in black and white on the page. If you spend all your pay check you’re $0 bank balance will make it blatantly obvious that you have nothing to show for your hard work. If you are swimming in debt and your Net Worth seems to be going backwards, not forwards again you will see that you are not building wealth but doing the complete opposite. Until you see the numbers staring you in the face it can be hard to see where you are financially and what your financial goals are. Having your assets and liabilities laid out in front of you can help you identify the need to change your current spending habits and create a more secure financial future. It can help us to start being more intentional with out money and motivate us to make better choices.

Now think about your why and make a list of the top three reasons you want to track your Net Worth.

Some reasons to track your Net Worth could be:

  • To grow your wealth so you can retire comfortably in the future and not be stuck working until you are 70 or older
  • Enable you to keep track of your debt balances so you can work towards paying them off faster
  • Set targets to aim for to help motivate you save and pay down debt

Now that you know your why for tracking your Net Worth we can get started on How to Track Our Net Worth.

 

How to Track Your Net Worth

There’s nothing scary when it comes to tracking your Net Worth and you’ll soon wonder why you weren’t tracking it all along. All you need is a simple accounting rule:

Net Worth = Assets – Liabilites

That is really all you need to know to get started. When we track out Net Worth we simply need to list our assets and liabilities and the difference is our Net Worth. If your Assets are higher than your Net Worth you have a positive Net Worth, if your liabilities are higher than your assets, you have a Negative Net Worth. Now I will go into a little bit about what Assets and Liabilities are and how they differ.

Assets:

Assets are all the things that make you money and that can be sold off for cash. They include things like savings accounts, term deposits, Superannuation or retirement accounts, property, vehicles and stocks or bonds.

Of course you may have other assets like jewellery, art, tools, furniture etc but we are going to ignore those for simplicity as their value isn’t as easily estimated or guaranteed. We just want to focus on the most liquid assets (that’s just accounting speak for assets that are easy to turn into cash!) that we can accurately estimate their current value.

Liabilities:

Liabilities are the things that cost you money and involve you paying money to someone else. These include mortgages, student loans, cars loans, personal loans, credit cards, pay day lenders, after pay, overdrafts or anyone else you owe money to.

What to Include in your Net Worth Calculation:

As described above, we are going to list any Assets and Liabilities at their current balance at the end of each month to calculate our total Net Worth. That is the balance at the 30th or 31st of the month, depending which month you are in.

ASSETS

Here is a list of Assets you might include in your Net Worth Calculation.

CASH

Bank Accounts – List all  your bank accounts and any term deposits at their current balance. This might include your Everyday transaction Account, Emergency Fund, Savings Accounts etc.

PROPERTY

House & Land – List any land or property you own at the current market value. For a more accurate estimate you can contact a real estate agent in your area for a market appraisal or you can do an estimation based on what similar homes in your area are selling for.

Vehicles – Use a car valuation website like Drive and Kelly Blue Book to get the current value of your car. Be sure to review the odometer reading of your vehicle and adjust the valuation if your vehicles odometer reading is higher than the valuation odometer reading range.

I like to be extra cautious and take the lower private sale value of my vehicle and take off a further amount of say $1000 if I know that my car is not in excellent condition. It doesn’t have to be an accurate estimation of course, but you want it to be a reasonable estimate of what you could sell the vehicle at today.

INVESTMENTS

Superannuation/Retirement Accounts – List your Superannuation or Retirement Accounts and your current balances here. 

Stocks & Bonds – Here you will again list the market value of any current stock or bond holdings you have. This is a great way to monitor how they grow over time.

LIABILITIES

Mortgages – List any mortgages on your home, land or investment properties that you have at the current balance of the loan. This will offset the value of your asset to show you what Equity you have (e.g. your current home value less what you still owe on your mortgage).

Credit Cards – List each credit card you own and the end of month balance of each. Your current balance will be listed on your online log in portal or your most recent credit card statement.

Car & Personal Loans – Check you car and personal loan account for the current balance of your loan. Don’t forget to include the vehicle’s current value in the asset section to offset the loan balance to give you your vehicles true Net Worth.

Student Loans – List your current student loan balance/s.

For any Aussies reading this, HELP-DEBT is wonderfully difficult to know what you owe month to month as you only get a statement once a year with your tax return. For our Net Worth calculation we just took the HELP debt balance to be the prior June 1st balance which you can find on your most recent HELP-DEBT statement and just carried that across for the year until we had the new updated statement.

Other Credit: List any other debts you have here. These may include After Pay balances, overdrafts, pay day lenders any money you owe to friends or family or anything else.

For help on how to minimise your debts once and for all check out: How the Debt Snowball Can Get You Debt Free Faster

Once you have all your assets and debts listed you can now calculate your total Net Worth for the month by taking away the Total Assets from the Total Liabilities.

If you want even more simplicity, this Net Worth Worksheet available in my Etsy store will take any work out of preparing your own Net Worth file. Simply enter your relevant categories and figures and the worksheet will do the rest for you!

Don’t forget to set a reminder on your phone calendar or in your planner to do this at the end of every month, or as frequently as you like so you remember to do it and build the habit!

You’ll be just as excited as I was to see how you had progressed in 12 months time. And there is nothing that will help you stay motivated to eliminate debt and grow wealth more than tracking your Net Worth!

This weeks comment questions: Do you track your Net Worth? What made you start tracking it? And do you find it helps you stay motivated with your budget and financial goals? Let me know in the comments!