Four tips for financial security

 Amira MacCue is the founder of Your Money Habit. She helps people wake up everyday knowing that all their bills are paid on time and to feel secure about their future.

Sometimes managing your money can feel overwhelming. Here are four tips to help you see the big picture and take control.

Tip 1  Value your time 

We all get the same 24 hours each day to spend as we choose. We can’t save it up nor can we get it back if spent unwisely. We give up time with friends, family and our hobbies to work so value your time – and in turn the money you have traded your time for. You can fall into a trap of trying to earn as much as possible then just fritter it away – time goes by and your quality of life has not improved. So appreciate the trade-off and value the money you earn from trading your time.

 Tip 2 Create habits that turn a pay rise into an asset

Most of us believe the way out of our financial woes is to make more money. Whilst extra money is great, the problem is that our spending always ends up matching our income. Whenever we get a pay rise or a better paying job, instead of using the extra income to pay off debts or top up the emergency fund, it just gets spent. The opportunity is wasted. With good habits in place, an increase in income speeds us toward our goals.

Tip 3 Get your budget working for you

The problem with most people’s household budgets is that they don’t show the complete picture, they are time consuming and lack consistency. Some questions to ask yourself:

  1. What are all your expenses? How often do they occur? (weekly, monthly, annually, one-off) and when? (the actual date, not an estimation).

  2. How is your cashflow effected by the timing of your financial obligations?

  3. How much money needs to be in your accounts at any given moment in the future?

  4. How much money do you need to put aside for long term expenses such as new appliances, car replacement, home repairs?

 Tip 4 Set goals that are motivating for you

Having a goal and knowing what you really want helps you prioritise your spending to give you the greatest return.

For example, is eating out every week less/same/more important than going on that family holiday you keep wishing for? Perhaps by eating out less, say once a month, instead of once a week, you get to experience both things.

Scenario 1

Eating out once every week $120        Annual cost $6,240   

Holiday -$0 savings                                  Annual savings $0

Scenario 2

Eating out once a month $120              Annual cost $1,440

Holiday- $92.30 saved weekly                 Annual savings $4,800

This simple example shows how one small change in scenario 2 can make a big difference over a year. Imagine then what having a spending plan together with a plan to earn extra income could do for you:

  • Pay off all your debts and reclaim your hard earned money

  • Stop living payday to payday

  • Start an investment savings fund that can be used towards creating a passive income

  • Reach financial goals faster than you thought possible - holiday, new car, home loan deposit