That horrible “B Word” and why you need it

You know those mums or dads who you see at school who are relaxed and seem to have it all together? 

The ones who go on holidays with the family, and drive a decent car that doesn’t break down? 

The ones who organise great birthday parties for their kids every year?

Do you ever think “wow, they must have better jobs, or maybe they inherited money or won the lotto”?

Not necessarily.  When I was a financial planner providing advice to everyday people, I saw many families who had it all together, and those who really, really didn’t (yet).  The difference is not necessarily what you expect.  It is not always extra income, or a windfall that helps them seem financially relaxed.  The miracle that helps them is actually that horrible “B Word” – the BUDGET.

The families that take holidays, have money for regular car maintenance, and who can afford to prioritise their families are usually the ones who plan, budget and live within their means.  They don’t just ‘wing it’ and let their finances dictate their lives, they actually take a little bit of time and effort to control their financial situation.

This gives them that relaxed look that you have noticed (but not really understood).  They don’t panic when something goes wrong, they have funds for new school uniforms when needed, and that school excursion you didn’t know about because your child lost the notice.

Can a budget and being in control really make that much of a difference? 

Yes.  It.  Can.

I had clients I worked with for 10 years.  The average two child family, mortgage, regular jobs, regular income.  They had visions of private school, a dream home in the country, and an early retirement.  They lived within their means, and said no to things they couldn’t afford.  They enjoyed eating out (but not every week) and they never used credit cards for regular expenses.  Money was put aside for emergencies, and if that didn’t happen that money was used for extra treats.  They set aside small amounts regularly to help fund their long term goals.  They prioritised their wants because they knew they couldn’t have them all.

Fast track a few years, and they were doing well.  Very excited when dad changed jobs and received a significant pay rise.  Now they could achieve more goals more quickly.  However two years later their finances had stagnated.  Nothing paid off the mortgage, and a credit card debt.  Why?  What happened?

Put simply, they became complacent.  With a lot more income they stopped being careful, and weren’t prioritising their spending.  They spent whatever they wanted whenever.  I asked if their quality of life had changed, was it better?  They couldn’t really say it was.  The extra spending wasn’t making them happier or better off.  But they did have lots more clothes, a new wine collection, and ate out all the time.  Whilst that was nice for a while, their goals were actually education, a dream home, and an early end to working.  When they began controlling their money again, they were moving forward in leaps and bounds.  Their budget was working, and they were happier whilst spending less.

Time and time again we see that it is not how much you earn, but how much you spend and what you spend it on that makes the difference between financial stress and financial relaxation.

It sounds really easy, but many people these days are struggling with something that their grandmothers knew quite well.  You can’t spend more than you have coming in.  It doesn’t work.  If you do that there are dire and unfortunate consequences.

Take some time to take control.  Work out what comes in, and what your basic needs are.  Over and above that are your wants, which you need to choose between if you want to get ahead.  Remember to live for now, but also plan for the future.  Use a spreadsheet, a notebook, or an App, but you have to do it.

This is not optional.  It should be part of your normal way of life.  Your grandmother did this.  It is the only way to become one of “those” families.  Those ones that have it all together.

And if you don’t know how to do it yourself, or need a bit of a push, maybe you need to find the right financial planner to help you.

Melinda Houghton

Adv. Dip FS (FP)

Insider Out – Understand and Trust your Advice

 This information may be regarded as general.  That is, your personal objectives, needs or financial situations were not taken into account when preparing this information.  Accordingly, you should consider the appropriateness of any information we have given you, having regard to your own objectives, financial situation and needs before acting on it.

I am no longer authorised to provide financial advice.  If you wish to receive financial advice you must contact an authorised provider.

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