Ultimate Self (realizing personal potential)

Money sense

The economic boom looks like it might be coming to an end and in leaner times it is more important than ever to be money savvy. The only way to be financially secure is to take responsibility for managing our money. Here are the basics of money sense:

Think about your financial health. Don’t just assume that the future will take care of itself. It’s become a cliché but that often-repeated saying is true: “We don’t plan to fail we just fail to plan.“

Develop the habit of saving.

Get out of debt. Most of us have to borrow for big-ticket items like cars and houses but going into debt for less expensive things is counter-productive. Debt costs money. Make extra payments until debts are cleared then either save what you were paying or put it onto the mortgage or car loan.

Be adaptable and change your money habits to match your stage of life. For example, the financial plan that works for a single will probably be a dismal failure for a family.

Build up a nest egg for the proverbial rainy day. If you have nothing to fall back on any extra expense can be disastrous. A young family I know had no money saved but had to find $2,000 for repairs to their only car. They had to borrow money from a multinational finance company and ended up repaying a total of $6,000! You might never need your nest egg but it will give you peace of mind and a sense of security.

When you get a tax return, bonus, or other financial windfall put it toward your mortgage, nest egg, or to pay off debts rather than spend it on luxuries.

Reduce reliance on takeaway foods and eating out. Learn to cook and share menu planning and meal preparation with the whole family. A young married couple of my acquaintance eat out or buy in for literally every meal. They spend over $600 a week on meals. They can’t understand why they can’t save a deposit for a house but if they cooked for themselves they could probably save at least $450 from their food expenses ($23,400 per year).

Which brings me to priorities. A given amount of money will only go so far. If you spend it on one thing you cannot spend it on another. Think about what is important to you and why. The choices you make today will change your circumstances tomorrow. Aim for balance. You don’t have to be a miser but you don’t have to be a spendthrift either.

Each of us has a limited amount of money we can earn in our lifetime. Our income is not like that childhood favourite The Magic Pudding (no matter how much anyone ate from the pudding, it magically replenished itself and became whole again). Money is a finite resource for each of us so it is wise not to squander it.

Be wary of credit. Just because some company is prepared to lend you money doesn’t necessarily mean you can handle the fees, charges, interest rates or repayments (some of which border on unscrupulous if not criminal levels). Don’t forget that credit providers are in the business of making money - out of you. Make sure you fully understand your commitments under any credit contract (there are often nasty surprises hidden in the fine print).

Treat credit cards with caution. It’s so easy to overspend on plastic. You lose track of what you buy and before you know it you are spiralling down the financial drain. The temptation of instant gratification and “buy now pay later” is too much for many people who sabotage their futures to satisfy some immediate desire. If you can’t resist, then cut up the cards. Or at the very least have only one and keep it for emergencies, or reduce its limit and don’t spend more than you can repay by the monthly due date.

We don’t have to be slaves to consumerism. Not having everything that advertisers and retailers induce us to want is not necessarily a bad thing.