3 ways for you to take control of your financial future

3 ways for you to take control of your financial future

Anne Graham

To spend or to save? It’s the eternal question. While we might want to live for today, tomorrow is just around the corner. It’s amazing what time can do for your money.

There’s a constant barrage of messages from the wealth industry espousing the
need to save millions of dollars to have a comfortable retirement. Now you probably
look at the numbers on TV or online and think they’re massive and completely out of
reach, leading you to give up as the task seems hopeless. After all, you’ve got kids
to educate, mortgages to pay, a career to build, and sights to see.

When you’re faced with these conflicting goals and day-to-day demands it’s easy to
feel overwhelmed and just give up. After all, what difference does it really make if
you pay a bit extra off the loan or put a bit more into super? There’s also the
possibility of receiving an inheritance, but even if it’s say, $110,000 that won’t make
a difference either – or will it?

If you do receive an inheritance or windfall, the $110,000 question is: would you
spend it or save it?

The implications of your decision will affect the rest of your life and that of your
family’s, and the decision you do end up making will be heavily influenced by your
mindset and habits. Acting on your decision may require a change in behaviour and
some discipline.

Back to the magic $110,000. For some people, it represents a new car, a holiday for
the family (or a helping hand to kids), and maybe an updated kitchen. I’ve worked
with people who’ve received an inheritance or windfall and the conversation goes
something like this: “It’s only a small amount really, and it makes no difference if I
spend it. I’ve worked hard and deserve some little luxuries. Anyway, I might not be
around that much longer.”

However, rather than spend the windfall and have nothing to show for it other than a
clean benchtop or new car, investing it for 20 years could turn $110,000 into over
$450,0003. Now that will definitely make a difference when it comes to your
retirement options. You could retire sooner, have a higher income in retirement or be
able to stay in your home and not have to move in with your kids.

The “spend it now” approach is typical and is based on a mindset of short termism,
instant gratification and denial to some extent. It’s also symptomatic of not taking
responsibility for your own actions and decisions, which can also stem from a feeling
of helplessness. We can see that the shift in approach from short-term to long-term
results in a significantly better outcome.

Starting early and changing habits little by little can have a profound impact on your
financial future and that of your family. Being self-sufficient and not relying on a
windfall is the sensible approach to financial security and when it comes to saving,
starting early makes a massive difference as seen in the table below:

3Source: Moneysmart.gov.au calculator $110,000 invested 20 years @ 7.5% monthly compound earnings.

The same amount has been invested earning the same return but the impact of
starting early is over $220,000, or 58 per cent better. This is the magic of
compounding.

Taking responsibility for your own financial future is the first step to taking control.
Being disciplined and sticking to the long-term goal can be difficult at first so
following the three tips below will help:

  1. Know why you want to take control – put some real numbers and
    time-frames around the outcome you want. E.g. “to have $598,000 in 20 years’
    time so I can enjoy retirement.” Retirement to you might mean regular
    holidays, maintaining your holiday home, staying in your family home,
    retaining club memberships.
  2. Know where your money goes – record every dollar you spend for the next
    month or so and then review. If you know where your money’s going you can
    take control and make changes if necessary. You can start changing bad
    habits and start introducing good habits.
  3.  Know your numbers – regularly check your progress against your plan.
    When you see the little wins you’ll gain renewed confidence to continue with
    your plan. In fact, as that home loan reduces and your investment portfolio
    increases you’ll become even more of an advocate of long-term goal setting
    and planning.

Taking control and responsibility for your finances can seem daunting and pointless.
Understanding the importance of making changes to your habits and mindset will go
a long way to a comfortable retirement for you and your family, giving you choices
and control of your future.

If you want to learn more about how you can start investing through a simple, diversified portfolio – head here.


The opinions expressed in this content are those of the author shown, and do not necessarily represent those of No More Practice or its related entities. This information is general in nature and does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. To view our full terms and conditions, click here.

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