Money Mat­ters: Sav­ings and In­vest­ments

With He­len Baker, fi­nan­cial ad­vi­sor and spe­cial­ist in fi­nance for sin­gle mums

Lift Magazine - - Contents - He­len Baker of Bris­bane Pri­vate Wealth is an Au­tho­rised Rep­re­sen­ta­tive of God­frey Pem­broke Lim­ited, Aus­tralian Fi­nan­cial Ser­vices Li­censee and mem­ber of the NAB Group of Com­pa­nies, with its Regis­tered Of­fice at 105-153 Miller St North Syd­ney NSW 2060. Lic

In the last is­sue of Lift, we started ex­plor­ing my Five Fi­nan­cial Foun­da­tions for your fi­nan­cial “now” and your fi­nan­cial “fu­ture”. The first of my five fi­nan­cial foun­da­tions was mak­ing sure you have an emer­gency fund set up. If you didn’t read the last is­sue of Lift (is­sue 4), you can down­load it here to catch up!

The sec­ond foun­da­tion we’ll cover in this is­sue is around cash flow. Some peo­ple re­fer to cash flow as a bud­get, but I don’t re­ally like that word be­cause it usu­ally con­jures up ideas of hand­cuffs and re­stric­tions and is more about what you can’t spend rather than what you can. The term ‘bud­get’ usu­ally springs to mind in a neg­a­tive way, and just like the word ‘diet’, if you set un­re­al­is­tic and un­man­age­able ex­pec­ta­tions you’ll will blow all your hard work, so the key is that it needs to be sus­tain­able.

In­stead, I pre­fer to call this sec­ond foun­da­tion your Spend­ing and In­vest­ment Plan, which is ac­tu­ally a much more re­al­is­tic idea of what we’re re­ally aim­ing to keep track of. We are go­ing to spend. We have to buy gro­ceries, pay the rent/mort­gage, put petrol in the car, pay for chil­dren’s sports or school trips and have a hol­i­day. In­stead of im­pos­ing hard and strict rules on those things that can make life feel mis­er­able, what we want to do is find a way to bal­ance your in­come against your ex­penses in a way that still leaves money left over to look at in­vest­ing.

Now de­pend­ing on where you are in your sin­gle moth­er­hood time line, right now you may only be able to meet your ex­penses un­til you find the best ca­reer/work­ing ar­range­ment for your sit­u­a­tion, or un­til your prop­erty set­tle­ment hap­pens, or you get through the first cou­ple of years and find your feet again. It can some­times take time to get it all to­gether so be kind to your­self, you only need to take one step at a time.

In my book “On Your Own Two Feet – Steady Steps To Fi­nan­cial In­de­pen­dence”, I talk about hav­ing sep­a­rate pots for your money in­clud­ing money for bills, hol­i­days and nor­mal ev­ery­day spend­ing. If you add up all your bills for the year and di­vide that by the amount of times you get paid, e.g. monthly then di­vide by 12, fort­nightly by 26, or weekly by 52, then set aside that amount into a sep­a­rate ac­count ev­ery time you get paid, when the bills come in you will al­ready be sorted. The money is there and there’s no more stress about bills!

Then sys­temise and au­to­mate where you can by set­ting up those pre­de­ter­mined ex­penses on a di­rect debit or a reg­u­lar pay­ment in your on­line bank­ing ac­count, which will take the whole stress of bills away com­pletely. (Just make sure you check on them ev­ery now and again to make sure there’s no skeaky in­creases).

Now to the prac­ti­cal tools to get you on your own two feet. For work­ing out your cash flow you can use web­sites like Money Smart which is an easy on­line tool that al­lows you to plug in all your num­bers and get an over all idea about your po­si­tion. www.mon­eysmart.gov.au.

Once you know your po­si­tion, you can then de­cide on the best spend­ing and in­vest­ment strat­egy for your sit­u­a­tion.

One trick I’ve found works re­ally well is to live to­tally off what you earn i.e. what you can con­trol. You can al­ways de­pend on your­self to pro­vide for you and your fam­ily, you’ll find a way to pay the rent and put food on the ta­ble. If you can en­sure you stay afloat with the money you re­ceive from work­ing you can treat your child sup­port money or fam­ily tax ben­e­fits as a bonus and start fun­nelling them into another ac­count to use as a hol­i­day fund or one off events you hadn’t planned for. It also means if some­thing changes in your ex-part­ner’s life and child sup­port re­duces, you are still stand­ing firmly on your own two feet! Over­all it will mean a less volatile ride and give you so much more cer­tainty and con­trol over your sit­u­a­tion, which only leads to more con­fi­dence. You will rely less on oth­ers and be in con­trol of your own des­tiny.

Once you’ve got your spend­ing sorted, if you have funds left over then it’s time to make a start on the in­vest­ing side of things. We know that su­per­an­nu­a­tion for women is sta­tis­ti­cally way be­hind men and re­ally on its own it won’t be enough for us to sur­vive, so we need to look at prop­ping up our own in­vest­ments too. When it comes to in­vest­ing, time is our friend, so the ear­lier we start, even with small amounts, the bet­ter off we will be.

So if you can, work to­wards the idea of spend­ing less than you earn and bor­row­ing less than you can af­ford and you’re on your way to stand­ing on your own two feet.

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