If I had a dollar for every time someone confessed they were losing sleep over money, well, I reckon I would have at least enough for a return ticket to Bora Bora.
Money worries dominate most people’s lives.
Until you put yourself on the path to financial freedom, then you’re doomed to repeat the same old money cycle of earning and spending, earning and spending.
Often I’ll ask people what they think the solution to their money problem is.
Most people, without missing a beat, will say: “I just need more money”. Or: “I need a raise.”
Very few will admit that they’re the ones stopping themselves from being wealthy. But it’s true.
If you earn a decent amount — and I don’t mean a squillion dollars — then there’s no reason why you should worry about money.
You have enough. It’s what you’re doing with it that’s causing problems.
Here are some tips on how to ensure you don’t loose sleep over money:
Stop spending what you earn
The first step is to look at what you earn in relation to what you spend.
You should aim to spend most of your income on your expenses, with a sizeable part left over for savings.
If you’re not able to do this, you need to do one of two things: earn more money to cover your expenses and allow for savings, or cut back on expenses.
It’s as simple as that. If you only earn enough to cover your bases then you’re not getting ahead.
Savings are crucial, not just for investment, but for peace of mind when something in life goes wrong and an expense pops up (as it inevitably does).
Get rid of bad debt
That credit card is not worth the frequent flyer points if you fail to pay it off each month.
Personal and car loans are also terrible ideas and it’s much better to save up for big-ticket expenses than pay enormous amounts in interest to banks.
One thing I know for sure is that debts against depreciating assets (as opposed to investment properties) will never lead to financial freedom.
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If you don’t trust yourself to pay off your card each month, then cut it up.
You don’t need it.
Audit your fees
A lot of people aren’t great at ensuring their money is going to the right people and is set up in the right accounts.
But it’s important to understand how much your superannuation fund is charging you and whether their results are worth those fees.
If not, then switch.
Likewise, if you visit a financial planner or a mortgage broker, make sure you understand how they’re getting paid.
There’s no problem with them taking a cut as long as you’re aware of it and it pays dividends to you.
These incremental fees to advisers or insurance and mortgage brokers, really add up.
High and low super fees can make the difference of tens of thousands of dollars in your own pocket!
Adopt a wealth strategy
To achieve financial freedom, you need a long-term investment strategy rather than just great cash flow management.
Don’t get me wrong, cash flow is important, but in order to establish true freedom, you need to set up a form of income from an appreciating asset, such as an investment property.
This is the stage where most people come unstuck.
They may be good at managing their daily finances, but they have no idea how to use their wealth to create more wealth.
And wealth is important.
Not only does it ensure a good night’s sleep, but it gives us the freedom to do exactly what we want with our lives.
And that is no small thing.