James Trethewie, Financial Planner AFP®, and former Bachelorette contestant, is now a celebrity guest contributor to Money & Life.
Feeling time poor and overwhelmed by your finances? Our guest contributor, James Trethewie Financial Planner AFP® offers some good advice on how can you manage your money better without putting a lot of time into it.
Financial stress is definitely something a lot of us are living with at the moment. According to a survey from Financial Mindfulness nearly 1 in 3 Australians suffer from financial stress. That’s a lot of people carrying the burden of anxiety that can come from struggling to cover your expenses, now or in the future.
If you’re time poor, or just the thought of tracking every dollar with a spreadsheet is enough to send you to sleep, don’t despair! There are things you can be doing to get some peace of mind on money matters without resorting to watching every cent you spend. Here’s my five step plan for feeling more secure about your finances.
1. Get over your fear and face the music
When you don’t really know what’s going on with your money, that ignorance can be blissful or terrifying. For some of us it’s easier to just keep on spending in the same way and pay no attention to nagging concerns. For others, there’s a vague awareness that money is slipping through our fingers but we’re too scared to take a closer look and understand the real extent of the problem.
In either case, there’s no time like the present to just take a deep breath and face up to what’s really going in with your finances. Own up to the debts, shopping expeditions and restaurant meals that are making it hard for you to make ends meet. Acknowledging that you could be doing better with your finances is the very first step towards peace of mind about money.
2. Use tools to help you track your spending
I don’t buy into the idea that budgeting is about knowing exactly how much you spend on every single item. It’s not something I’m wired for and I don’t think I’m the only one! But it is wise to take a general look at where your money goes and you shouldn’t need a spreadsheet to help you keep track. There’s a good chance your bank will have tools and apps, alerts and features to help you monitor and categorise your spending. Plus, there are plenty of other budgeting apps available for your phone or tablet, but it’s good to remember that any app you use is only as good as the person operating it!
3.Master your cash flow
Once you’ve got a rough idea of what you’re spending on essentials and extras, the next step should be fairly easy to get underway. By using a simple cash flow model to channel your income into four different accounts, you’ll be creating a “set and forget” system for making sure you’re sticking to budget targets without micromanaging every transaction.
4. Understand the costs and benefits of compound interest
If you find yourself running short of money in the “yourself” account from month to month, it can be tempting to top it up from one of your savings accounts or put extra expenses on your credit card. Understanding the potential outcome from taking on debts – or sacrificing savings – may just be enough to pull you back into line. Take a look at ASIC’s compound interest calculator and you’ll see just how much of a difference it can make when you start saving five years earlier, or save an extra $100 each month. By the same token, the interest on your credit card debt can mount up even faster as the rates for borrowing are higher than for saving or investment returns.
5. If all else fails, seek advice
Maybe you’ve already read up about how to manage your finances and just can’t seem to get motivated to take action. If you’ve tried to start over with money and just end up feeling frustrated or even more anxious than before, then you’ll probably get a lot out of meeting with a Financial Planning professional. With the best intentions and technology possible, it can sometimes take another person to keep you accountable, help you stick to your commitment to control your cash flow and prepare for a more secure and positive financial future.
 Financial Mindfulness, Personal financial stress devastating Australian lives, Andrew Fleming, 13 November 2017, “The results show nearly one in three people (30.4%) are suffering from significant financial stress”