I just finished a meeting with a client and we covered a couple of really common mistakes people make when it comes to their cash flow, which costs them a packet and holds them back financially. I wanted to share a couple of the strategies I showed her in the hope I could save others from falling into these traps.
Have you ever been trying to save for something, but found it hard and struggled to make progress? You’re not alone!
- My client was in her mid-30s and making good income.
- She had been trying to put money away for a three month trip to South America for over two years and was struggling to make any headway.
- She figured it was possible to do this easier, but didn’t know where to start.
- She was worried if she didn’t make some changes, not only would she not be able to afford the trip, but that her lifestyle was always going to be cramped by her income – and that she might even be forced to work until she was too old to enjoy her lifestyle.
Can you relate? If so, I’ll show you what you need to do to avoid these traps and how we solved this problem for my client.
Why This is Important
Being able to afford the things you want is the most enjoyable (and therefore important) part of your money strategy, holidays are important right… But seriously, whether you’re saving for something like a big trip, or an investment like your first home, investment property, or investment plan, you need to be able to get this right or you’ll always struggle to afford the things you want without sabotaging your future!
Who This is Important for
- Working your butt off trying to get ahead, but confused about your money strategy and options, and can’t seem to figure out how to get ahead as fast as you would like?
- Thinking there must be some way you can get more out of your income, cut your tax bill, and maybe even get your savings and investments working harder for you?
- Wanting to set up a plan for the future, but can’t figure out where to start?
As a Financial Adviser specialising in young professionals, executives, and business owners, I help people understand their money and how they can get more out of what they already have so they can keep (or spend!) more of the money they earn. I help clients simplify their money plan and finances so it works better for them.
It’s amazing how often I see people really struggling to manage their cash flow and make it actually work for them. Isn’t it all about being able to afford to have the lifestyle you want now without sabotaging your financial future?
What’s also amazing is how easy this can be when you make some simple changes and get the right advice.
Let’s face it, not spending money and putting it away for some future purpose basically sucks, and is definitely way less fun than spending it today! But, here’s the thing – there’s actually a way you can make this process work better for you, easier to manage, and even actually something you enjoy.
Saving without a set purpose or target is like running laps without knowing when the race will end or how long you have left – it’s hard work, unfulfilling, and unless you’re passionate about running, often just plain boring. But when you’re half way through a run and know how long you have to go, the end is in sight and you have something to look forward to, making all your hard work worthwhile!
Tip One: Have a Specific Target
The problem I see most often when we meet new Financial Advice clients is that they don’t have a good idea of what they’re saving for and how much they actually need. Once you are super clear on exactly what you need and have a specific number or target in mind, it becomes heaps easier to measure your progress and also see when you’re going to hit your goal. This is crucial because it gives you motivation throughout your savings journey. Whether your targets are short term like my client, or slightly bigger or longer term like buying your first home or investment property, paying down debt, or even starting your own business, having a clear picture of what you need will make it easier to get what you want.
Tip Two: Have Some ‘Mini Wins’
This is another problem I see often that makes it harder to hit your big savings goals – not having any short-term targets (or victories) to enjoy while you’re working toward your overall goal. Once you have some milestones to look forward to you can enjoy your mini victories, knowing you have just reached another milestone. If you don’t have some ‘mini wins’ it can often seem like you’re just saving for something that seems really far away, and because your goal is so far in the future it can make it harder to stay on track with your plan.
Don’t fall into the trap of just sticking your head in the sand and hoping, praying, or wishing you’ll somehow magically get what you want. Take the time to sit down with someone and figure out your money plans. Think about giving yourself some wins on the way to your biggest and most important money goal to help you get enjoyment out of not just the end result, but the journey as well!
If you could fix just one area of your cash flow and savings to improve your situation what would you like to fix first? Would you like to streamline credit cards, take an extra holiday, pay down your mortgage, or something else? Once you set your goals and your mini wins, you will be surprised at how quickly you can get on track to your idea of financial freedom.
Recall my client had been trying for almost two years to put away enough for her dream trip to South America. I asked how much was needed for the trip, and was told that because there were no set holiday plans, she hadn’t set a specific target. My client told me that the plan was that when savings built up to a certain level, she would plan in more detail to figure out the final number (big mistake!).
What we did was help put a clear target in place, and then structure her bank accounts and savings in a way that made it easier to see where the money was going, and most importantly, easier to actually stick to her targets! We were also able to help get a better return on the savings and even save some tax to help make it even easier to get to her goal faster.
When I caught up with my client the other day for her progress update, she was stoked to tell me she was ahead of target and had just booked flights and done a bunch of planning (thinking back to my trip to South America, I was pretty jealous!). Not only was my client really looking forward to her trip, but also already planning for her next big purchase when she gets back from South America – her first home! Needless to say I was happy to see how my client had really jumped on board with the process and was finally in sight of her long planned holiday. All because we had set some clear targets!