The Five Pillars- Your 2015 New Year Actions!

Screen Shot 2015-01-07 at 10.29.02 am 2015 has arrived and for 3 in 5 of us, we have made new years resolutions.

Now while most of these are forgotten about by the time February comes; the top three usually relate to health, wealth and family. Statistics in regards to how successful we are in achieving these resolutions are to put it bluntly....demotivating.

Only one in 10 actually achieve what they\ want to achieve. This is due to many reasons such as too complex, too difficult, too broad and not enough discipline. It may even come from the term resolutions not actions.

So if you have made some resolutions, want to achieve some and you understand being in control of your finances plays a big part in your overall happiness, below are five simple, specific and easy to stick to actions not resolutions.

If you do all these in 2015, you will have achieved a lot. It’s not to say you can do more, but you can always do more and lets choose to be realistic. If you are successful this year, next year you can move on to more exciting actions in 2016 but rest assured these are your pillars and the basis to work from going forward.

1)   Cashflow

This is number one and will always be number one. Cash is king and there are reasons why people call it that. Without positive cash flow you are losing money every month and this money has to come from somewhere. In most cases the hit goes to the second pillar – More debt. The key to cash flow is not so much how much positive it is; as we only have limited ability to change this in the short term but it is important to understand by how much positive is it and what you are actually spending. Most people do not have a budget and the ones that do, like NY resolutions do not stick with it. Most people think they know what they spend but in reality have very little idea what they actually do.

Action 1- For the whole of 2015,  Do not try to control your spending any more than you currently do and just track it.

By tracking your spending you are building an extremely accurate picture on what you are actually spending your money on. You cannot do this for a month or even three months. I suggest for my clients to keep on living life like you are but your goal is to just track every single penny you spend. If you can do that for 12 months, I assure you that will be a huge achievement.

From experience this will teach you how much and little you truly do spend. Where you save money and where you like to spend it. It’s not rocket science but like I said at the top - lets keep things simple. The reward will be your knowledge here and this knowledge is very powerful.

There are numerous ways you can do this from phone applications like PocketBook, ANZ MoneyManager, Xero to excel spreadsheet to pen and paper.

Whatever works for you but make sure you do every last cent.

2)   Debt Management

The second pillar is debt management. Not only can it become very dangerous if you are unable to repay, but to build wealth debt is your biggest friend or enemy.

To manage debt it is very simple and you need to find a great mortgage broker who truly understands offset accounts, how to structure debt and what the best rate in the marketplace. If you type Mortgage Broker in to Google, thousands come up but please be selective, as they may just focus on the best rate not the right structure. If you prefer you can give me a call. Either way it is a good move.

The key to managing debt is to firstly setup the loan the correct way and secondly get the best rate. That’s the job of the mortgage broker.

The second habit to put in to place is to setup a set amount per month you can afford over the minimum repayment and to stick to this for 12 months - without question. Do not get to adventurous at this stage and put too much then take it out. That’s a bad habit. Lets create new ones.

The first action will help this second action in year 2. Lets just be disciplined and consistent. For example, If on January 1 2016 you can see $4,000/mth hitting the account every month for 12 months and not a penny taken out that is an achievement. Do not worry about interest rates; just worry about this amount each month.

Action 2 –Call a mortgage broker and decide on an amount per month over the minimum amount that you can stick to for 12 months. 

3)   Investing

The third pillar is growing your wealth. The key to investing is to have an investment strategy firstly. This states why you are investing, what your risk levels are, how you are going to invest and what you are looking to achieve. You need to be very clear on all of these before you even consider rushing out to buy an investment property, some shares, starting a business or throwing more money in to Super.

I suggest the key for 2015 is to build this Investment Strategy. Come up for your end game and write it down. Talk with your partner about what you would like to change in your life longer term and write it down. Where would you like to live now and in the years ahead? Where do you want to retire, what are you going to do and when is it going to be.

Then put all the things you would like to do in life. IE: Start a new career, send the kids to private education, help your kids purchase their first home. Write all these down. All of them.

After you believe you have them all, begin to put next to these what you think they will cost in todays dollars roughly. IE: A new home is $1mil. Kids Education is 6 x $25,000/year= $150,000.

The final thing to put after these is why. Why do you want to change this in your life? What are the reasons you want this.

The key to investing is to know why you are investing. The reason is not to make money......unless you have everything and then it might be. But that is not a reason that will ensure you have a successful investment experience and its needs to be much more deeper than that.

One example, it could be to pay for my kid’s education at Sydney Grammar between the years of 2024-2029 at $30,000/year. I believe that investing in their education will give them the best start in life and I feel responsibility as a parent to provide this to my children.

Once you have these, in 2016 we can figure what is and is not possible. We can begin to take these words and bring them to achievable dreams.

Action 3- Write down your longer-term lifestyle plans and dreams. Put figures against these in today’s dollars and a few reasons why this is important for you to achieve. 

 4)   Family Protection

 There is no point planning for a future if there may be no chance that future being possible. There is a tremendous problem with underinsurance in Australia. Tragedies happen every day, we know they happen but families do not want to spend the time or discuss the importance of family protection. Australians have an “it should be right mate” culture and when things go wrong, in most cases things will not be ok financially unless you do have insurance in place.

I cannot stress the importance of knowing what you are and are not covered for before it is too late. Why take the risk with your families future when you can solve that very easily and affordability.

There are many ways to reduce the cost if you need to but by not knowing the actual cost you don’t know if you do need to anyway. I suggest you speak with an independent financial planner who does not take commission on Insurance. This will save you 30% on premiums every year, a huge saving. Unfortunately there are fewer than 50 of us in the country and I am one of them.

Action 4 – Book a meeting with an Independent Financial Planner and put affordable, suitable and sustainable  cover in place before it is too late.

5)   Estate Planning

The last issue is one of the “gunnado” things we all like to put on the list but never do. This piece of paper is the last thing people want to do but in reality it should be one of the first things they do.

One will is not the same as every other will. Having no will is not the same as having a great will. Similarly to Family Protection, I cannot stress enough the importance of putting a will in place, especially if you have a spouse and kids. To put it simply you need to book a meeting with an estate planning specialist solicitor.

This chat will blow your mind on what you think will happen if you died and what will happen. You will also be told of the amazing ability to put your assets in to a testamentary trust. A simple line in a will that could save your $10,000s in tax and you will learn just how much time, heartbreak and issues you will save your family due to having this will.

Action 5 – Get a proper will in place and never have to worry about it again

If you have read this far, don’t put these 10 minutes to waste and begin these actions TODAY.

If you are unsure on any of these please feel free to pick up the phone or email and I’d love to help.

Best wishes for 2015, be the one in ten, not the nine.