Have you decided it's time to take action with your money? Not sure what your next steps are? If so, this guide to personal finance is for you.
Let's take it from the top. All we want to do is feel better about money.
Yep, feelings. Money is about feelings.
For many of us, it's a source of stress and anxiety first and foremost.
It's the negative feelings that push out the good ones.
Ideally, we'd like to feel in control and full of abundance.
I recently read that 74% of Australians feel either stressed or externally stressed about their financial situation.
Why is that?
- Is it because there is no personal finance subject at school?
- Is it because we were brought up in a family that “didn't talk about money'?
- Or is it the stories we hear in the media or from friends that affect our decision making?
It might be, but that's ok we don't need to focus on the past. Let's start moving forward.
The good news is that personal finance is a skill you can learn.
Yep, it's possible. I did it.
I started adulthood focusing on things like these
- Cars I couldn't afford
- Loans I couldn't mange
- Invest in shares I had no idea about
- Listening to friends and family about ‘great ideas'
I was spending money on things that I thought would impress other people.
But when debt got the better of me, I knew it had to change. I started paying attention to my finances in a serious way.
If I can do it, so can you.
As a reader of the articles on this site you have a massive advantage: you don't have to go through what I did. The guesses, assumptions, trial, and errors that I experienced before I realised what works for personal finance.
In this post, I'm sharing with you some of my most helpful personal finance tips.
This is what I would share with anyone who wants to get serious (and better) about their money.
Feeling a bit overwhelmed with money?
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1. Personal Finance is a skill you can master
I mentioned it once and want to mention it again.
Like any other skill, you can get better. But like trying something new like a sport, cooking, or painting it's going to be easy to chuck it all in and say it's too hard.
So what is this skill? To put it simply, it's knowing where your money has gone, where it is today, and where it will go tomorrow. Having the understanding, plan, and thoughts into what you want to do with your money and why.
Now is the opportunity.
Anything you get taught or learn about money can be applied for the rest of your life.
It doesn't matter if you are down to your last $13, made a horrible investment 10 years ago or frozen by fear of making the wrong decision. Just by reading through this page you are growing and learning to become someone in control and confident with their money.
What you can do about this: Keep reading, you are on your way!
2. It can be fun
Spending money is allowed to be fun.
Yeah, it's a drag paying bills and see what comes in and what goes out, but if you start being deliberate and thinking ‘bigger' about money then it can become something you learn from and enjoy.
Too many people I know are nervous about spending money. The scarcity mindset of “I'm not prepared to waste this money on something” is obvious and blocks people from truly finding enjoyment.
I like to use the money to experiment, try new experiences and buy back time.
For example – my wife and I put aside $100 per month so we can spend money on something new or different that we might have previously ignored due to price.
Things like paying extra for season passes to a theme park, ordering a subscription box or getting photos for the kids done at childcare.
All things we could have said “thanks, but not worth it” but now we actually know if its worth it. If we like the result, we work it into our regular lives. If not, we move on having learned.
How can you start experimenting: Is there something you wonder about doing or owning, but say no because of the price? Why not buy it and see if you like it?
3. The way you feel about money can change (for the better)
On of the key problems people ignore when it comes to money is their mindset.
We have such a programmed mind that has been built up all our lives. Our parents, family, and friends have all influenced how we think about money.
Maybe you come from a poor family who struggled most with your upbringing. Maybe your family did ok, but you never talk about money so you have no idea how it all works.
Without putting any effort in, your environment has taught you what you know about personal finance.
Your mind was made up for you. You might have certain financial views about property, debt, holidays etc.
There is no right or wrong, but if you do feel like you got the wrong end of the stick, there are ways to can add to what you know.
Force change in your financial life, starting with how your mind understands the use of money.
Unfortunately, there is no money class at school. We aren't sat down and taught about how to handle money. The good news is there are a hundred different avenues for learning new and different ways of managing the numbers. It's up to you to pursue them.
What you can do about it: Have a think about some ways you are struggling with money mentally. What are some blockers or fears you have at the moment?
Have a read of my post on money mindset to see how you can upgrade your way of thinking.
4. Focus on the fundamentals first
It's always easier to fail at the fun stuff, that find success on the boring stuff.
When I hear and read about people's attempts to get their money on track and beyond, they jump straight to the advance and flashy things.
I want to buy a house, buy crypto, apply for a new credit card and get bonus points, do what that guy did etc.
They look straight at the results and fail to assess what happens between now and then. These are your systems, the fundamentals of personal finance.
You don't need to worry about interest rates or new card offers if you don't know how much you can save each month.
Basic personal finance comes from three skills – earning, spending and saving.
Reviewing your capabilities in each of these areas is your first step.
What you can do about it: Here are some simple questions that you should know the answers to:
- How much do you earn currently?
- Is this higher, lower or the average salary?
- What Am I doing to progress my career and earning potential?
- How much are you spending each month?
- What is your biggest expense, top 5?
- What do you want to spend more/less on?
- What is your current process for saving? Is it automated?
- Do you have set targets to meet some short and long term goals?
Start with answering simple, fundamental questions like these and get more confident in your status straight away.
5. Think macro not micro
To ‘get back on track' with their money, many people focus on the little things
- cutting back on coffees
- cancelling that subscription
- selling things they don't use anymore
While its great to be able to make changes like this in the name of improving your finances, there is a small limit to the way they can improve your overall wealth.
It could even affect your mental health – is the $30 a month in savings really going to offset the fact you can't do a couple of things you really love doing like drinking coffee or watching Netflix?
Instead of worrying about the little things, focus on the big wins.
- Getting a better rate on your mortgage, or negotiating rent
- automating your finances so you save and invest regularly
- land a dream job or negotiate a raise
Why don't we do these things? Because they are hard…at first.
It's hard because we don't think about them nearly enough as we do the little things. If we start to spend time researching, understanding, and learning about how we can attack the big wins they become easier.
What you can do about it: No one gets rich by skipping a latte, think about one big win you can investigate and make a reality this year.
6. Solve your problems by spending less than you earn
You may have heard this many times, but I really want you to understand how important it is.
Spending is our default solution to a problem. We things to fix things with it. Need to get fit? Buy new gym clothes or a blender. House too small? Buy a bigger one. Car not cool anymore? Upgrade.
You need to be real with yourself. Be realistic in what you can afford and have the means to buy.
We get stuck surrounded by debt because we want things we can't afford. We take loans out for houses, cars, gadgets, or travel thinking we can pay them back but then life happens.
Expenses keep coming in and we haven't got the income to support everything need to pay.
Another problem for many of us though isn't that we spend more than we earn, but that we don't even know it or not!
Very few people I talk to have actually written down and become aware of their financial situation
What you can do about it: List out all your incomes and expenses – see my article on awareness for more detail
7. Success doesn't mean doing more
I used to think that becoming really really good with money meant being really really advanced. Sophisticated investing, optimising tax accounting, multiple cards and accounts, family trusts and negative gearing were necessary things to become truly wealthy.
Over the years I've proven that wrong by trying a number of these things and realising that they just get in the way. For example – Owning two properties didn't suddenly make me rich. It made me tired (of paying bills), disappointed (at the total return), and distracted (from what really mattered).
In a roundabout way, when I first started focusing on succeeding at personal finance I thought it would be simple. Then I found all these rabbit holes that got me spending time, money, and resources on making them work. After experiencing a few and understanding what truly mattered I came back to the notion that simple is truly better.
Less is more. For me I want to reduce as much financial clutter as possible – fewer accounts, more automation, boring (but reliable) investments.
What you can do about it: What is something “complicated” that's part of your financial system but isn't making you as financially free as you like? Is it property, stock, type of debt, or income? Would changing or removing it from your life make things simpler? How can you do that?
8. Your dreams are not unobtainable
Have you ever muttered these phrases before?
- “one day”
- “when Im rich”
- “that'd be nice”
While it seems like you are dreaming, you are really keeping your ambitions vague and at a distance.
We don't want to consider the reality of these things we hear as it's tough to get specific and it's scary to be real.
You'd rather keep dreaming of the day you'll be rich and be able to do all the things than set a plan and work out costs.
Then without a plan and living in denial you get to 75 years wondering what you did wrong to not live that life you thought you'd have
The funny thing is, our dreams are not that far-fetched.
You don't need to keep them at a distance.
It takes months, years, decades, but if you start with something as simple as writing them down on paper then you've taken a step.
Maybe you want to live in New York for example. What are some ways to turn that dream into a reality?
- visit on a holiday
- live there for a week, two weeks, month
- Research jobs you could do there
- research places you could live
- work out how much you'll need and what qualifications would be in demand
See, we are building momentum already. You have moved on from “one day” to “I know what I need and I'm setting a goal”.
Turn a dream into a goal. Try it.
What you can do about it: Write down a list of 10 things you wish you can do, then work out the next step or two you can take this week to get closer to that dream
9. Surround yourself by positive people and remove the enablers
Taking action is uncomfortable, especially if you don't want to find out the results.
While you are finding your way and motivating yourself to move forward and positively, have a think about those who are around you.
Friends, family, colleagues. These are types of people that can influence who you are and what your money mindset becomes.
- Do your colleagues always talk about new cars or homes
- Friends show off new toys and gadgets?
- Family always bring up how you waste money on things you like
These people and behaviours influence you without you realising. You become sensitised and become a mirror of what they say and think.
It's possible to change this and slowly pivot so you can create a positive environment to live in.
I don't want you to quit your job or cut ties with your family, but start to take note of who in your life creates a positive space when discussing money. Spend more time with them. Spend less time with those who hand our stress or anxiety.
It's not just the people you know in real life, but your digital influences as well. Do you follow people who flash money and show off a rich life, making you compare their lives to yours? Is your online life out of touch with what you follow and read online?
You can take action and be deliberate with you spend time with the most and cut out the negativity.
What you can do about it: Take a look at your social feeds. Review your friends. Unfollow five people on each platform that don't make you happy. Then add five new people or brands who are going to give you positive vibes.
Some suggestions – Dave Ramsay, Ramit Sethi, My Millenial Money
10. Understand that help is a available
There are some things we naturally look to outside help for – money isn't naturally one form.
- If we get sick, unwell we go to a doctor.
- It the car breaks down, we take it to a mechanic
- But if we spiral into debt and stress about money, we hide and try to fix it ourself
Why do we quickly look for help when something goes wrong with our health or car, but when it comes to money we hide from it?
Money is an area of our lives we can hide from others and we do. We push it under the rug and think that it'll go away.
But like a car that's broken down, its near impossible for it to repair on its own.
Luckily for us, and especially in the modern-day there are options galore.
Yes, there are financial advisors but there are also quicker, affordable options for most situations.
- Financial coaches (like me!) now exist to help you with one on one support to managing money, building wealth or working through problems
- Websites like MoneySmart are interdependently run and give you factual information on financial topics
- Sites like mine help give you confidence in your ability to change while reminding you that personal finance is something nearly everyone struggles with
What you can do about it: Do a google search and look for a financial coach, online course, or helpful website that can help with you ability to control your finances.
11. You don't need to do it all at once
Wow, we are up to number 11. A lot to take in isn't it?
That's OK. No one said you need to make every action today.
I've been working on getting upskilled and smarter about money for years.
I didn't read a blog post and magically turn into a pro.
One step at a time.
You've done something great today, you've spent time reading this article here.
It means you are investing in yourself to get better.
All you need to do is worry about the next step. Don't think about the 5 new accounts you should get, the investment strategy, the retirement plans.
And know that you can do this. One step at a time.
Control and confidence over personal finance is easier that you think
To sum it up let's recap:
- Personal finance is something everyone can master, have fun with and feel good about
- Simplicity is important no matter how much you learn.
- Your dreams are achievable
- There are lots of ways to get help with this
- Don't try to do it all at once.