Is your financial future set in stone?

Posted On January 31, 2015| Leave a reply

It turns out that for the past nine years or so I’ve been looking at my finances all wrong. My income isn’t the problem. It’s actually been pretty good since about the age of 23. Even when I travelled to Europe and taught English my monthly income was almost double the national average on an excellent month and on par with the average on a mediocre month (national average of the country I taught in). If I had saved 20% of my income over the that time and invested then things would be much different right now, at least on the financial front.

Which makes me wonder: are our financial fates set in stone?

I estimate that over the past ten years I’ve earned around $400,000. That averages around $40k per year. I started on that wage in my early twenties, then I went to Europe earn a little less, and finally upon my return to Australia, earned $50k (2011/12), $63k (2012/13) and $73k (2013/14). This financial year (2014/15) I estimate my income to be around the $35k mark as half the year was spent on maternity leave. Next year it should go back up to $75K+

I could earn more but I could also earn significantly less. Our joint household income is a little higher than the national average which really doesn’t say much because the national average doesn’t include pensioners and those on government support. It’d be nice if more people earned around the $70k per year but that’s not the reality. A large number are struggling on $25k per year while others are complaining about $200k per year. Go figure.

So is your financial fate set before you even enter the workforce?

Sometimes I think that financial freedom is not on the cards for me. I work hard, I try to save, I constantly learn about investing, I love writing and reading about personal finance, and yet here I am still no where near where I thought I would be by the time I hit 31. But then I think a little more and realise that would be taking the easy way out.

Our financial situation is the result of our every day actions. It’s the choice between going out for dinner twice a week or cooking a healthy stir fry at home. It’s buying coffee every day or leaving it as a treat at the weekend. It’s filling up your wardrobe with clothes you’ll rarely wear or storing all that cash in a savings account. It’s challenging and educating yourself to get a better job or staying in the same position because it’s easy and comfortable.

The choices we make every day determine how well we do financially.

Today. I choose to make better choices.

Today instead of buying a pair of shoes that I really liked but would probably rarely wear, I immediately transferred the cash into my savings account and walked away. I’m now $180 better off and one step closer to making a habit out of making smarter choices.

What are you doing today to benefit your financial future?

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Should I Sell Some Shares To Pay Off My Credit Card?

Posted On January 8, 2015| 6 Replies

12696032183_0d9622ae98_zI have a slight dilemma. Obviously I got myself into the mess by being irresponsible with money during my maternity leave. Eight months of not working and only receiving minimum payments for paid parental leave for four of them, paying for family from Europe to stay, getting married, and having a baby, and assuming I’d have a side income that would cover any shortfall. Well, it all adds up. And yes, they’re all excuses. But here I am again with credit card debt…although it was a pretty awesome year.

The only person to blame is myself.

Now I have two options:
1 – Sell down some shares and pay the credit card in full then cancel it.

2 – Transfer balance to a 0% for 16 months credit card and ensure I pay it off and never put anything on credit again.

Consequences of choosing Option 1:

  • If I sell shares I will be liable for CGT (capital gains tax) at the end of the financial year. For any shares that are owned for less than 12 months, tax is paid on 100% of the profits. Shares held for over 12 months, tax is paid on 50% of the profits.
  • By selling shares I also reduce my exposure to the market and this will reduce my long term returns. My current portfolio has dropped slightly and now would be a better time to increase my exposure rather than decrease it given the drop in share prices.
  • Any sale will also incur a brokerage fee.
  • I will be consumer debt free.

Consequences of choosing Option 2:

  • I will retain the credit card debt for up to another 16 months, although I would aim to pay it off quicker.
  • A portion of my fortnightly income will need to be allocated to paying down the debt instead of being put into savings.
  • I may not get approved for a credit card with 0% interest in which case I would need to go with the option of selling my shares.
  • I keep my current shares balance and should I need cash for an emergency I can access it within three days.

A few weeks ago I was leaning towards the first option. I wanted to sell enough shares, pay off the credit card in full and never look back. After some thought and considering opportunity cost, I’m not sure I want to do that anymore, especially if I can transfer the balance to a 0% credit card.

So tell me, what would you do, sell down your investments to pay off the credit card or transfer to a 0% card?

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Do you want to get wealthy in 2015?

Posted On January 7, 2015| 1 Reply

Contando Dineiro by Jeff Belmonte, published under a Creative Commons license (https://www.flickr.com/photos/jeffbelmonte/)

Wealth is subjective. Winning the lotto doesn’t guarantee wealth but it does provide a bit of security, at least temporarily, that is until you run out and have to go back to work. You can top up your superannuation and hope to retire on at least a cool million, but if you’re 30 years away from retirement, a million will probably get eroded by inflation. Another option is to get your shit together right now and work towards your own definition of wealth.

The start of the year is a great opportunity to freshen up your finances, set smart goals and work on creating a foundation that will help you build your wealth. If you’re already on track, it is a good time to reassess your position and see which areas you can accelerate, where you can cut back, and what you should be paying more attention to.

So do you want to get wealthy in 2015?

Continue reading at The Wholesome Investor 

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Do you track your spending?

Posted On January 5, 2015| 2 Replies
http://401kcalculator.org

http://401kcalculator.org

2015 is in full swing and one of the things I really hope to do is save, save, save. But in order to do that successfully I have to (a) increase my income, and (b) reduce my spending.

No one would mistake and call me frugal. I’m not. And I’m not prepared to give up all of my simple pleasures or even the more extravagant ones (if you can even call them that). You only live once and giving up everything to save a couple of bucks that you might get lucky to spend later on is, well, crazy. You have to enjoy some of the hard work along the way too, just not too much.

One of the things I’ve noticed over the years that my spending can easily get out of hand. I love going out for coffee ($4.50), add cake or lunch ($10 – $30). That can easily add up to upwards of $100 per week. So this year I’ve decided to do two things.

1 – I’ve allocated $50 per week as my sanity allowance (lotto, coffees, lunches, restaurants, magazines, gifts, clothes, etc).

2 – I’m going to track my spending using the TrackMySPEND money application by MoneySmart.gov.au.

I think $50 sanity allowance is a reasonable amount. It doesn’t mean that I have to spend that much each week either. I can just as well save it for another week, put into the piggy bank, or add it to the savings account.

What I like about the TrackMySPEND app is that it allows me to simply add each transaction, allocate a category to it and then see how much I’m spending in each area. The purpose of tracking my spending is to get a better idea of where my spending weaknesses lie and to see if there’s a pattern. The app even allows you to nominate spending limits, view your history, add tags, and much more. There’s even an option of exporting it out to excel or other software.

The plan is to track my spending for the entire year. Doing that will take discipline and constantly being conscious of my spending. That’s a good thing and something I need. It’ll be interesting to see how much I really spend on eating out, entertainment, gifts, and the other little things that easily add up throughout the year.

Do you track your spending? If so, what do you use?

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2015: It’s Going To Be A Fun Year

Posted On January 2, 2015| 2 Replies

IMG_89042015 is going to be the year where things happen. Goals become reality and it’s not just about the final outcome but the process too. The process is what makes a goal worthwhile because nothing worth having ever came easily and if it did, well it probably wasn’t as appreciated as if you were to work hard for it. So here

Here are my 15 goals for 2015.

Financially

By the end of the 2015, I am in a comfortable financial position. My husband and I are at the stage where we have no consumer debt other than the car loan at 0% which we will be halfway through paying for. Our joint bank account will be at about $5000 as we had earlier in the year purchased an investment property for around $250,000 using a 5% deposit and 2% for closing costs. My emergency fund is sitting at around $3000 and my travel account is at $1000 as we had purchased tickets to visit family in Europe for Christmas and New Year. Our share portfolio will be at around $15,000 and our superannuation accounts will be at $30k (me) and $15k (hubby). Baby J’s bank account will reach $1500 and his share portfolio also at $1500. The plan is to build a share portfolio for baby J where the dividends will pay for his high school and university education.

Goal #1 – Save 35% of my income into our joint account
Goal #2 – Save 100% of  para-planning income split 50% joint account, 25% emergency fund and 25% travel account.
Goal #3 – Save any extra side income made from writing (fiction & non-fiction into travel account
Goal #4 – Use any quarterly bonuses received to top up our share portfolio
Goal #5 – Travel to Europe for Christmas (but only if we meet the previous four goals)

Writing

In 2015, I really want to improve my writing. I want to work on expanding my vocabulary and experimenting with articles, blog posts, essays, fiction, short stories, and marketing copy. I want to grow as a writer and have a book published. I’ve been writing for over 20 years, during that time there was a point where I approached magazines and even had a few articles published. But then I stopped. I placed a barrier before me and couldn’t climb over it. This year I’m demolishing the barrier and moving forward with my writing.

Goal #6 – Set up an author website
Goal #7 – Self publish my fiction novel and sell at least 100 copies
Goal #8 – Write and self publish a second fiction novel
Goal #9 – Build a profitable website on health, fitness and travel in my home city
Goal #10 – Approach magazines and websites with article ideas/blog posts

Health & Wellbeing

Did you know sitting is the new smoking? At least according to a recent article I read in Runner’s World. We spend far too much time sitting on our butts whether it’s at school, work, drinking coffee as we gossip about the latest celebrities news, or catching up on the must-see sitcoms. In 2015, I want to get back to being healthy and fit. Over the years I’ve realised it’s not about how I look but how I feel, and I feel a hundred times better after a quick run, sweaty weights workout, or some tough yoga practice.

Goal #11 – Experiment with yoga by doing 365 days of yoga in 2015
Goal #12 – Go for walks with baby J most days of the week – beach and park
Goal #13 – Run, cycle, swim & weight train at least once per week
Goal #14 – Do 1 triathlon and run 2 half marathons, 2 x 10km, and 1 marathon in 2015
Goal #15 – Eat 4-8 servings of fruit and vegetables every day by experimenting in the kitchen

That’s 15 goals for 2015. Are they going to happen? Well that all depends on me and how badly I want them to happen. Lately, I’m realising that no one is stopping me from doing the things I want other than myself. I am my own worst enemy, but this year, it’s time to become my own best friend instead, and make those goals a reality.

What are some of your goals for 2015? What are you going to do differently this year to make them a reality?

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