Getting on top of your finances is something many are aiming for. However, you would think that earning $300,000 a year would lead to quite a comfortable lifestyle. Nice house, nice car, regular holidays, kids in nice schools however it is quite common for people on this level of income to feel like they are not rich and quite frankly not living the lifestyle they would want or should be.
You can click here for the article.
I wanted to talk about Phil’s situation because on the surface you would be thinking there is no problem. However, this is a common problem that many people on high incomes struggle with.
There are many reasons for it, however, they all share common traits which we will discuss along with what you can learn, implement and be more in control of your money and destiny.
I have personally come across many people on high incomes like Phil in the article above and are either struggling to maintain or lead a good lifestyle or feel that they should be doing much better with the income they have.
It generally comes down to a couple of things, firstly lifestyle creep, keeping up with Joanses & bad money habits.
Lifestyle creep, when you continue to increase your income over time and your lifestyle/purchasing habits increase in line with your income.
Keeping up with the Joneses. You might be in a profession where traditionally because of your status you need to follow those that have gone before you, nice house in the nice suburb, latest luxury car, expenses schools for the children and literally liking a luxury lifestyle just because your friends do. This may not make you happy and if you looked under the bonnet of those that you are trying to mirror your lifestyle you’ll most probably find a mountain of debt as well.
Bad money habits. We are not born nor taught money skills from schools and in most cases from our parents. For some reason, it’s a taboo subject but understand the rules and implement simple achievable strategies and all can have the lifestyle we want without the compromise.
I liken Phil in the article above much like Usain Bolt trying to be an elite soccer player. Yes, he has the fitness and naturally a gifted sportsperson, however, it takes years and years of practice and failure to become an elite soccer player. You can’t just train for a couple of months and expect to be at the top of the game.
Money’s the same. In this case, Phil and many people like Phil jump out of the gates a hundred miles an hour, no clear plan, no real strategy, may have even read too many books about how to retire on 10 properties and $100,000 a year and really no thought around what it is he is trying to achieve.
I’ve seen many people on lower incomes manage their money better to the point where some are mortgage free and in a position to create wealth quickly.
As I have said previously we don’t know everything, however, we have just about seen every mistake people have made when it comes to money and we have a system that allows people to take control of their finances, live the lifestyle they want while building wealth for the future.
- Start with the end in mind. What are you trying to achieve? No point taking on more risk and stress if you don’t have too. Do you go on holiday without a destination or experience in mind? So why can’t you give your finances the respect it deserves? Afterall it’s going to be you that’s going to benefit from it all.
- What’s the gap? Something we take every client through. You want to be at x by x date, so what’s the gap between what you have now and where you want to be. Only then will you have the information required to bridge the gap.
- What’s getting in the way of you achieving x? Is it that you are not managing your money right? Have you got your priorities wrong? Have you got the right strategies in place? All or part of these is what’s getting in the way for Phil to enjoy his lifestyle. There is no structure in his strategies.
- What options or strategies do you have at your disposal? Is it that you need to contribute more to super? Do you need to save and invest more? Do you need to readjust your goals so you can still maintain your lifestyle?
- Save 10% of your income and live off the rest. This is one sure way to increase your wealth on autopilot and then you don’t feel guilty about spending the rest. Think investing 10% of your income is not possible? Start at 1% and every few months, 6 months annually increasing it by 1% until you get to 10%. You’ll find it is easier than you think.
- Assess your spending. This does not mean keeping to a tight budget. When I talk to clients I talk about spending plans. You need to enjoy yourself as well otherwise what’s the point. The important thing here is to spend on things that you value and eliminate those expenses that don’t add any value. For some you may value your coffee in the morning, others might be clothes and other wine. Whatever it is, plan for it and eliminate those expenses you see no value in.
- Avoid get rich schemes. We have seen so many people buy up big with investment properties normally from someone in a shiny suit only to find out later down the track there properties are far less than what they paid for them. There is a right way and wrong way to go about it. I’m sure in Phil’s case he may struggle in the coming years with increasing interest rates and all investment properties being held in Melbourne.
We spend many hours with clients working through the above exercises to help them get crystal clear on what it is they are looking to achieve and what options are available to bridge the gap in a timeframe that is going to work for them. If you have the right structure it makes like a lot easier.
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So, if you’re a professional, business owner or someone planning for retirement and are wanting to get your version of a personal trainer in finance and want to master your finances then feel free to book in a 15 min Let’s Get Started call here>>> and we can start a conversation.
I’ll be honest here, we won’t do your pushups for you, but if you are motivated for the right reasons we can save you a lot of time and heartache and save you from the mistakes most people make to fast track your way to wealth.
Hope that’s been useful.
Make it a great Life!
Challenging the Status Quo!
Glenn Doherty – CFP – Founder & Financial Organiser at Jigsaw Private Wealth
Mob: 0401 253 729
Advice Disclaimer: Any reference in this publication to the provision of advice refers to advice of a generic nature, and should not be taken as product or investment recommendations. Before any action is taken based on the information provided, independent financial advice from a licensed financial adviser should be sought. Financial Freedom Project Pty Ltd ATF GA & DC Doherty Family Trust Trading as Jigsaw Private Wealth is a Corporate Authorised Representative of Exelsuper Advice Pty Ltd. The information contained in this publication is of a factual nature only and is not intended to constitute financial product advice. Information is current as at June 2018. This is an online information blog. It does not imply an offering of securities.