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Retirement planning

If you want to be successful, you need to know your money type

If you want to be successful, you need to know your money type

People often struggle in their careers because they don’t know their Money Type. Employers are also unaware of how their employees’ Money Type impacts their performance. How many skilled technicians end up struggling in managerial jobs? As one software engineer client told me, “I just want to go back to coding. I don’t want the extra money for a title. I don’t want to spend hours in meetings. I hate dealing with people!”  

Discover your Money Type and fast track your career.

Find Your Winner Circle & Build Your Wealth

Find Your Winner Circle & Build Your Wealth

Before I start this blog, I want to make sure you know what an Investorgetic® is. An Investorgetic® is a persona I created while writing Money Intelligence to counter the Consumerholic persona in our society. It's a term I coined that's made up of 2 words: investor and energetic. It means someone who is passionate about investing to build their wealth in a sustainable way. 

How your friends impact your wealth

Create your Financial Blueprint for a happy retirement

Create your Financial Blueprint for a happy retirement

When it comes to your retirement, it’s no use crossing your fingers and hoping for the best. You need to know exactly how much money you will need, and the steps you need to take, to achieve the retirement lifestyle you want. 

Your Future Depends on the Now

Your Future Depends on the Now

Part 3 - How to Become an Investorgetic®. The secret to becoming a Millionaire Series

Focus on Financial Liberation: Introduction and Step 1 

Your retirement may seem like a distant dream; something to worry about later on. Yet what you do now – how much you earn, spend, save and invest – determines how much money you will have in retirement.

How much money you will need depends on the kind of lifestyle you want. Do you want a frugal retirement, living week to week on the pension? Or do you envision yourself debt free, living in comfort off your own savings and investments? 

It is never too early to transform into an Investorgetic™. You can start working towards a financially liberated retirement no matter what stage of your life you are in. But the fluctuating global economy complicates matters. What is financially relevant now might not be in 20 years’ time.

For example, the erosion of investor returns has caused major economic upheaval. The rate of return for cash investments nosedived from 7.5% in 1995 to 2.5% in 2015. This has had a huge impact on people’s quality of life in retirement.  

So, when the world is faced with an uncertain financial future, how can you plan for your retirement in 20 or 30 years? And how can you plan for another 20 years after that?

Create your wealth road map 

No one can guarantee what their future will be. But you can understand and manage the risks by creating your wealth road map. A wealth road map considers various financial

scenarios – good and bad – and uses the numbers to create a sound financial strategy bolstered by wise investments.

Your wealth road map is not a one-off assessment. At the very least, it needs re-evaluation yearly and whenever you experience a major change in your circumstances.

Improve your current financial position

Before you can start planning for the long term, you must take an honest look at your present financial situation. What needs improving? What bad habits need nipping in the bud? Address these now to avoid financial headaches later.

1.     Reduce your credit card debt

Do you have credit card debt and little or no assets, equity or savings? Even a small amount of debt can snowball over time and ruin your chances of saving enough for a self-funded retirement. You must pay off – or at least reduce – your credit card debt before you start investing. It may even be prudent to refinance your debt by increasing your home loan. By doing this, you can reduce the credit card interest you pay by two thirds. However, you would also need to rein in your spending. Otherwise, you could fall into a vicious cycle of refinancing your home loan every few years to pay off your continuing debt.

2.     Finalise the family home

If you are renovating, building, selling or upgrading the family home, this must be finalised before you commit to a long-term financial plan. You don’t want to take on a hastened investment that ends up costing you dearly because you were too preoccupied with small to medium-sized goals.

3.     Manage your budget

At some point in the future, you will need to pay off your investment debts. If you currently struggle to budget and save, chances are you’ll struggle in the future, too. Failing to live within your means places long-term strategies and investments in jeopardy. To invest and build your assets, you must first work out your expenses, commit yourself to a realistic budget and regularly save money from your disposable after-tax income.

4.     Manage your bank accounts

Effective banking practices allow you to control your household expenses and manage your financial goals. For example:

  • Have no more than one credit card or debit card. Use this card to pay all the household expenses. Ensure the limit is no more than $2000.
  • If you have a spouse or partner, ensure both incomes are paid into your home loan/offset account.
  • Create separate accounts for holiday savings, household budget, education and investment/property. Set up monthly or fortnightly direct debit payments into each account.
  • The investment/property account can be where any rental income goes in and property expenses go out. If you don’t have a property, you can use this account to save for your own home, investment property, shares or managed fund.
  • The education fund can be a savings account or another offset account split against the home loan (where the balance offsets the home mortgage and the interest is calculated on the net amount). This allows you to save for your children’s education while reducing the interest on your home loan. Use money in this account for school fees, uniforms and books, and save for future private school and/or university fees. 

5.     Your age and retirement goals

If you don’t allow yourself ample time to grow your wealth and assets, you may need to adjust your lifestyle at retirement. People who start planning in their 40s have a 20-year horizon to work with. This gives them a much better chance of achieving their retirement goals than someone who is in their 50s with limited assets. However, when there is a will, there is a way. It starts with an honest money conversation.  

Once you have improved your current financial situation, you can start looking at ways to invest your money.

Stay tuned next week for how you can make wise investment decisions based on your attitudes towards risk.

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Susan Wahhab —CPA, SMSF Specialist, Entrepreneur, Working Mum, Small Business Supporter— is Australia’s leading Financial Strategist and Money Mentor. Susan is the founder and managing director of Accounting and Financial Services firm Winner Partnership Pty Ltd www.winnerpartnership.com  

Susan is the author of the transformational and practical book Money Intelligence®. Susan is passionate about helping people achieve financial liberation. At the age of six, she witnessed how her money-savvy mum (whom she calls the money manager) joined forces with her dad (whom she refers to as the money maker) to save the family business from bankruptcy and become financially free. Susan truly believes that people can become financially liberated by developing a healthy relationship with money. Buy the book in either printed copy or ebook and learn more about being money intelligent www.moneyintelligence.com.au

 

 

Don't let YOLO undermine your money goals

Don't let YOLO undermine your money goals

Part 1 of Investorgetic® Series - The secret to becoming a Millionaire

Are you someone who takes a "YOLO - you only live once” approach to money? It’s true that we should seize life with both hands and enjoy it as much as we can. But this is not an excuse to spend, spend, spend. If anything, it is more reason to take a long-term, responsible approach to your wealth.  

People are living for longer. If your idea of living life to the fullest is spending all your money on life’s luxuries, what happens if you live to 90 or older? Could you guarantee yourself a decent living for 30 years or more after retirement?

Consumerism has blinded us to the true sources of love, happiness and success. Advertising tells us we can find these things in products and services. We borrow to spend, and we spend to enjoy our lives. Most of us don’t even question this; it’s just what we do.  

Are you a Consumerholic? 

You may be thinking, “This isn’t me. I’m in control of my wealth and how I spend my money.”  

Maybe, maybe not. Look at the following list. You know you’re a Consumerholic when you:

  1. Feel the need to buy more clothes, bags, shoes and perfumes, despite having a cupboard full of these things (some of which you probably never wear).

  2. Live week to week and save none of your income.

  3. Spend more than you earn, accumulating personal credit card debt

  4. Pay for holidays and other luxuries with your credit card or home loan redraw, rather than saving for them.

  5. Believe a car is an investment.

  6. Ignore opportunities to invest (apart from paying off the mortgage).

  7. Are scared to borrow money to invest, yet have no issue with borrowing to consume, eg. for new furniture, overseas holidays.

So how do you score? Do any of these points ring true for you? If so, your spending habits need an overhaul. To build your wealth and retire in comfort, you need to change your spending habits and your mindset. You need to invest your money wisely. You need to become an Investorgetic®.

Find your inner investor

An Investorgetic® mindset is not about denying yourself enjoyment. It’s not about putting your life on hold and giving up all of life’s luxuries. Rather, it’s about living within your means – at every stage of your life.

So, how exactly is an Investorgetic® different to a Consumerholic? Typically, an Investorgetic®:

  1. Plans proactively for the long term.

  2. Ensures their daily actions are tied in with their long-term goals.

  3. Is careful with money. They plan, budget, save and live within their means.

  4. Focuses on income-producing asset investment.

  5. Saves money for emergencies and holidays.

  6. Puts money into an education fund for their children.

An Investorgetic® makes wise money choices that help them reach their financial goals. They get excited about investing – yes, such people exist!

They have a different approach to living life: they don’t rely on credit cards and they know the difference between necessary and unnecessary expenses. Every decision they make is pointed at building their long-term wealth.

But to know where to invest your money and what you want to get from your investments, you need to have a clear vision of what you want your financial future to be. Without a well-defined vision, nothing will change.

Stay tuned next week for Part 2 of the Investorgetic® Series on how you can articulate your Magna Vision.

 

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Susan Wahhab —CPA, SMSF Specialist, Entrepreneur, Working Mum, Small Business Supporter— is Australia’s leading Financial Strategist and Money Mentor. Susan is the founder and managing director of Accounting and Financial Services firm Winner Partnership Pty Ltd www.winnerpartnership.com  

Susan is the author of the transformational and practical book Money Intelligence®. Susan is passionate about helping people achieve financial liberation. At the age of six, she witnessed how her money-savvy mum (whom she calls the money manager) joined forces with her dad (whom she refers to as the money maker) to save the family business from bankruptcy and become financially free. Susan truly believes that people can become financially liberated by developing a healthy relationship with money. Buy the book in either printed copy or ebook and learn more about being money intelligent www.moneyintelligence.com.au

 

 

From Consumerholic to Investorgetic®: Your Millionaire Path

From Consumerholic to Investorgetic®: Your Millionaire Path

New year, new opportunities to build your wealth

Forget New Year’s resolutions. If you want to make real financial change in your life, you need a strategy.

How many times have you made a resolution to lose weight, stop drinking, stress less and exercise more? We start off with the best of intentions, but without a solid plan, we quickly lose focus. Within a week or two, we resort to old habits. Nothing changes. It's the same when it comes to your finances. You cannot pay down your debts, build your wealth and achieve sustainable change without transforming your mindset and working from a strategy.

Take an honest look at your financial situation. Do you spend to live, or live to spend? We are a nation of Consumerholics: we rack up debt for things we don’t need and have lost sight of what is truly important.

How do we regain control of our money? How can we rediscover what truly matters?  

You must become an Investorgetic®

An Investorgetic® is someone who is passionate about building their wealth. They invest their money responsibly, are socially aware, put high value on their relationships and use their wealth and knowledge to help future generations.  Watch this short video for tips on what people are doing to become Investorgetic®:

If making ends meet is a struggle for you right now, this may seem unachievable. But it’s not. Anyone can become an Investorgetic®. It takes commitment, strategy and three fundamental elements:  

1.     Magna Vision

“Life should not be a series of busy nothings.” 

What do you want your life to be like? Be clear about your vision for the future. Let it light up every aspect of your life and form the basis of every decision. Where do you want to be in 30 years? Do you want to be debt-free, own your own home, have enough money so you can be self-funded at retirement? Think about the future of your children. Is it important to you to have enough money set aside so they can attend university? Remember, your mindset and the actions you take now pave the way for their own financial independence. Don’t let the next shiny, new thing make you lose focus of your vision. Every time you make a purchasing decision, ask yourself: will this help or hinder my chances of achieving my goals?

2.     Courage

“Be strong and courageous.”

I’ll be honest, letting go of your Consumerholic mindset isn’t easy. You’ll face many challenges along the way. It takes courage to embark on a journey of financial transformation. It’s natural to feel apprehensive and scared. They key is to remember your goals and not let fear impede your success and happiness. You deserve financial freedom. You deserve the life you want. Embrace this opportunity to change your life and muster the strength to deal with challenges as they come.

3.     Faith

“Ask and you shall receive. Seek and you shall find. Knock and it will be opened to you.”

The journey won’t always be easy. There’ll be times when you question yourself; times when it all seems so hard. The key is to have faith in the process. It will work. If you have a solid system in place and take a long-term approach, you will gain control of your finances. You’ll not only survive, but thrive.

Best of all, you don’t have to work out your new financial strategy alone.

Over the next 12 weeks, I will guide you through the steps you need to take to make the transformation from Consumerholic to Investorgetic®. Stay tuned for next week’s article on how an Investorgetic® mindset can revolutionise your finances.

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Susan Wahhab —CPA, SMSF Specialist, Entrepreneur, Working Mum, Small Business Supporter— is Australia’s leading Financial Strategist and Money Mentor. Susan is the founder and managing director of Accounting and Financial Services firm Winner Partnership Pty Ltd www.winnerpartnership.com  

Susan is the author of the transformational and practical book Money Intelligence®. Susan is passionate about helping people achieve financial liberation. At the age of six, she witnessed how her money-savvy mum (whom she calls the money manager) joined forces with her dad (whom she refers to as the money maker) to save the family business from bankruptcy and become financially free. Susan truly believes that people can become financially liberated by developing a healthy relationship with money. Buy the book in either printed copy or ebook and learn more about being money intelligent www.moneyintelligence.com.au

8 Ways to Beat the Banks Series:  Part 2 - Practice Resourceful Habits – Manage Your P&L

8 Ways to Beat the Banks Series: Part 2 - Practice Resourceful Habits – Manage Your P&L

This is part two of my eight-part series on how you can beat the banks at their game and get yourself out of debt.

Do you know the difference between essential and non-essential expenses? Honestly? I see so many clients who struggle to save money, yet always have enough to eat out, pay for Foxtel and spend weekends away. They have blurred the distinction between lifestyle spending and spending to live.

People in this predicament usually do not know how to manage their P&L – their profit and loss. In accounting speak:

Income – Expenses = Profit/Loss.

If you have a profit by the year’s end, congratulations! Your expenses are less than your income and you are living within your means. If you have a loss by the year’s end, you are living above your means. Your lifestyle exceeds your income. That’s not good!

Often, people’s expenses are just slightly higher than their disposable income – about 5%. So if your disposable income is $100,000, you will have a $5000 loss by the year’s end. In isolation, this deficiency is not too significant. However, if it occurs year after year, your loss will accumulate to tens of thousands of dollars – $50,000 in 10 years.

People often make unwise decisions when faced with their yearly loss. Instead of changing their spending beliefs and making different choices, they redraw their home loan or use credit cards. Their credit card debt snowballs and they may need to refinance their home every two to three years. Their debt basically finances their lifestyle. But at some point, the debt needs to be repaid.

So how do you stop running at a loss?

You must know the difference between essential and non-essential expenses.

In a nutshell, non-essential expenses are luxuries that aren’t required for survival: holidays, designer clothes, concert tickets, magazines, treats. Essential expenses are vital to meeting core needs: rent/mortgage, food, car, home insurance, utilities, electricity.

When I have a budget session with my clients, we go through their expenses and determine what is essential and non-essential. Outings, cello classes and cleaners are all expenses they feel they can’t live without. Trying to get my clients to let go of non-essential expenses is a bit like extracting teeth! Lifestyle spending is pleasurable. But the pleasure is short term, and the Consumerholic mindset leaves us wanting more.

Non-essential spending can have a significant impact on your life. Ask yourself, “Do I fail to save money? Do I run at a loss year after year? Am I struggling with credit card debt?”

If you answered yes, your spending beliefs need a shake-up. It’s time to practice resourceful habits.

Go through your spending and distinguish between what is essential and non-essential. Every time you go to spend money on something, ask yourself, “Do I really need this? Or is it an unnecessary expense?” You may not like the answer. But knowing gives you the power to make an informed decision.

Managing your P&L doesn’t mean you aren’t able to enjoy your money. It’s about understanding what is truly important to you and getting rid of the rest. It’s about making the conscious choice to say no to non-essential spending. It’s about building your wealth and stopping the cycle of debt.

Download the first three chapters here: http://www.moneyintelligence.com.au/free-stuff/ 

Stay tuned next week for Part 3: Challenge Your Money Beliefs and Habits.

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Susan Wahhab —CPA, SMSF Specialist, Entrepreneur, Working Mum, Small Business Supporter—     is Australia’s leading Financial Strategist and Money Mentor. Susan is the founder and managing director of Accounting and Financial Services firm Winner Partnership Pty Ltd www.winnerpartnership.com  

Susan is the author of the transformational and practical book Money Intelligence® - Anchored in Values. She believes that people can become financially liberated by developing a healthy relationship with money. Learn more about being money intelligent www.moneyintelligence.com.au

 

 

8 Ways to Beat the Banks Series:  Part 1 - Begin with Savings in Mind®

8 Ways to Beat the Banks Series: Part 1 - Begin with Savings in Mind®

This is part one of my eight-part series on how you can beat the banks at their game and get yourself out of debt.

Is your credit card debt spiralling out of control? If so, you are not alone.

According to ASIC’s Money Smart, Australians currently owe $32 billion on their credit cards. That’s an average of about $4,300 per credit card holder. What’s more, the average credit card holder who pays an interest rate of between 15-20% forks out about $700 in interest per year. (“Credit card debt block”, September 8th, 2016) That’s a lot of money going down the drain.

People often feel powerless when it comes to their credit card debt. I see so many clients who have taken too long to act, needing advice on how to get rid of debts totalling tens of thousands of dollars.

How can you ensure this doesn’t happen to you? The good news is you CAN gain control of your credit card debt. The first step is to change your money mindset.  

You must begin with savings in mind®...

One of the biggest financial lessons I learnt from my money-savvy mother was to “save for a rainy day, as you never know what will happen”. Saving is a form of risk mitigation. Yet, in a society such as ours where it’s the norm to spend and amass as much as possible, saving is not a priority.

I call this the “Consumerholic” mindset. It took seed in the 1980s – an indulgence decade that hooked people on credit cards. Most of my generation – Gen X – got swept up in the credit card craze, and credit cards became "normal" for the generations that followed. I have seen clients use their credit card as if it was their personal fund. Their credit cards allow them to purchase whatever they want, whenever they want, so they don’t bother about saving.

We live in a society that struggles to save. Part of this problem is caused by the false sense of security people have about their jobs. Workers assume wages will continue to rise, so they kid themselves that they will be able to pay off their debts more easily in the future. But when they do receive a wage rise, the extra income is used to expand their lifestyle rather than pay down their debts.

How to make saving a habit?

Savings should be your “first expense”, not your last. Tell yourself, “I need to save X amount of money from my disposable income before I spend it on anything else.” Make it a priority.

You may think it’s difficult to save. It’s not. Start by putting aside $50 a week. Place it into an interest-bearing account you aren’t allowed to touch. You can even make this an automatic process so you don’t forget and aren’t tempted to spend the money on something else.

Once saving this amount becomes a habit, it’s easy to build on it. Increase your savings incrementally. Add an extra $10 a week, every second month, and see how quickly your savings grow.

Saving means you won’t have to rely on your credit card for all your purchases. You won’t have to waste hundreds or thousands of dollars on interest. And it is never too late to make it a habit. Start saving now, because you never know when you will need it in the future.

Stay tuned next week for Part 2: Practice Resourceful Habits – Manage Your P&L.

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Susan Wahhab —CPA, SMSF Specialist, Entrepreneur, Working Mum, Small Business Supporter—  is Australia’s leading Financial Strategist and Money Mentor. Susan is the founder and managing director of Accounting and Financial Services firm Winner Partnership Pty Ltd www.winnerpartnership.com  

Susan is the author of the transformational and practical book Money Intelligence® - Anchored in Values. She believes that people can become financially liberated by developing a healthy relationship with money. Learn more about being money intelligent www.moneyintelligence.com.au

8 Ways to Beat the Banks Series: Introduction

8 Ways to Beat the Banks Series: Introduction

When I decided to start my business in 1995, I visited the local Harvey Norman store to buy a computer and printer. The price tag was $3000 – three times the price of what you would pay today. The salesman recommended I get a two-year interest-free credit card to pay for the bulky items.

I didn't understand why the bank would give me a two-year interest-only credit card. I asked the salesman if there was a catch. He said, “There’s no catch if you pay the debt within the two years. But you're in trouble if you don't – the interest would be 20%.”

I knew I was going to pay it off in two years, so I said to myself, “Why not? I get to keep my money and I have two years to pay it off.” So I signed up. 

A couple of days later, the salesman called me to say my application for credit had been rejected by the credit card company, despite receiving copies of my latest payslips and bank account balances. I had more than $3000 in the bank.

When I asked why I’d been rejected, the salesman said it was because I didn’t have a credit history. Back then, I didn't know what this meant. So the assistant accountant asked the “silly question” – what was a credit history? The salesman said this was a record of debts I had repaid responsibly after borrowing money from a bank or store. He added that if I wanted to build a credit history in order to help me buy a house or car or build a business in the future, I needed to start borrowing.  

And, that my friends, is how you and I get hooked on debt! But getting “hooked on debt” might not be such a bad thing if you use your Money Intelligence and beat the banks at their game. 

The key is to know the rules and exercise enough discipline to win the game. The banks know that most people will come back to them to borrow more money. People get married, have children, buy a home, get a family car, and build a business. Most of us need the banks to do these things, and the banks need us! They form a major part of building our civilisation. 

However, since the late 1980s, I have seen my generation – Gen X – and the younger ones get hooked on credit-card debt on a massive scale. It's not uncommon for a client to walk in the door, needing financial advice on how to get rid of a $50,000 debt on various credit cards from different banks. Most are paying more than 15% interest. It's a vicious cycle because the interest rate is so high that most people are stuck paying off the interest only. 

So how do you get ahead? How do you beat the banks at their game? 

I have to be upfront. Beating the banks will take time! And before you beat them, you need to beat the part of you that got you into debt in the first place. You see, no one can beat you unless you let them beat you. You allow them to take little bites of you in the beginning while you're still functioning, then as time goes by big chunks get bitten off. You start to wonder, “Where did the years go and how did I get here?” Middle age hits and you have big responsibilities: a mortgage, a partner, children and school fees, annual holidays and a new car lease. Work gets harder as technology and globalisation impact your industry, and your debts snowball. 

There is a way to win the game. In my book Money Intelligence®, I present the 18 values and 48 money mindset principles that form the basis of the Money Intelligence model I created so that the average person can learn to take control of her/his financial outcomes.

Here are 8 Money Intelligence —MQ Principles— I share in the book on how you can win the game and get yourself out of the consumption debt:

MQ Principle # 1:  Begin with savings in mind®

MQ Principle # 2:  Practice resourceful habits – manage your P&L

MQ Principle # 3:  Challenge your money beliefs and habits

MQ Principle # 4:  Take calculated risks – the devil is hiding in the detail

MQ Principle # 5:  Don’t allow your emotions to blind your better judgement

MQ Principle # 6:  Live by Pareto’s 80/20 rule

MQ Principle # 7:  Patience is a virtue worth practising

MQ Principle # 8:  Set your own standards and don’t mind thy neighbour

Over the next eight weeks, I will explain each of these strategies in detail. I will give you the tools to not only overcome your debt and beat the banks at their game, but to change your money mindset and increase your MQ so you don’t fall into debt again.  

Stay tuned for next week’s post on  Money Intelligence® MQ Principle # 1: “Begin with Savings in Mind®”  

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Susan Wahhab —CPA, SMSF Specialist, Entrepreneur, Working Mum, Small Business Supporter—is Australia’s leading Financial Strategist and Money Mentor. Susan is the founder and managing director of Accounting and Financial Services firm Winner Partnership Pty Ltd (www.winnerpartnership.com)  

Susan is the author of the Transformational and Practical book Money Intelligence® - Anchored in Values. She believes that people can become financially liberated by developing a healthy relationship with money. Learn more about being money intelligent www.moneyintelligence.com.au

Success with money is knowing your strengths and weaknesses

Success with money is knowing your strengths and weaknesses

Drinking thick, sweet Arabic coffee is a Sunday ritual for my family (after eating too much food!). Once the coffee is finished, I read everyone’s cups to entertain them and make them laugh. It’s what I am “famous” for at home. Sometimes, my coffee readings are spot on, and sometimes I am way off the charts. That's why I am sticking with my finance day job! 

When I read coffee cups, I usually see obstacles that prevent people from being content. Something or someone is blocking their happiness. My relatives eagerly listen to what I tell them and then reveal to me their real-life challenges. We discuss what they could do to overcome these obstacles. Our conversations touch on personal responsibility, how the way we view challenges affects the way we deal with them, and how our strengths and weaknesses play out in our lives.

How I would love to use my psychic gift in the finance sphere to make a bigger, faster difference to people’s lives! I could read my clients’ coffee cups in my meeting room and receive visions of their older selves – hopefully cruising the Mediterranean instead of lining up at a soup kitchen!

What do you think your financial future would look like? Wouldn’t it make our lives easier if I could get the coffee out and read your cup, so that we both knew what your financial destiny would be? If the cup says you will be wealthy, you could go ahead and prepare yourself for a life of abundance. If the cup says you will be financially insecure and living in poverty, you could accept your fate and walk away.

But would this be right? Is simply accepting fate the way we should live our lives?

 Of course not!

The key to your financial happiness is mindset

If we were to maintain the fatalistic belief that “what is written is written”, humanity would not have walked out of the jungle and created civilisation. Humanity has been gifted with an embedded program of challenging the status quo. This program is not for a select few – even though 2% of the elites want you to believe it is! It is for everyone. Each one of us has the power to change our lives. Each one of us can succeed. Everyone has the ability to make a difference to their world – and, with it, our world.

 So, how can you change your financial world?

 1.    Begin with an unwavering self-belief:

Like my relatives who believe in the power of the coffee cup, you must believe in the power you were gifted with the moment you were born. You must believe in yourself first. You must believe in your talent and what makes you unique. You must believe you have a life purpose – and you must share this purpose with others!

 This unwavering self-belief injects you with a renewed lease on life, where you and only you have the power to create the life you want. Strong belief in who you are and what you do infuses passion in your life and work. And with passion comes opportunities.

 2.    Know thyself – your strengths and weaknesses:

The second step to real, long-lasting change is to get to know yourself and your money story. What are your values, beliefs and thoughts around money? What is blocking your happiness? What are the obstacles preventing you from financial security? Listen to the money conversation going on in your head.

Knowing what kind of money person you are is also important. Understanding who you are allows you to take an active role in shaping your financial future. Building on your strengths, yet also being aware of your weaknesses, will help you achieve your financial goals and create the life you want.

I meet so many people who believe the answer to their financial problems is an expensive weekend seminar on investing and wealth building. Many finance “gurus” promise quick results that don’t make sustainable change. People’s mindset and values are ignored.

Like my coffee-cup readings, where it is revealed that happiness is something one must work on instead of wait for, financial independence doesn’t happen without having the right mindset. It doesn’t happen without understanding how your strengths and weaknesses impact your financial life.

What are your strengths and weaknesses when it comes to money?  

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Susan Wahhab — CPA, SMSF Specialist, Entrepreneur, Working Mum, Small Business Supporter — is Australia’s leading financial strategist and money mentor. She is the founder and managing director of accounting and financial services firm Winner Partnership (www.winnerpartnership.com).   

Susan is the author of the transformational and practical book Money Intelligence - Anchored in values. She believes that people can become financially liberated by developing a healthy relationship with money. learn more about being money intelligent at www.moneyintelligence.com.au.

How can Pareto's Principle build your wealth?

How can Pareto's Principle build your wealth?

In 1906, Italian economist Vilfredo Pareto observed that 80% of his country’s land and wealth belonged to just 20% of the population. To explain this unequal distribution, he created a mathematical formula – the Pareto Principle. Also known as the 80/20 Rule, the Pareto Principle means that 20% of something is responsible for 80% of the results.

The Pareto Principle extends to our interpretation of how nature and the man-made world work. For example: 80% of a business’s sales are generated by 20% of its clients; 20% of staff cause 80% of a business’s problems; and 20% of staff provide 80% of production. Bearing in mind that the 80/20 formula is not set in stone, the ratio could be 70/30 or 90/10. But the theme is that the minority impacts the majority.

Pareto and your money

I have observed this principle in the way people manage their money. I have examined my clients’ budgets and can attest that it’s household expenses – the 20% – that get people into trouble. It’s not the mortgage; it’s not the recurring essential expenses such as electricity and rates that destabilise the household budget. It’s the spur-of-the-moment, emotional and non-essential purchases that undermine our finances – purchases such as takeaway meals, alcohol, entertainment and holidays.

Imagine if you saved and invested this 20% of your income (9.5% super + 10% personal savings). You would be building your wealth for the long term.

We can see further examples of Pareto’s Principle negatively affecting our finances:

  • Most of us use only 20% to 30% of the clothes, shoes, jewellery, bags and make-up we own. The rest is worn only for special occasions, or perhaps too uncomfortable to wear at all, and remains idle in our cupboards.
  • Most of the household items we own, such as towels, linen, cutlery, cups and pots, don’t get used. We find ourselves using the same towels and the same cutlery and plates. We leave “visitor sets” for when visitors show up, but 80% of the time they don’t.
  • We leave 20% of our food and drinks, including milk and juices, in the fridge, unused, then throw them in the bin by week’s end.
  • We keep unused food – such as tinned tuna, Spam, jam and Vegemite – in the pantry for months. We tell ourselves we’ll use these items to make a quick meal if we’re short for time, but we end up buying takeaway pizzas, burgers or Thai food. The tinned food ends up being thrown away months after expiry date.

Live by Pareto's 80/20 Principle

Wouldn’t it be life changing if you did a stock take of all the possessions in your cupboards and reviewed your inventory? Would you be surprised to find there are many items that have not been used for months, yet could still be used?

How much money would you save if you committed to not buying any clothes, bags, shoes, jewellery, make-up, towels, cutlery, plates and bed sheets for a whole year? What would you do with the savings?

Do you know how much you spend every year on building your inventory? It might be time you found out...

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Susan Wahhab —CPA, SMSF Specialist, Entrepreneur, Working Mum, Small Business Supporter— is Australia’s leading Financial Strategist and Money Mentor. Susan is the founder and managing director of Accounting and Financial Services firm Winner Partnership (www.winnerpartnership.com)   

Susan is the author of the transformational and practical book Money Intelligence® - Anchored in Values. She believes that people can become financially liberated by developing a healthy relationship with money. Learn more about being money intelligent www.moneyintelligence.com.au