"Budget, Love"*

While I am a strong believer in 'knowledge is power', it can also be damn scary!

I recently read this article entitled "Women cashed up, but not making money" by Katherine Jimenez in the investment/money section of the newspaper that normally only Dad reads before it gets recycled. It has shaken me up a little bit because it made the point that "a person in their early 30s will need at least $1 million in net assets, excluding their home, to retire comfortably. That would translate to about $50,000 a year in retirement,". This is so much more money than I can picture right now and seems like an impossible sum. So much so that I often think, 'What's the point. It all seems to hard.'

The article suggests that one of the most common mistakes women make is to rely on a man taking control of the finances in their relationship. While I won't be sharing my life or earnings with a man anytime soon I have to admit that my younger brother J has totally taken control of my finances and is doing his best (from the other side of the world) to steer me in the right course to financial independence. Ever since we were little J has been good with money and able to save. Even with the miniscule amount of pocket money we received each month, he always had something left over for a special treat at the end of the month. As an adult this has allowed him to become financially stable with solid investments in property and shares. I'm not sure that this is the mistake the author is referring to because J is not actually making the money for me.... what J has done is put me on a budget, with the goal that I will be debt-free by August!

To put together my budget, J needed an insight into my monthly spending. For the first time ever I was actually able to provide him (and myself) with an accurate picture, thanks to keeping this blog up to date (mostly!). He also wanted to know what financial goals I had for the future. This approach is similar to the one recommended by the scary article, that the key to wealth creation is to have a strategy and identify the steps that should be taken:

1. Be clear about what you want and where you see yourself in the future.

2. Be clear about where you are right now - know what your personal balance sheet looks like. e.g. your monthly cashflow position, income and expenses.

While I have often joked that I need to marry a lovely, wealthy woman to keep me in the manner to which I have come accustomed (hell, a lovely unwealthy woman would be fine at this point!) this isn't really a stable financial goal. Instead, what I want to do is become that woman; independent and wealthy. Well, not wealthy wealthy but at least comfortable.

It's been hard work and really time-consuming keeping on top of my money, which is probably why I haven't done it in the past - it was too much like hard work!! The last couple of weeks I have been a little remiss updating the blog but not my personal records. I know what my personal balance sheet looks like... and it was a right mess, with my expenses of $2815 in May exceeding my income of about $2802. As J rightly commented "If you keep your finances in this mess much longer you’ll have a pretty shite time..."

So, since 18 June I have been sticking to the budget J has set and so far so good (fingers crossed). I've never been able to work within the confines of a budget before but this is going to be different. I am different and motivated and terrified of failing! It's crunch time as so many financial gurus say at this time of the year! I will try and update the blog for the last week or so but in the meantime, I would love to share a few of J's guiding principles, which really are very sensible!

J's tips:

1. Always pay off debts first. It is crippling financially and de-motivating mentally. Then you can save. When you save and see money growing you want to do it more – it can be addictive.

2. Any commission you get should not go to monthly expenses but should go to paying off debts, then into savings.

3. Make sure you have 2 bank accounts.
a. An everyday account: Keep only the money you are allowed to spend in a month here.
b. Savings account. This is where you save money.
 - Have your employer split your salary. Deposit your monthly spending into your everyday account. Deposit savings direct into your savings account.

4. Make sure your budget is realistic, if you think you’ll have trouble keeping to it now, you never will.

5. You are on a budget, but that shouldn’t stop you having fun.

6. Set yourself goals (long and short term). Reward yourself when you reach them.


And my favourite:

7. It’s not a financial diet, it’s a lifestyle change (now that is cliché – but it is also true)

 *for those of you overseas and reading this blog, the title is a reference to a cute little ad which you can watch below...