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Achieve Financial Freedom

Achieving Financial Freedom by not letting your expenses grow as your income grows!

Time and time again we see new financial planning clients who are Doctors, Dentists, Tradespeople, Business owners, Professional Athletes and even Accountants who have great incomes but still aren’t really getting anywhere financially.

These people are generally stuck in what we call “lifestyle inflation”. This basically means that every time their income increases so does their spending. This makes it very hard to become financially successful and reduce debt, increase savings/investments or achieve other big picture financial goals. Clients who suffer from lifestyle inflation, even though they may be very professionally successful, generally feel as though they are stuck in the rat race working just to pay bills.

It can be hard at times to resist the urge to buy a newer, more expensive house or car, or book that overseas holiday after seeing pics of friend’s holidays on Insta or Facebook. This can make it hard if you decide to have kids and you are suddenly trying to support your expenses on one income.

We use our portal to check and monitor progress towards client’s goals to keep them accountable. We also have a few tips below.

  1. Make short and long term financial goals and write them down
    • It’s easy to waste money when you are not working towards a goal. It’s best to make a range of short and long-term goals then work backwards to determine the best way to achieve them. Goals can range from saving for a holiday, paying off your home loan early, early retirement or putting the kids through private school. All of which require planning and discipline.
  2. Work out how much you need to spend and automate your savings
    • There are lots of variations of budgeting and some people track everything down to the last dollar. We generally just try and encourage to split your income into 3 buckets:
      1. 60% of your take home income is allocated to must-haves. Housing/mortgage, food, bills, transport, insurances.
      2. 20% is to splurge on shoes, booze, holidays, wedding and things that are not necessities (nice to have)
      3. 20% is designated to savings. Extra mortgage repayments, investments, superannuation (depending on your goals). If you have any credit card debt or personal loans on much higher rates, these should be paid off first.
    • You can separate these into separate accounts if easier. Then set up automatic transfers on your online banking to automate all the transactions.
  3. Pay down debt and create passive income streams
    • For many people (depending on circumstances) it makes sense to pay off all debts. Starting with higher interest loans such as credit cards/car loans then moving onto your home loan. Once you have reduced your home loan to an acceptable level. It’s a great idea to start creating income that you don’t have to work for. To achieve this you need to buy assets that increase in value over time or generate income (or both!). There are numerous assets for this but the most common are shares and property – your investments will be dependent on your tolerance towards risk.
  4. Make Slow and Steady Improvements
    • You can still improve your lifestyle as you achieve success in work and life, however the key is to do it at a slower pace than your income. No millionaires got to where they are by spending all extra funds as soon as they hit their savings account.
  5. Don’t equate success with Material things
    • The age we live in with social media. It may seem everyone is living the high life on fancy holidays or buying new things. However, this can just be a façade – “only when the tide goes out do you discover who’s been swimming naked” Warren Buffett.
    • The true measures of success are love, health, friendships, family and experiences. If you are happy with your quality of life you shouldn’t feel the need to prove it. You may end up being the object of envy when others see how easily you’re able to pay for private schooling, travel, retire from paid work and enjoy life while they are still paying off debt into their later years.
  6. Work with an Adviser
    • A professional adviser can work with you on all of the above and more. They can also keep you accountable towards your short and long-term goals. A number of surveys has shown that clients with an adviser experience greater overall happiness. Also an increase in peace of mind and an increase in family wealth.

If you want any help or need some advice email invest@cpwealth.com.au call (08) 7160 1191  www.chandlerprivatewealth.com.au

Book an appointment at our Adelaide office, Broken Hill or Skype by  clicking here