Many people have money problems even when they work fulltime. Here are some ways to help.

Get some financial education

You need to know the financial basics. If you don’t know what assets and liabilities are or if you only have a vague sense of possibilities in investments, then you need to get some financial education. Read some books (there is a list under Recommended Reading), see a financial advisor or go to one of the many online sites that offer financial education. Once you understand how money works and how it can best be used, how you think about money will change.

Find out about investment options. Many people think the jargon around investing keeps them out of the game. But it doesn’t take too long before you understand some of the concepts and you can see there are many other ways to make money that are interesting and inspiring. People invest in many different ways depending on their interests and risk profile. You just need to have some curiosity and understand that the knowledge will benefit you, if you learn and take some action.

What are some of the questions you have about money and investments? Where can you find out the answers?

Take Action: Spend less than you earn

This may be basic, but so many people don’t actually do it!

For example, when you think about how much your salary is, you think of the gross amount (the amount before tax and deductions). If you divide this by 12, you may have a healthy monthly figure. But if you take out taxes, deductions like superannuation, insurance and then repayments and regular bills, it may not leave you much left over for the fun stuff. So you need to know what you earn AFTER deductions and what you are spending.

Spending money is addictive and a vice everyone enjoys to some extent. You work hard to buy more stuff and as you earn more, you spend more. If you get a raise, then you can buy that new car or new clothes, or get a better apartment in a better area.

But is it possible to do things differently?

• Think before you buy. Do you really need this? What does it add to your life right now? Are you buying it because of what you want other people to think? Will you still want it in six months? If not, is it worth it?
• Analyse your credit card bill. Go through the paper copy or download it. Categorise and total it based on the expenses e.g. supermarket shopping, takeaways and restaurants, entertainment etc. Look at how much you spent on things that weren’t necessary. How many items on your bill do you not even remember? Are you surprised by how much it adds up to?

How many of those expenses could you scale back and how much would it save you per week or per month?

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Money is important, but if all your money goes out the door and there is none left for the future…your job is just treading water. To get ahead, you need to make changes.

Save 10% of your income

I first read this suggestion in “The Richest Man in Babylon” years ago, but I didn’t take action. 10% seemed such a small amount at the time that I just didn’t do it as it didn’t seem worthwhile. I didn’t set aside a separate account, but said to myself

“I’ll just put some money away when I have some left over at the end of the month”. Of course, that never happened!

Finally, I started a separate account called “Cash” and started putting 10% of my income into it AS SOON AS the money appeared in my account rather than at the end of the month. It was pretty pathetic at first but I had at least started. Now that account has a tidy sum in it and I like watching it grow in small increments each month.

If you saved $20 per week for five years in a savings account with an interest rate of 6% paid monthly, after five years you will have $6,214.33 in this account. If you managed to put $100 away per week, you would have

$31, 071.66 in five years time.
Imagine if you had done that five years ago!

This account is not a savings account in that you intend to spend it eventually. It is a lifetime account, one you leave there as the basis to your personal wealth. It should only be used for growing your assets and investing. It is important to do this and recommended by so many wealth coaches for the following reasons.

1)       Discipline with money – You have committed to save, you have taken action and you are mastering this amount of money. As it grows you will have the discipline to carry on saving, and you won’t spend it. This proves to yourself that you can control money. It doesn’t control you. You are a saver, not a spender. This is important for your mindset about money.

2)       Attraction for more money – This initially tiny but growing amount becomes like a gravitational field and attracts more money. Interest compounding on the account over the years makes the growth accelerate. Compound interest is when interest is paid into the account, which in turn grows the principal, and in turn generates more interest.

3)       Basis for further investment – As the amount grows you can use some of it for further investment; not spending, but investment to grow your wealth.

4)       A safety net – Although this account is not meant to be touched, it is a safety net in case of emergency. It is there if you lose your job, or you need some expensive surgery, or you are in an accident, or a loved one needs an operation they can’t afford.  Life will throw curve balls at you! Having some money in an account you won’t touch is important in case you do really need it someday.

Take action now and open an account for your 10% money.

Think of it as your discipline, your safety net, your dreams, and your money confidence and watch it grow.

Don’t spend it on something you think you really want, as chances are you will want something else in six month’s time. It is not for spending. It is for your future. If you have the discipline to do this, you will also see a change in your attitude towards money quite quickly.

What is 10% of your income now? Will you commit to putting that into a lifetime account? How much will you have in this account after five years?

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You do earn money in your job, so you just need to keep hold of it. If you implement some of these strategies, you will give yourself more choices about the work that you do and the life you lead.

If you take action to control your money, you will find more opportunity to enjoy your life and your job.

You can invest in self development, perhaps towards a different career altogether. If you have some extra money, you can pay off some debt so you don’t feel trapped where you are now. You will feel there is hope that you will make it out of the situation you are in now.

The money you earn can be used to leverage yourself out of your situation and into opportunities you cannot yet even conceive.

Here are some initial steps.

Assess: What are your finances like now?

Be honest! You are only trying to fool yourself if you exaggerate any of the figures or reduce your debt levels on paper.

Give yourself a financial health-check.

· How many days/weeks/months could you live with your present lifestyle if you had to stop work tomorrow?

· How much have you saved for emergencies?

· What is the value of your assets? (what you own e.g. house, car, investments

· How much is your total debt? (what you owe other people e.g. mortgage, personal loan, car finance)

· What are you worth? (total assets – total debt)

· What is your income every month? Are you dependent on your job, your spouse, or the government for this income?

· What are your expenses every month?

· What are you left with every month? (income – expenses)

· How much do you invest every month?

Assess: What do you want financially?

People don’t usually think too much about what they want financially because it seems obvious! They want enough money to fund their lifestyle and buy the things they want. They want to be able to pay the bills, keep the family happy and have a holiday every year. But have you ever written down what you want financially for the rest of your life?

Have you thought about what you want in retirement? Or if you want to be financially independent before then, how much would you need to accomplish that?

· What do you want your life to be like in the future?

· How much money will you need to live that life?

· How far are you away from when you want to retire?

· How much money do you need to save/invest to have a great lifestyle when you retire?

You need to be specific with the numbers and make it tangible, as these are the first steps towards your financial plan. A good start is to see a professional financial planner who will help you with your financial goals and the practicalities of how to achieve them. It may cost you some money now, but in my experience, it will make you a lot more in the long run!

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The media is filled with financial crisis at the moment. Huge economic shifts are happening and it can often feel as if we are powerless to do anything about it. Many people don’t enjoy their jobs but feel as if they have no choice when they are trapped by financial circumstance. In order to get a new perspective on the financial situation, I interviewed Michelle House who runs www.SecretBudget.net . Her focus is on helping people to budget and manage their finances to improve their financial situation.

How can people make the best of these uncertain economic times?

Firstly, take a deep breath!  I think people can panic before they know the facts of their situation.  I highly recommend that you sit down and do a budget.  Write it down, don’t walk around with it in your head!  By sitting down and taking an honest look at your situation, you can determine if your expenses outweigh your income.  If they do, it’s time to knuckle down.  If they don’t, congratulations!

But, it is really time to make sure that you are putting away some of that money.  With the people that I have coached in household money management they have all agreed that  it’s not reasonable to have just one party responsible for the budget.  It’s up to both parties in the relationship to be responsible for the money, it’s not fair to leave the responsibility with just one party.  If you’re on your own, it’s up to you!

What are your key principles around money?

• Be accountable – know what you are using your money for.  Don’t impulse buy/spend.
• Budget – have it written down, not just in your head!  Review it regularly
• Honour it – you worked hard for it!
• Make it work for you – aim to not work for IT
• Pay yourself first – the first money principle I learnt from my mum who learnt from The Richest Man in Babylon

Tell us a bit about your business

www.secretbudget.net is a website that offers free tools for managing the household budget.  It also includes a growing database of savings tips and ideas that is contributed to by online members.  The Personal Budget Organiser is a wallet that i designed after needing one myself!  I have always found it difficult to keep track of my balance with cards, seeing cash is much easier and curbs impulse buys!

Why did you start your own business? Is it better financially than working as an employee?

I’ve had my own businesses since I was 22, so I only ever had 2 full-time jobs with other employers.  What I love the most about being my own boss is that I can constantly challenge myself to achieve more.  I can also change the course of the business as I need to and of course when I need flexibility – it’s there!  It does require a lot of self discipline and constant review of where I want to be.  As I continue to grow the business I can see the financial rewards coming.  Initially though, it’s probably harder than working for someone else!

You are also a Mum. What are the 3 most important things to tell /show your children about money?

.            * We don’t just buy things when we’re out eg drinks, lollies etc…  we plan what we are doing and what we’ll be coming home with.  My 5 year old is really starting to see the value in this and takes her own pocket money if she wants a treat.  It is decided before we go though…

* We consider everything we buy e.g. we limit take-aways and other entertainment so that we have more money for holidays, we make our own kids treats and then put the saved money in a jar – teaching the value of making your own

* They are aware of the business and that we have customers that pay us money, that pay bills, and then what’s left is profit.  We also have a game called Cash Flow for kids that they’re about to start playing and learning from.

Is there anything else you would like to share with the readers?

Money does indeed make the world go around.  In these times of “financial crisis” that are being talked about its’ time to take stock, work out if you may need to get another job to boost your income, consider selling anything that you cannot afford.  These times come around every 7 years or so…. now’s the time to be really, really responsible with your money!

My best tip – Reduce expenses by 10%, increase income by 10% and you’ll be up 20%!!

Michelle House from www.SecretBudget.net

Get your FREE budgeting tips here!
Michelle House is bringing up a young family and manages the finances of a family business in property maintenance. She has also become well known as a budgeting expert, thanks to the creation of her practical budgeting tool called the ‘Personal Budget Organiser’, or PBO. The PBO works as a portable filing system within a wallet – perfect for organising money, receipts, or anything that will help you budget. Teaming her product with a useful website, www.SecretBudget.net Michelle hopes to inspire people to ‘get back to basics’ with their understanding of expenditure and money.

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Someone we know just won the lottery here in Australia. At least this proves it is not an urban myth!
But a lottery win is not a financial plan – and for most of us, we can’t rely on luck for our financial future. We need to make active choices every month to make the most of the money we have, and make sure we are financially secure for the future. With the financial doom and gloom in the media at the moment, you need to know that you CAN make a difference to your financial situation with some behavioural change.

Here are some of the top tips to help your with the finances:

1. Put aside 10% of your income (before bills) every time you are paid. It doesn’t matter how much this is, but put it aside into a “Cash – don’t touch” account. It will build up and you can use it as a basis for investment. You also have a buffer for tough times and unexpected situations.
2. Be aware of your spending. Try keeping a budget and record receipts, even just for a week. If you add up those coffees and lunches out, you will see how much you are spending. There are some great free tools and information for budgeting at this site http://www.secretbudget.net/about/about/budgeting-tips.html
3. Declutter your life and sell it on eBay. Be ruthless and go through your stuff. Do you really need those clothes or the clutter in the garaage? Go through it all and sell what you can, and give the rest to charity. Put the money from the sale into your 10% account for investments. Warning: do not browse the For Sale at the same time as selling!
4. Get educated about finance and investment. If you don’t know anything about money, except that you need it, then you need to do some reading! I recommend “Rich Dad, Poor Dad” by Robert Kiyosaki as a good start to understanding money – or “Why we want you to be rich” by Kiyosaki and Trump.
5. Don’t watch adverts or become a victim for specials and sales. You will spend money you don’t need to because it sounds like a bargain. This tip and 27 others can be found at http://www.marcandangel.com/2008/07/17/28-unique-bits-of-financial-brilliance/

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The word “consultant” is now used in many industries to describe specialised skilled individuals hired by companies to perform a specific job. Consultants are generally paid a premium, either as an employee on a large salary or as a contractor at a lucrative daily rate. If you want to improve your income and change your career prospects, could you consider becoming a consultant?

Here are five critical areas to focus on if you want to earn a 6 figure salary as a consultant.

1) Specialisation.

2) Know the market.

3) Have a great resume and good interview skills. Strip your resume of peripherals and non-relevant experience. Concentrate on expanding the areas of your resume that are about your specialist area. Have recommendations and references available that relate to the specific work you will consult in. Professional networking websites e.g. Linked In are good tools for promoting yourself and finding opportunities through colleagues.

4) Be flexible. Consultants often have to work at different companies, in different cities or even countries in their work. Daily financial benefits are often given for working out of town, but this may not fit with family life or work/life balance. Know what your limits are before signing a contract. Being flexible about the role itself is also important. Job descriptions, particularly for contract work, are often loosely defined. Adaptation to the differing demands of the job are therefore required. Your contract is more likely to get renewed if you are flexible.

5) Be confident. Consultants are confident in their abilities and portray this to their clients. Even if they don’t know the answer, they are confident enough to say that they will find the answer within a short time-frame. They deliver value for money and so are confident in their daily rate/salary level.

Being a consultant has its pros and cons. There is the freedom to move on, autonomy, project based work and financial reward. But there are also stressful deadlines, overwork and too much travel, job uncertainty and not being paid for off days. It is not for everyone, but if you love change and are confident in your abilities, it is a great way to go.

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A friend told me recently that she is paid considerably less than a colleague for doing the same job. She found this out by accident but is angry about it. She has approached her manager and will be having a meeting to discuss this as part of an annual salary review.

She asked me for some tips on how she can demonstrate why she should get a raise, so I thought I would share some.

1) Find out what the industry standard is for the job you are doing, and take into account the city you live in as standard of living counts too. You can try www.salary.com in the US, http://www.hays.com.au/salary/default.aspx in Australia and NZ or http://www.payscale.com. You can also ask your peers at other companies for ballpark figures.

2) Work out your value to the company you work for. Are you hired out to other clients? If so, what is your charge out rate? How much do you personally add to the company you are in? This may be in financial terms or in experience or softer skills. For example, someone who knows the business inside out is valuable to a company.

3) What reason do you have for asking for a raise? Are you adding extra value to the company since you accepted the position at the rate you are on? Have you up-skilled? What reasons can you give the HR Manager when they ask why they should give you a raise? Saying “because I am not paid enough”, is not a good enough reason! If you can’t think of any, then make sure you have the answers next time around.

4) Know how much you are asking for and go in with that figure written down unless you are confident discussing money. When people ask me how much money I want, I will write it down as my English reserve kicks in. I am happy writing a larger figure than I can say out loud, and it is what I consider my value to be. If you don’t believe you are worth this figure, it will come across in your manner, so make sure you have the right amount in mind and be confident about it.

5) Go in with the above points written down in a professional format. Be prepared and demonstrate this to the reviewer. It is almost like a second interview if you are trying to sell them on giving you a raise.

6) Assess your negotiation skills. You may want to improve them in order to get the best deal.

7) Do you want a raise or do you want recognition? Assess your motivations. Is it just about the money, or do you feel the company is not seeing what you do? If you feel under-appreciated, this may be a different conversation.

Do you want money or are you willing to negotiate for other perks or better working conditions? For example, are you willing to trade a $5K raise for a day working from home? What will give you greater quality of life? $5K after tax is not so much, but a day working from home will give you 45 days less commuting time, less fuel consumption and more time with your family.

9) Go in with an open and friendly attitude. Don’t be confrontational or demanding. Put forward your points and discuss them in a rational and organised fashion. Demonstrate your professionalism. If you are given feedback or constructive criticism, then take it with a positive attitude (although that may be hard!). Everything you can do to improve your performance will lead to more money.

10) If you are told that you will not be getting a raise this time around, DO NOT storm out the office! Take a deep breath and ask why. Ask how you can improve and what you can do so that next time around you will get a raise. If you then achieve those things, they will find it hard to refuse you next time.

The best way I have found to get a raise is to move to a different company and ask for more on entry to the new position. This may be a more radical approach, but it has worked for me.

Remember to focus on whatever is in your power to change. You can’t change the company, but you can change yourself and your situation.

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Increase wealth with innovation

One of the focuses of the Australia 2020 Summit is the productivity agenda. This link contains an overview and also a downloadable PDF.

http://www.australia2020.gov.au/topics/infrastructure.cfm

This agenda targets the changing nature of the workforce and the economy and how ‘innovation’ systems can be used to improve productivity across these areas. The economy needs to adapt to an aging population, the problems of climate change and a new economic landscape which focuses more on China and not just the US.

One of the innovation messages is to “turn knowledge into wealth” and improve commercialisation of science and research. This productivity agenda also features improvements in early childhood education. These two are intertwined if education and the economy are considered as whole.

People exist on the continuum – starting in education and ending up in the economy.

Currently the education system is focussed around modules of knowledge that don’t necessarily relate to real world situations. They do not apply directly to turning that knowledge into wealth.

One of the major missing components is teaching children and young people about money, entrepreneurship and creative innovation.

Science is taught in a vacuum, likewise literature and other areas of knowledge. I am not suggesting that these lessons are left behind – but that there are also modules that help students to turn their passions into profits. The commercialisation of science, or the arts can also be taught alongside how to use the internet to build a business, how to sell and how to account for the profits legally. The expansion of programs like Young Entrepreneur are needed. There could be more competitions that encourage participation and innovation, rather than viewing from the sidelines like a reality TV show. Seed money for young start-up ventures could be sought from angel investors. This should be encouraged as part of mainstream schooling and not just for the geeks or the super intelligent. Young people need to understand that they will need to earn a living so being taught the value and reality of money early on will help them later. If this had been encouraged for my generation, the credit crisis may well have never happened.

Some might say that it should not just be all about the money, and I agree that learning should also be undertaken purely for the pleasure in learning. But the practicality of what children are taught and how this will be used in the workplace must be examined. One of the graphs in the PDF shows how the number of people in management, admin and professionals has increased and the number of tradespeople has decreased. This means a huge number of people who work in offices, and not enough tradies to fix their plumbing or do their roof. I know, as I am one of the office workers who finds IKEA furniture difficult to put together!

To address this, education needs to start valuing real world skills as important to learn from an early age. Indulge children who want to bang nails into wood – maybe they will turn into builders instead of IT consultants – and probably make more money that way. Has the exit of male teachers from early learning meant that these more ‘male’ skills have been neglected in favour of softer skills? Teaching needs more innovation, less blame and a better PR job. It is often not portrayed in a way that encourages young people to enter teacher training currently.

For the rest of us, increasing wealth with innovation is exactly what we need to do. Changing the paradigm from one job or one career to multiple streams of income, investments, and self education for life.

Jim Rohn says “Formal education will make you a living; self education will make you a fortune.”

Individuals needs to embrace this attitude and start learning about the new economy and the impacts of technology, China and climate change.

Stop complaining about the oil decline and invest in sustainable energy stocks. Buy property on the outskirts of the city and save the change for your investments. Read books instead of watching TV. Listen to audios on self development instead of music all the time. Learn a language (Mandarin?) on your commute. Learn some practical skills. Take some evening classes.

And then turn this knowledge into your own wealth.

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