Is your money mindset holding you back?

Is your money mindset holding you back?

Updated on Budgeting, Education

Does your Money Mindset have your back? Or… Is it holding you back?   If you’ve never really thought about it, you’d be forgiven. When it comes to our financial success, we tend to focus on things like income, investments, and expenses. It makes sense to put our financial position down to how much we earn or spend, or the performance of our investments. But what about the role of our Money Mindset?  What is a Money Mindset? A money mindset is your set of beliefs and attitudes about money. It shapes how you make financial decisions, how you perceive wealth, and how you react to financial challenges. Understanding your money mindset is important because it can either support you in achieving financial success, or hold you back from it.  There are various types of money mindsets, but they often fall into two broad categories:  Abundance Mindset vs. Scarcity Mindset Abundance Mindset: An abundance mindset is the belief that ample opportunities exist to earn, grow, and enjoy wealth. People with this mindset see the world as full of potential and possibilities. They tend to be optimistic about their financial future and are willing to take calculated risks.  Scarcity Mindset: A scarcity mindset, on the other hand, is the belief that resources are limited and difficult to obtain. People with this mindset often focus on what they lack rather than what they have. This can lead to fear, anxiety, and a reluctance to take risks.  Fixed Mindset vs. Growth Mindset Fixed Mindset: A fixed mindset in a financial context means believing that your financial abilities and knowledge are static and unchangeable. People with a fixed mindset might think they are either “good” or “bad” with money and that this cannot be altered. Growth Mindset: A growth mindset is the belief that financial skills and knowledge can be developed through effort and learning. Individuals with a growth mindset see financial challenges as opportunities to improve and grow.  Money Mindsets in Everyday Life Having explored the concepts of abundance vs. scarcity and fixed vs. growth mindsets, let’s look at how these money mindsets might manifest in everyday life: Kylie believes there are many ways to grow her wealth. She takes an online investing course, consults a financial adviser, and starts a diversified investment portfolio. She views market fluctuations as learning experiences and opportunities for growth. Jacob believes he will never be good with money and that financial success is reserved for others. He avoids investing due to fear of losing money and prefers to keep his savings in a low-interest account. He often feels stressed about his financial future and is reluctant to seek advice. Taylor is optimistic about her financial future and believes in plenty of opportunities. However, she thinks her financial skills are unchangeable. She sticks to familiar, low-risk investments and dismisses new strategies, missing out on potentially higher returns. Oscar grew up believing money is scarce and financial security is hard to achieve. Despite this, he commits to improving his financial situation through education. He starts with low-risk investments to build confidence and gradually diversifies his portfolio, overcoming his fears over time. Strategies to shift a negative Money Mindset If you’ve identified that your money mindset might be holding you back, don’t worry! The following strategies can be used to help you to shift your mindset to a more positive one:  Your money mindset plays a crucial role in your financial success… it should have your back, not hold you back! By identifying and overcoming negative financial beliefs, you can create a healthier relationship with money and achieve your financial goals. Take the first step today by reflecting on your financial mindset and seeking professional advice to guide you on your journey. The information provided in this article is general in nature only and does not constitute personal financial advice.  

Avoid passing bad money habits on to your children

Avoid passing bad money habits on to your children

Updated on Budgeting, Education

Generally speaking, we Australians are pretty financially savvy, that is, we understand the how and why of effectively managing our money. Unfortunately, that doesn’t mean we’re actually putting that know-how into practise and making astute financial decisions.   According to the Australian Bureau of Statistics (ABS), the average Australian household debt has risen by 7.3% (over $260,000) in the 2021-2022 financial year. As of July 2023, Australians were paying $18.4 billion – that’s billion with a B – in credit card interest every year.  As parents, we’re role models, integral to shaping our children’s values and beliefs. Like little sponges, they absorb our behavioural patterns, pick up on signals and mimic our actions.  For us to replace bad money habits with good ones may be a big ask, particularly as they’ve evolved over the course of our lives. But the trouble is that kids are a cluey bunch, eager to learn from us, and not surprisingly, our money habits are among many characteristics we unintentionally pass onto them.  Of course, we all want the best for our children. But in this busy world, we’re pulled in so many directions at once that sometimes it’s all we can do to juggle our daily work, family, school and social lives. Who has time to consider the inadvertent messages we could be giving out?   Yet, when it comes to ensuring our children are equipped to build themselves a secure financial future, it’s worth the effort, right?   The table below shows a list of good and bad money habits that are commonly passed onto children.  Poor money habits  Good money habits Impulse buying We regularly make spur-of-the-moment purchases. Additionally, we tend to indulge our kids – we want them to be happy.  Impulsive or indulgent behaviour can inadvertently foster in children an attitude of instant gratification, normalising impulse buying.  Lead by example As a family, we discuss the difference between needs and wants. When we see something we want, we walk away and give ourselves a cooling off period to determine whether we genuinely need the item. We encourage our kids to wait for things they want, and suggest that delaying the purchase can lead to smarter choices and savings. When shopping we compare prices and identify items that offer better value.   Not budgeting  We don’t have a household budget, preferring to manage our money as it comes in. But even though we know what bills are due we often seem to have trouble getting the money together. Sometimes we run out of money before pay day.   Not budgeting can engender a culture of living pay-to-pay and children can grow up not understanding the importance of tracking spending and living within their means.  Family budgeting  We involve our children in creating and monitoring our household budget. We discuss decisions around allocating money for different purposes so that when our kids receive pocket money or gift money, they can practise budgeting by setting amounts aside for saving, spending, etc.  Credit card misuse  We rarely use cash; using a card is fast and convenient. Although occasionally we max the card out we make sure we pay off as much as we can every month. Some months, depending on expenses, we can’t manage the full balance. Cards, while useful, can cause children to perceive them as a source of unlimited money.  No free money  We have taught our children how to read our card statements. They know how to check purchases against receipts and understand how interest adds to the card balance. We involve our kids in making card payments and explain the consequences of not paying the full balance each month.  Not saving  We’ve never set up a structured savings plan so have little-to-no savings. We’d like to take a holiday or have a nestegg for emergencies but there never seems to be any money left over at the end of the pay cycle. Children seeing parents struggling to save may not learn the value of saving or setting goals.  Set goals, save We stick to our budget and always try to allocate a portion of income towards savings, and encourage our kids to do the same. We get them to set short-term goals like saving for a new toy or book, and long-term goals like an outing or a larger purchase, and then help them create a savings plan to achieve their goals. We make it fun by using a visual chart to track progress and when they reach their goal, we celebrate the achievement, making a special occasion out of buying the item or attending the event.  Failing to discuss  We never talk about money with our kids. They have a limited understanding of how money is earned and how we use it. Failing to discuss how money is earned can lead to children not grasping the concept of money as a finite resource, and appreciating its value. Widespread use of credit cards or taking cash from ATMs suggests that money is readily accessible.   Have the conversation  We have always been open with our kids about the household finances. We want them to understand that money needs to be earned, and if not used wisely and allocated appropriately, it can run out. We have also provided the opportunity for them to earn pocket money for doing age-appropriate household chores.  If we can make time to examine the way we view and use money, and replace poor habits with good ones, we can positively influence our kids by:  As parents we have a limited opportunity to equip our children with tools like, knowledge, confidence and forward planning skills – before they decide they know more than us!   So, by modelling good financial behaviour ourselves, we can instil the habits that will set our children up for a life of financial freedom.   I don’t know about you, but if I can achieve that, I’ll know that I’ve done what I can to enable the next generation to succeed and thrive.   What a legacy!  The information provided in this article is general in nature only…

Financial Education for a Successful Future 

Financial Education for a Successful Future 

Updated on Education, Finance

Think back to when you got your first job and that sweet taste of financial independence. Regardless of what age you started working, it’s unlikely you knew how to manage that first paycheck.  Let’s face it; our world isn’t particularly adept at teaching financial literacy to the younger generation.   I don’t know about you, but when I was in school, we learned trigonometry (SOH-CAH-TOA is still permanently etched in my brain), which has been helpful for all the times I’ve needed to solve the missing sides and angles of a right triangle, but not so much for managing my financial affairs as an adult.    It’s time we change that narrative by sparking open, honest discussions about money and giving our young adults the financial tools they need to flourish.  The Need for Open Discussions About Finance  Money talk has often been cloaked in secrecy, even considered taboo in some households. This needs to change.   Parents can play an integral role in setting their children up for financial success by fostering an environment where money conversations flow freely. Open dialogue demystifies the world of finance and empowers young adults to make informed decisions.  Using Positive Language  As we foster an environment of open discussions around money, it’s important to remember that the language we use significantly impacts the subconscious beliefs and attitudes our children will develop.    Just as negativity can breed fear and anxiety, positive language can cultivate a healthy relationship with money.   Instead of saying, “We can’t afford this,” try saying, “Let’s work out how we can save for this.” This small shift in dialogue encourages a mindset of abundance and possibility rather than scarcity. It helps young adults view financial challenges as opportunities for growth, aiding them in building a positive and proactive belief system around money.  Financial Goal Setting  Goals give us direction and purpose.   Whether saving for a first car, paying off a student loan, or investing in their first property, encouraging young adults to set and work towards financial goals from an early age is a great way to help them build discipline and a future focussed mindset.  It’s equally important to celebrate milestones, no matter how small. This positive reinforcement nurtures a sense of achievement and motivation, propelling them further on their financial journey. The Essentials of Budgeting  Ever heard of the saying, “Failing to plan is planning to fail”?   That’s precisely why budgeting is so important. Budgeting is not about limiting yourself; it’s about making your money work for you.   The 50/30/20 rule, where 50% of your income goes towards needs, 30% towards wants, and 20% towards savings, is a great place to start for young adults because it’s simple and gets them in the habit of saving from an early age.    Understanding and Practicing Responsible Spending  Managing your money doesn’t mean you have to miss out on the things you enjoy. It’s all about responsible spending.   Need versus want is a timeless debate, but helping young adults to understand the difference is key.   Impulse spending is something that can often sabotage budgeting and saving efforts. A great tip for young adults to help them avoid impulse spending is to implement a 48-hour waiting period for non-essential spending. This allows time to consider whether the purchase is within their budget and aligned with their financial goals.    We’re not just equipping our young adults with financial knowledge but empowering them to build a successful financial future.   So, let’s keep the money conversations flowing and start helping our young adults build habits that will set them up for financial success. The narrative changes today!     The information provided in this article is general in nature only and does not constitute personal financial advice.   

Pay attention to super in your 30s

Pay attention to super in your 30s

Updated on Education, Superannuation

If you are in your 30s, chances are life revolves around children and a mortgage – not super. And as much as we love our kids, the fact is they cost quite a lot. As for the mortgage, this is the age during which repayments are generally at their highest, relative to income. And on top of that, one parent is often not working, or working only part time. Even if children aren’t a factor, career building is paramount during this decade. Don’t be alarmed, but by the time a 35-year-old couple today reaches retirement age in 32 years’ time, the effects of inflation could mean that they will need an income of about $150,000 per year to enjoy a ‘comfortable’ retirement. To support that level of income for up to 30 years in retirement they will want to have built a combined nest egg of about $2.7 million! If you are on a 30% or higher marginal tax rate, willing to stash some cash for the long term, and would like to reduce your tax bill, then consider making salary sacrifice (pre-tax) contributions to super. For most people super contributions and earnings are taxed at 15%, so savings will grow faster in super than outside it. Even if you can’t make additional contributions right now there is one thing you can do to help achieve a comfortable retirement: ensure your super is invested in an appropriate portfolio. With decades to go until retirement, a portfolio with a higher proportion of shares, property and other growth assets is likely to out-perform one that is dominated by cash and fixed interest investments. But be mindful: the higher the return, the higher the associated risk. For any young family, financial protection is crucial. The loss of or disablement of either parent would be disastrous. In most cases both parents should be covered by life and disability insurance. If this insurance is taken out through your superannuation fund the premiums are paid out of your accumulated super balance. While this means that your ultimate retirement benefit will be a bit less than if you took out insurance directly, it doesn’t impact on the current family budget. However, don’t just accept the amount of cover that many funds automatically provide. It may not be adequate for your needs. Whether it’s super, insurance, establishing investments or building your career, there’s a lot to think about when you’re thirty-something. It’s an ideal age to start some serious financial planning, so contact us today about putting a plan into place.   The information provided in this article is general in nature only and does not constitute personal financial advice.

Super in your 20s: Boring? Doesn’t have to be!

Super in your 20s: Boring? Doesn’t have to be!

Updated on Education, Superannuation

Superannuation is for the oldies, right? In some ways that’s true, but even in your twenties there are good reasons to take a bit more interest in your super. The average 25-year-old has around $10,000 in super, but the decisions you make now, even with relatively small sums of money, could earn you hundreds of thousands of extra dollars over your working life. Are you getting any? Earn more than $450 in any given month? Then every three months your employer should be paying 9.5% of that into your super fund. Usually you can choose your fund; if you don’t, it gets paid into a super fund of your employer’s choice. If you don’t know if your super is being paid, or the fund it’s being paid into, ask your employer. If you think you’re missing out, search ‘unpaid super’ on the tax office website (ato.gov.au) to see what you can do. This is your money. Where have you got it? Had more than one job? If you have a lot of little super accounts the money can disappear in a puff of fees and insurance premiums. Simple fix – combine your super into one account. Is it working for YOU? Your money is going to be stuck in super for a long time, so you want it to be working hard for you. Most funds offer a range of investment choices and some will do better than others. What do you want? Buying a new car. Travelling, Having fun. Let’s face it, there are lots more exciting things to do with your money than sticking it into super. The choice is yours but think about this: If Mum and Dad retired this year, they would need a minimum of around $61,909 per year to enjoy themselves. If that doesn’t sound like much now, by the time YOU retire inflation could have pushed that annual amount to around $214,248. That means you will need to have at least $3.71 million in savings! Sure you’ve got 40-plus years but that’s still a lot of money to save up! It can be done if you start early enough – and you don’t need to miss out on enjoying life now. Starting early and adding a bit extra when you can makes a big difference. Let’s work on another 40 years before you can retire. If you start now by making an extra post-tax contribution of just 1% of your annual income to super, ($350 from a $35,000 salary – and the government could add to that with a co-contribution) at an 8% investment return could add an extra $149,000 to your retirement fund. If you wait 20 years before starting to make that extra contribution, you’ll only get a boost of $49,000. $100,000 less! Continuing this small extra contribution as your salary increases will turbo boost your super fund balance. Imagine your retirement party?! So, still find super boring? That’s okay; you’re not alone. But instead of finding the time to organise all this yourself, contact us today and we will review your current super, any insurance required, the investment choices and prepare a strategy to get your super into shape – then you can get back to enjoying life!   The information provided in this article is general in nature only and does not constitute personal financial advice.

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