{"id":130864,"date":"2023-10-09T12:30:00","date_gmt":"2023-10-09T01:30:00","guid":{"rendered":"https:\/\/propertyupdate.com.au\/?p=130864"},"modified":"2023-10-09T12:15:56","modified_gmt":"2023-10-09T01:15:56","slug":"how-to-become-rich-by-using-better-money-habits","status":"publish","type":"post","link":"https:\/\/propertyupdate.com.au\/how-to-become-rich-by-using-better-money-habits\/","title":{"rendered":"All you need to know about becoming rich by better managing your personal finances"},"content":{"rendered":"

Taking control of your personal finances and getting rich is simple, but it's not easy.<\/p>\n

And that's not a play on words.<\/p>\n

It's simple if you know how, but not easy because of our bad money habits.<\/p>\n

New York Times\u00a0columnist,\u00a0author, and financial planner\u00a0Carl Richards<\/a> regularly had his articles published on Property Update<\/a>.<\/p>\n

I asked him for permission to publish them after reading his book \u201cThe One-Page Financial Plan: A Simple Way to Be Smart About Your Money<\/a>,\u201d\u00a0 and saw how he boils down his wisdom in table napkin sketches which have made him famous.<\/p>\n

Here are a few\u00a0insightful lessons and sketches from his book and from his many blogs.<\/p>\n

To become rich you'll need a financial plan - but it can be as short and as simple as 1 page<\/span><\/h2>\n

We're\u00a0living longer.<\/p>\n

That means there\u2019s a lot more life to enjoy.<\/p>\n

How prepared are you?<\/p>\n

Do you have a plan to become rich?<\/p>\n

There are a number of reasons why we are hesitant to spend time planning for our financial future, but the biggest one is that we have confused the process of planning with the end product, a plan.<\/p>\n

Richards believes Financial Plans are worthless, because they are based on a heap of assumptions that are likely to be wrong.<\/p>\n

\"personal<\/p>\n

 <\/p>\n

But the process of planning is vital.<\/strong><\/p>\n

Once you have a general idea of your own destination, the focus should shift to what you can do over the short term to get there.<\/p>\n

Focus on the next three years.<\/p>\n

Thinking in shorter time frames inspires us to act instead of worrying about all of the things that are out of our control.<\/p>\n

So set a course quickly realise that you will be wrong, and plan on making course corrections often
\n\"traditional
\nBy the way...<\/p>\n

Doing nothing isn\u2019t a financial plan<\/span><\/h2>\n

\"I
\nRichards explains that uncertainty has a way of paralysing even the smartest people.<\/p>\n

If we don\u2019t know exactly what we\u2019re doing or when we\u2019re doing it, we tell ourselves we\u2019re better off waiting until we do know.<\/p>\n

The problem with this logic is that we\u2019ll never know everything.<\/p>\n

Life will happen, plans will change, and the unexpected will occur.<\/p>\n

Richards recommends that instead of beating ourselves up for not being able to predict the future, we should commit to the process of guessing.<\/p>\n

And over time, we'll adapt as needed and keep moving towards a future that looks more (or less) like the one we envisioned.<\/p>\n

But first...<\/p>\n

You need to understand your \"why\"<\/span><\/h2>\n

\"objectives<\/p>\n

You really need to understand why money is important to you.<\/p>\n

If you don\u2019t know the objective of your personal financial planning, this question will help reveal your values and help you\u00a0gain the clarity you need to that will help you delay gratification and develop financial discipline, because...<\/p>\n

Saving without a purpose isn't going to work<\/span><\/h2>\n

 <\/p>\n

\"saving
\n<\/a>According to Richards, your one-page plan reminds you of 'why' you're saving money, helps you weigh the different options, and makes it easier to identify the best path for getting you where you want to go financially and develop essential financial skills.<\/p>\n

Your starting point is your current net worth<\/span><\/h2>\n

When it comes to money, what we don\u2019t know can hurt us.<\/p>\n

Richards has\u00a0seen this time and again when people tell\u00a0him they want to get serious about their finances.<\/p>\n

They want to invest.<\/p>\n

They want to take control of the financial future.<\/p>\n

But when asked about their current financial position, they don't really know what's going on.<\/p>\n

\"current<\/p>\n

 <\/p>\n

\n
\n
\n
\n
\n

So where do you stand financially today?<\/strong><\/p>\n

Start by creating a money management worksheet.<\/p>\n

Garb a piece of paper draw a line down the middle and make a list.<\/p>\n

On the left side, list all your assets<\/strong>: bank accounts, the value of your home, any savings, any property investments, shares, and superannuation.<\/p>\n

On the right side, list all your liabilities<\/strong>: things like your debts - credit card debt, mortgages, education loans, car loans.<\/p>\n

Once you add up all your assets and subtract your liabilities you now know your net worth. That's your starting point.<\/p>\n<\/div>\n

Not knowing these numbers can hurt you.<\/p>\n

This process seems simple enough.<\/p>\n

However, if you keep avoiding or skipping this step, you\u2019ll continue to have a difficult time figuring out where you want to go, let alone how to get there.<\/p>\n<\/div>\n

\"How<\/p>\n

\n

 <\/p>\n

Formulate a budget<\/span><\/h2>\n

 <\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n

\"control<\/p>\n

Yes the dreaded \"B\" word - but when\u00a0you budget,\u00a0you build awareness.<\/p>\n

Awareness\u00a0of where you've spent your money in the past and more importantly how much and where you should spend your money in the future.<\/p>\n

Richards says that most of our problems do not come down to lack of income, it's due to poor money habits.<\/p>\n

Spending mindlessly, without even thinking about it, has become a national bad habit.<\/p>\n

And we all know how hard it is to break habits.\u00a0So we make the same mistakes over and over again.<\/p>\n

So, it\u2019s important to control your budget.<\/p>\n

There is a simple rule you must follow...<\/p>\n

Spend less than you earn and save the difference<\/span><\/h2>\n

 <\/p>\n

\"spend<\/p>\n

Richards recommends you should start\u00a0by saving as much as you reasonably can.<\/p>\n

Your definition of reasonable may not match your neighbour's and that's O.K.<\/p>\n

Instead of stressing about a random percentage, focus on what you can save given your commitments.<\/p>\n

What's reasonable in your thirties probably wasn't reasonable in your twenties.<\/p>\n

It's never too late to get smart with your money<\/span><\/h2>\n

\"essential<\/p>\n

According to Richards, it's never too late to begin setting up your finances and start saving or investing.<\/p>\n

He suggests you should stop dwelling on what you didn't do in the past and focus on what you can do today with your current salary and other incomes.<\/p>\n

And stop waiting for perfect.<\/p>\n

I've said it before, but it's so important I'll repeat it...<\/p>\n

Start by saving as much as you reasonably can. Spend less than you earn, and don't lose money.<\/p>\n

You'll be better off tomorrow than you are today, and even better the day after that.<\/p>\n

However...<\/p>\n

Investing is NOT the same as speculating<\/span><\/h2>\n
\n

Richards believes that when people talk about investing, they often confuse it with speculating or trading.<\/p>\n

This confusion isn't surprising.<\/p>\n

The financial media has convinced us that investing success depends on predicting what the markets will do next.<\/p>\n

But predicting the markets<\/a> is easier said than done.<\/p>\n

As a result, we end up frustrated, even scared, by what we 'think' is investing.<\/p>\n

In reality, investing is about what we want to happen in the long term, not what happens day to day. Investors get to ignore the market's daily or even weekly performance.<\/p>\n

Speculators, however, can't help but lay awake at night and worry about what will happen tomorrow.<\/p>\n

It's much the same as what I see with property investors - they try and find the next \"hot spot\".<\/p>\n

They look for what's going to work now<\/em> rather than for what's always worked<\/em> - over the long term.<\/p>\n

By the way...I've explained why the rich keep getting richer and how you can become one of them in my best-selling book:\u00a0\u00a0Michael Yardney's Guide to Investing.<\/strong> Why not\u00a0check it out here<\/a> and get your own copy?<\/p>\n<\/div>\n

\"difference<\/p>\n

Greed and fear kill Investment returns<\/span><\/h2>\n

Richards believes that most of us make the same mistake with our money over and over again.<\/p>\n

We buy high out of greed and sell low out of fear, despite knowing on an intellectual level that it is a very bad idea.<\/p>\n

I know that it's easy to say \"I'll be greedy when others are fearful and fearful when others are greedy\", but it's really hard to do.<\/p>\n

 <\/p>\n

\"Fear<\/p>\n

That's human nature.<\/p>\n

Why you need a financial adviser<\/span><\/h2>\n

It's their job to stand between you and your big mistake.<\/p>\n

\"financial<\/p>\n

Richards says\u00a0our odds of avoiding the<\/strong> Big Mistakes<\/strong>\u00a0caused by the human emotions of fear and greed go up dramatically when we have an adviser standing between us and a decision we'll regret.<\/p>\n

It's your financial advisor's job<\/a> to protect you from making mistakes.<\/p>\n

They should get you off the emotional roller coaster and remind\u00a0you of all the reasons why\u00a0shouldn't buy high and sell low.<\/p>\n

Beware of fake experts<\/span><\/h2>\n

There are two types of experts in the world: real experts, and fake ones.<\/p>\n