Fancy $400,000 the day you retire? OPINION
REMEMBER the Kellogg's Cornflakes campaign, "Sometimes the simple things in life are the best"?
Well, when it comes to growing your wealth, the simplest financial planning tool is often the most effective: A budget.
A big part of the reason financial planners exist is not because we have some secret financial sauce which nobody else knows about, but because, a little like working out and eating a balanced diet, most people lack the motivation and time to work their money as hard as it needs to be worked to achieve their goals.
For most working Australians, the twin dreams of owning your own home and retiring comfortably is attainable with a relatively modest amount of financial organisation and sacrifice. However, it does require spending a few hours a month tediously establishing and living within a household budget to identify savings for investment. Unfortunately, this is not what many people want to do on a Friday night or Sunday morning.
If I told you I will pay you $400,000 the day you retire if you give me two hours of your time next week and one hour a month until you retire, would you take the deal? Who wouldn't? Well that is the return many people would get from spending this amount of time running a household budget and investing the savings (assuming, in this example, you are 35 years old, can find around $250 a week in savings and are a "balanced" investor).
Unfortunately, until recently, as a financial planner there was little I could do for clients save for provide them with a spreadsheet and hound them to fill it in by going over every transaction in their bank statements, then manually calculating whether they had managed to keep to their budget each month. Basically, it was an excellent cure for insomnia.
However, Yellow Brick Road, together with financial software firm Rubik have developed a cashflow management app which draws live data from your bank accounts, organises your transactions into budget categories (that is, discretionary and non-discretionary) and tells you in real time whether you are on track with your budget or not. You can set targets and goals, such as paying so much off your mortgage or saving for retirement. Called YBR Money Manager, it will be rolled out nationally in the next few months.
Email me at email@example.com if you are interested in participating in the pilot (terms and conditions apply).
This information is general in nature and readers should seek professional advice specific to their circumstances.