“You don’t become overweight by over-eating once, you don’t live pay-check by pay-check by overspending once, you don’t have bad credit by missing a payment once, you don’t have relationship issues by not communicating once, your actions become habits and your habits become your reality.”

So, let’s cover the misconceptions and get into some good habits:

Common Misconceptions:

1. If only I earned more money, then I would be able to do the things that I wanted to do. Now this to me is the biggest fundamental problem people have especially in their money mindset.

The reason I say that is let’s just use popcorn as an example since Melanie and I really enjoy eating popcorn when we are watching our Korean dramas. If we have a small box of popcorn and both of us are just eating along, eating along while watching an episode of our favourite series before we know it, it is suddenly done. If you gave us a large box of popcorn it wouldn’t be any different, we would just continue to eat and eat and before you know it, it would suddenly be done.

So, my point is, it makes no difference if you have a small amount of popcorn or a larger amount of popcorn. The real solution is limiting the amount that you could actually consume, not by creating more and more popcorn. As I mentioned earning more money is not the main problem, rather do you have the right budgeting strategies, and are you equipped to tackle your own personal finances correctly.

2. Budgets don’t work for me, I’m always over them anyway.

The first thing we need to understand about a budget is that it has five basic parts to it, or it should have five basic parts.

1-Paying yourself first

2-Your future

3-Your fixed costs

4-Your variable costs

5-Emergency Funds

So, if your budget is always over then I can almost guarantee you that your problem is going to be in your variable cost management because variable costs by nature are not fixed. Therefore, you might not have limits on these costs resulting in unnecessary overspending.

The second obvious problem is the amount of debt that you incur (which we will be tackling in a later blog article). Just keep in mind that if you have a lot of debt, your fixed cost goes up due to the interest payments. So in order to overcome a budget that doesn’t work, you need to structure it in a way that prioritises things that are important to you and not by limiting what you cannot actually do.

3. I don’t have the time to worry about my personal finance, I have other things to do.

To be honest with you, there is always a better time to do things and that is a problem because time doesn’t just appear. We need to make time for the things that we want to do. So, the real question is, are you ready to move to the next level and if you are, then this is the time when you need to lean in and own it. “I’m going to make time, I’m going to make it happen” because we all know what is going to happen if you don’t, you are going to end up in that never-ending spiral with personal finance problems that are going to be around for many years to come. That to me is something worth making time for.

4. I can start to save money later.

Yes, well you could start saving money later but the real question is are you really going to. Life happens (you purchase gifts, your car needs repairs, appliances pack up, you need to buy things for the children for school, etc.) all these things come up the whole time. Unfortunately, many people put this off for years, and nearing their retirement age they realise they have saved and invested very little. The earlier you start saving and investing, the earlier your three helpful finance friends can assist you on your journey.

Your first friend is compound interest, imagine if you started saving and investing when you were a teenager, you would have forty to fifty years of compound interest before you retire. As an example, if you started with an initial investment of $5000 and contributed $150 a month at a rate of return of 4% you would have accumulated $323,226 over the 50 years. It is going to be a near-impossible task to catch up to that grand total if you only had a 10-year time frame. The reason being is you would have to invest $2,145 per month for the 10 year period which would be 14 times the original $150 per month. True wealth is built over time, so rather use time, sit back and watch compound interest work its magic.

If you are not into the interest game, you might be interested in your second friend, property. Normally one can expect your property to double within 9-10 years. Again the earlier you get into the property game, the earlier you can build up equity in your investment properties. Later this can be leveraged and used to acquire more properties which can earn you rental income and capital growth.

The third friend is the stock market. Do not be scared of this industry either. An investor needs to be a long-term investor and not a short-term speculator. A true investment is one that guarantees ones principal while providing an adequate return. Equity has a good history of normally beating inflation in the long run, grows in capital and you have a dividend reward for taking the risk of being a shareholder. You can expect good shares to pay out a consistent dividend and double in value in 6-7 years.

This is why we recommend that saving and investing is done over time rather than trying to catch up in the last 5 years before your retirement.

5. I don’t need to worry about my current debt levels

There are many different types of debt. Mainly there is short term debt and long term debt, there is good debt and there is bad debt. The real question you need to ask yourself is, is the debt burdening your fixed costs and not allowing you to do what you want, when you want, and how you want. If that is the case then you went with short-term debt and you probably have gone with swiping your credit card, going on a shopping spree, using it for a holiday which means you have used it for expenses and not using it for your advantage.

You see there is good debt, the type that reduces your tax for example I can borrow someone’s money to purchase an investment property for my property portfolio. That is good debt as it is buying an asset rather than paying an expense that will probably reoccur over and over again.

While I’m not saying do not buy those expensive things or go on those luxurious holidays, I’m saying rather have your assets producing cash flow so that you can do what you want, when you want, and how you want.

If you need help developing your Money Mindset, join us in our unique and exclusive membership for the ambitious entrepreneurs and modern businesses, the Headquarters of M&J.

Can I pour you a glass of wine?