The Goal Kicker – April 2010 Edition

Welcome to this month’s edition of “The Goal Kicker” – the monthly ezine produced by achieve-goal-setting-success.com - dedicated to helping you achieve your goals by providing goal setting related articles and reviews of the latest goal setting products available.

Over the last few months, many of you have asked us to provide more tips and advice on how to achieve your financial goals. It’s a big topic – and also one that is close to everyone’s hearts because, while money doesn’t buy happiness, financial goals are often linked to being able to achieve other personal goals such as recreation and lifestyle, and family goals such as providing the best education for your children.

In this edition, we’ve included the basics of financial goal setting and some of the practical steps you can take to achieve them, including:

• Understanding the basics of personal finance – it’s not that hard!
• Budgeting and making the most of what you’ve got.
• Understand how to create more wealth for you, your family and your retirement.
• Making money by trading in the foreign exchange.

Understanding the Basic Principles of Finance

The good news though is that the maths and principles of finance are easy – MONEY IN less MONEY OUT equals cash flow, and the aim is to keep a positive cash flow.

Of course, there are many factors that influence the ‘money in’ and ‘money out’ parts of this equation, and you need to understand some basic principles of finance and HOW to deal with money, because if you UNDERSTAND money you are better able to MANAGE your money.

So:

• Understand that a certain amount of money is necessary – too little will cause stress, as will the endless pursuit of wealth. Money can’t buy happiness, but it is the currency for living the lifestyle you desire.
• Know how much money you REALLY need. The endless pursuit of more money for no reason will ultimately end in failure and your unhappiness. Set short and long term financial goals and prepare a plan (and a budget) to get you there.
• Understand that financial management is just a skill – it’s not hard and there are no magic tricks. Keep all your finance records in an organised file and maintain a healthy awareness of your finances – know what you earn and what you owe. You should know exactly where all your money goes!
• Maintain a positive cash flow – you need to earn more money than you spend. And what you don’t spend you need to save or use to reduce your debts. But understand that wealth is more than cash flow – it includes your assets (such as your house if you own it) and your ability to create wealth. But you need a positive cash flow too.
• Understand that you earn interest or dividends on your investments, and you pay interest on your debts – that’s how banks make their money. Debt is not necessarily a bad thing, but you need to avoid bad debt and manage good debt properly.
• Know when to get help with your finances – get help with debt consolidation and ALWAYS seek unbiased financial advice before investing your hard earned cash in anything. Talk to a financial advisor NOW if you haven’t yet thought seriously about how you’re going to fund your retirement.
• Know that tax is important and we all need to pay our fair share – it funds public infrastructure and services that we all use. But you can optimise your tax bill and make sure you don’t pay more than you need to.
• Understand that charity is a good thing, because it makes us appreciate that we really are OK financially – contribute 10% of your net (after tax) income to charity if you can. And remember that contributions to approved charities are tax deductible! If you can’t spare any of your income for charity, then donate your time and become a volunteer!
• Understand that to make money, you need to spend money (and maybe borrow money) – but do this wisely. Avoid bad debt and endeavour to pay off your debts as soon as possible.
• Understand the importance of wealth protection. Get insured - protect what you’ve got from what you don’t know. Protect your health, your income, your business, your life and your assets (your house and your car mainly). And protect yourself against public liability.
• Understand that ALL investments involve a level of risk but some are riskier than others. High return investments are almost ALWAYS high risk, or high input. Know your risk profile.
• Protect yourself from identity theft and fraud. Beware of scams and ‘get rich quick’ schemes. If an investment sounds too good to be true, it is!

Making the most of what you’ve got

And the simple rule of managing a household budget is that you need to earn more money than you spend so you have a positive cash flow. If you don’t and you are spending more money than you have, you will have a negative cash flow and either need to earn MORE money, or spend LESS.

SIMPLE.

The key here is to know exactly how much money you’ve got coming in and where it all goes – so you need to be informed. Only then can you look at HOW you can manage your budget better.

Step 1: Assess your income
The first step in preparing any personal budget is to know how much money you’ve got to start with – your income.

Income is what money comes in the door and could be from your usual job (either as a salary, or a wage), welfare payments, child payments or returns on investments. So what is YOUR weekly income after tax? You can get this from your payslip or by adding up the inputs into your bank account.

Be careful you don't overestimate your income if it includes penalty rates or overtime, in fact you’re better off UNDER-estimating your income for your budget so any penalty rates or overtime become a nice little bonus!

And if you’re preparing a household budget, also include your partner’s income.

Step 2: Determine your Expenses
This is a little harder, but it is important to be as realistic as possible when estimating your expenses. In fact it is better to OVER-estimate your expenses for your budget so you have a nice little bonus if you don’t spend your full budget allocation for a particular expense.

Some expenses are fixed (they more or less the same every week or month, such as insurance premiums), but others such as groceries will vary from week to week depending on what you use. It may be worthwhile going through your credit card and bank statements for the last few months to see exactly where your money is going.

Also, don't forget about the yearly bills such as land tax/ rates and car registration. These are often big bills, but must be allowed for in your spending. To make it easier to tally your expenses, convert all your expenses to a weekly cost. For example, if your yearly car registration bill is $520, divide this by 52 to get $10 per week. By doing this for ALL of your expenses, you will be able to see exactly how much you are spending on average every week.

Are your weekly expenses more than your weekly income? If so, you have a negative cash flow (not good) and really need to cut some costs and BUDGET.

Or are your weekly expenses less than your weekly income? In which case you have a positive cash flow (good thing), but where does all this extra money go?

Step 3: Now set yourself a budget
By budgeting, you can make better use of the money you already get – so you may not need to earn more money after all!

From your weekly income you know how much money you can spend, and from scrutinizing your expenses you should now have an idea of what expenses you can cut and where you can save some money. Use this information to set yourself expenditure targets – and stick to them! You’ll be surprised how quickly your savings start to improve.

And as part of your budget, you need to allow for:

• An allocation for your living expenses – weekly costs and the big bills that come in from time to time, as well as allowances for gifts and a little luxury if you can afford it.
• Debt repayment – pay off debts with the highest interest rates first, and make extra contributions if you can to reduce your debt faster.
• Savings and financial goals – whether you’re just saving for a rainy day or saving towards a specific financial goal, you need to allocate these contributions in your budget.
• Investments and retirement planning – put some money away for the future. One day you WILL retire and need to survive from your savings.

Understanding Wealth Creation

But whatever your idea of creating wealth is, there are some things you need to know first.

You need to know:

• The principles of wealth creation and investment.
• How to make more money – what options there are, including using the internet.
• The role of your career in creating wealth.
• About assets and what to do with them.
• Traditional investments.
• Planning and investing for retirement.

Before embarking on ANY wealth creation strategy, we strongly recommend that you see your accountant or a reputable financial advisor, who can discuss the options that suit you best based on your financial background and history.

Making Money with Forex

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