aquarius

21 September 2017Last updated
Search

Career

An honest look at the numbers

Spick and span or Spaghetti Junction? Part of being a grown-up is being able to balance the books but for some of us, it’s a task we’d rather not tackle. Finance guru Rasheda Khatun tells us why it’s always a good idea and it’s never as bad as you think

By Catherine Harper
6 Jun 2016 | 12:02 pm
  • Source:Getty Images Image 1 of 2
  • Source:Getty Images Image 2 of 2

Most of us at some point are guilty of ostrich-like behaviour when it comes to finances, especially if we’ve overindulged in the sales. But burying our heads in the sand won’t get us anywhere in the long run as we need to face up to it and move forward.

Keeping up with the Joneses is very prevalent here, whether it’s about a particular car, things for the children, the latest ‘in’ school or must-do brunch every week. Not many of us have this idea when we first arrive, but it’s not long before most of us are doing it at some level! For lots of us, salaries are higher here and, of course, with no tax, disposable income can be higher so you may be able to afford a lavish lifestyle. But consider this; at what cost are you affording it? Take a step back and look at what’s important to your family. Ask yourself if driving a fancy car is really worth more than having a nest egg to put your child through university. Most of us earn more here than we would do at home but, thanks to spending habits, we’re still unable to save what we would at home.

Ideally, you should start thinking about organising your finances as soon as you start earning a salary. If you get into the habit of putting away 10 per cent of your income, regardless of the amount you earn, you’ll find yourself ahead. However, in reality, we wait until we’ve got an established income and career before we even start thinking about savings, and many of us only get around to it when we have children. Some never get around to it!

Losing 10 years of saving 10 per cent of your income will make a huge difference in your wealth pot and that extra 10 years of saving as little as 10 per cent will make a massive positive difference. It’s never too late to start, and you’re far better off maximising the years you have left than waiting yet another month to get going. Remember, there’ll always be something to stop you – something you want to buy, something you want to do, somewhere else for the cash to go – so make saving a spending habit rather than a tiresome ‘must-do’. Start saving with something, even if it’s only a tiny something.

When it comes to finances, the old adage is valid: the truth will set you free. You simply cannot move forward to where you want to be if you don’t know where you are and what’s going on. It’s so important to just face it and the great thing is, as soon as you do it, it’s never as bad as it seems. It’s always something you can tackle. Knowing where you are now will help you work out a step-by-step strategy to move you to where you want to be. But don’t be too hard on yourself. Avoid criticism or judgement; what’s happened has happened, and now it’s time to get it right.

You need to be honest about how much you spend weekly and monthly. It’s crucial, as this is where most debt stems from. It’s the grocery shopping, little things for the children, the holidays, the never-ending birthdays and events. But it is what it is, and some aspects won’t (or can’t) change. List your fixed expenses and your variables, and come face to face with what you’re spending. And be realistic; there’s no point understating it, because then you’ll budget less and overspend. Ask yourself, “If I continue spending like this, will I have enough money for a house/university/retirement/a business?” Most importantly, consider saving as your first expense.

If your finances are in a complete pickle and it all just seems too much to sort out, remember there are a few basics you can start with to begin seeing positive change. Firstly, either as a couple of by yourself if it’s only you, make the decision that sorting out your finances is a top priority. As a couple you need to be on the same page, and as an individual you need to be fully committed to your personal financial revolution. Then, monitor what you’re spending for two months. This will show you your true outgoings and give you an accurate picture of where your cash is going. Then, if you have debt. look at ways of consolidating to make it more manageable. If it’s feasible, look at paying debts off one at a time (a strategy called the snowball effect) to put yourself back in credit.

“Saving is not as daunting as I thought”

Aquarius editor Louisa Kiernander went into her session with Rasheda thinking she wasn’t ready to start saving…

“I met Rasheda for a consultation over a coffee... We’ve interviewed her for the magazine before, so I know her approach is realistic and that she gives sound advice.

“However, I really didn’t know what I would be able to talk to her about as I didn’t feel I was in a position to be able to start saving. Between ever-increasing everyday living costs, rising rental prices and raising kids, every penny seems to have a place to go each month.

“Rasheda said we weren’t going to talk about saving and that, instead, we would be talking about how well I understand my current finances and where I want them to be.

“As it happens, this year I have made a concerted effort to get to grips with my money. I started using a great budgeting app and have been diligently tapping in every expenditure. So I know where I am at.

Where I want to be, however, is a different matter... Savings? Yes, they would be great. But when all my money is accounted for, how can I?

Rasheda said, ‘Don’t think about it as savings – think about it as paying your future bills. Whether it’s for a property, or your kids’ schooling, or your retirement... it’s money that will make your future brighter’.

“After a good, long conversation about many things, not just finances, I left the café feeling like it wasn’t such a daunting, or impossible, prospect and that the time to start is now.

“We’ll see over the next few months if I put my money where my mouth is and start prioritising my financial future, rather than leaving it in last place on the list of priorities each month. I really hope I do.”

‘There’s more to think about than saving”

Aquarius reader Kaye Lui thought her affairs were in order, but Rasheda showed her the bigger financial picture

“Recently I have made an effort to shed heavy financial commitments – I sold my car and moved into a much more affordable place. I even downgraded my phone contract.
I did this in anticipation of 2016 being a bad year financially.

On top of that, I wanted to start thinking about saving for the future.

“When I met Rasheda, she highlighted areas that I hadn’t even thought of, such as having an income protection policy, so that in the event that I fall sick or am out of work, I can still collect an income. “We also talked about having an emergency fund, and I now realise that this is really important too. On top of that Rasheda gave me advice on how to create the property portfolio I want to work towards, and she helped me put into perspective how much pension I would need for the ideal future landscape.

“I have put this off for years, but it does need to be addressed and talking to Rasheda made it seem much more surmountable. The session gave me a bird’s-eye view of my finances – present and future – and provided me with ideas for securing my future.

“Additionally, I recently took a loan that I am now sitting on as I want to wait for the result of the Brexit referendum in the UK before I do anything. Rasheda pointed out that, as this is a high-interest loan, it may need to be reinvested in the short term to ensure that I get the best out of the amount – this is a plan I am working on now.

“Going forward, I am working towards activating all of the plans we discussed. I have some ‘homework’ to do before my next meeting with Rasheda and am looking forward to talking to her about the next steps.”

By Catherine Harper

By Catherine Harper