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Starting financial bootcamp

You can’t start a business until you’ve got your personal finances figured out, writes financial personal trainer Hannah McQueen 

For more financial features on rent vs buy, saving big and more, click here. 

The idea of losing weight is fairly simple: eat less than you consume. The basic idea behind getting ahead financially sounds equally easy; to spend less than you earn. But what sounds simple we can often find impossibly difficult in practice. Which is why most Kiwis struggle to live within their means, spend more than they earn, with high amounts of debt and, sometimes, relationship breakdowns due to financial stress. Others have fewer obstacles, but despite earning good incomes, somehow still aren’t making the progress they might. 

When you’re serious about getting your bank balance in the black you need to start by hopping on your monetary scales. You need to determine your financial BMI as well as identifying any of the wider issues effecting your fiscal health. To be blunt, the process of getting to know the ‘financial you’ can be confronting, one you might feel scared to start, but as I tell my clients, if we’re going to get ahead quickly, we need to understand where you are at now, what you are up against, what tools you have in your arsenal (including some you don’t even realise you have, or you may not be using properly), and finally, what life goals you want to achieve. 

Many financial experts assume you are already in control of your money. But for a lot of us this is simply not the case. To some degree we all have issues around money, and at times we’ll wonder how we can practically work through them. Our attitudes towards money are intrinsically linked to our feelings of self-worth, self-esteem and aspects of our relationships with others. Too often, financial professionals fail to adequately diagnose and discuss. 

Your monetary situation has many layers, and you need to understand the different components to develop a financial plan that will really work. A lot of people shy away from understanding the nitty gritty of their situation because money seems bigger than them – it’s their Goliath. When you’re staring down the barrel of credit card debt, hoping to buy your first home, pay off your mortgage or to secure an income for your retirement, it can feel like you are going up against a powerful opponent. But when you own the fact you are the financial underdog you can use this as the catalyst to sort out your money priorities.

Five simple questions to ask yourself 

1. Are you sinking, floating or flying?

That is, on a day-to-day basis how much cash is left over? Are you going backwards, living beyond your means? Are you unable to repay your credit cards off in full each month and incurring more debt to live? If this sounds like you, then you are sinking. You might wear trendy clothes or even own a tidy home in a nice area, but you’re still sinking. Floating means you are not going backwards, but you’re also not getting ahead particularly fast. You may not be worried about your financial situation, but you are frustrated at the lack of progress. Your savings history is sketchy at best. To fly means you have money left over at the end of the month that is moved into a savings account or used to accelerate mortgage repayments. 

2. Are you a shopper or a saver?

Understanding your money personality is critical to determining a financial plan that’s right for you. Do you like to spend money or do you prefer to watch it grow? 

A shopper usually spends little amounts often, although some shoppers are happy to be quite tight on a day-to-day basis, yet splurge when they find something they love. Men can just as easily be shoppers as women, they just spend money on different things, and in a different way.

3. As your assets go, are you starting out, building up or sitting back?

If you are yet to buy a house, or have less than $100,000 saved, then you are in the starting out stage. Building up means you have a property and a mortgage. Sitting back means you have your retirement sorted.

4. How much time do you have left to get your finances sorted? 

If you are aged 60, you may only have five years before retirement to right the wrongs of a lifetime. If you are pregnant, you may have less than six months to get yourself in a better place. If you are anxious or frustrated, you will want to see some results fast. Time tends to be the limited resource that dictates the gravity of each person’s plan. 

5. How ready are you to take control of your finances? 

This is perhaps the most important question of all. Tackling your finances and diagnosing your situation may initially leave you feeling exposed. If you just take the next step, develop a way forward, you will soon feel empowered and excited that you were brave enough to start.

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