Behaviours can dictate your financial life

As everyone knows, it can be a whole lot easier to spend money than to save it. We all set goals in life, and often they involve our finances; buying a house, getting a new car, getting married, the list goes on. What many don’t realise is that it’s our behaviours around where we spend our money that often drive our success.

It’s an interesting subject. For some, saving comes easy, for many others, it’s a struggle. Why does you behaviour have such an impact on your money?

How we approach money is important

Think about where you spend your money: It might be a coffee on the way to work or buying lunch every day. We all make these small choices, and while they may seem insignificant at the time, they can have a big impact. It might only be $3 or $4 for the coffee but over a week, a month, a year, it really stacks up.

It’s why so many Australians live from pay cheque to pay cheque. This, in turn, spirals into other financial decisions, like overspending on a credit card as our cash flow just isn’t there for things we want or need.

Making short-term spending decisions, like that coffee or lunch, can easily flow on to impact your entire financial position and dictate your success in hitting your life goals.  When it comes to taking a healthy approach to money, it’s all about rethinking your behaviours.

Tips to modify your behaviours

Luckily, changing your ways to be a little more aware of how you’re managing your finances doesn’t require you to change your entire way of life! Here are a few simple tips to modify your behaviour that can make a real difference:

1. Have a plan: Know where your money is going

It’s something we often reference in our weekly posts: Having a plan will make a difference to your financial habits.

It’s absolutely crucial to understand what you spend your money on. It’s often the shock of understanding where your money is going that triggers the first impetus to change.

Start by understanding your goals and what is motivating you to achieve them. Then see how your finances will impact those goals and what you need to change to ensure you reach them. It’s where a service like our BeApt offering can really help, with an online tool, backed up by financial planning, to truly track and manage your cash flow.

2. Be disciplined in your approach

While you won’t have to change your whole life, the reality is that you will have to make some modifications to your behaviour towards money.

One methodology I really like is the ‘50/30/20 rule’. It works like this:

• 50% of your wage goes to life’s necessities, such as your mortgage, rent, groceries, transport, etc., i.e., the things you need.
• 30% goes to wants, i.e., going out with friends, eating out, buying that daily coffee on the way to work, etc.
• 20% goes straight into savings.

It’s having that discipline, particularly around the 30% and 20% rules, which can make a real difference. By setting yourself a plan that includes clear percentage goals like the above, it becomes easier to budget your monthly spend and gain control of your finances.

3. Don’t give up everything

Often we see people fall down on a financial goal when it takes all the fun out of life. You need to be able to live for today while planning for tomorrow, so don’t give up everything you enjoy.

Make sure you still prioritise the things in life that make you happy, just use a more disciplined approach to it. For example, if you receive a bonus at work, have a plan for that money that sees 50% kick straight to your savings, while the other 50% you use on something you want as a reward for all your hard work.

General Advice Disclaimer

The information in this blog is provided by Apt Wealth Partners (AFSL 436121 ABN 49 159 583 847) and is of a general nature only. It may not be relevant to your personal needs, objectives or financial circumstances. The circumstances of each investor are different and you should seek advice from a financial planner who can consider if the strategies and products are right for you.