“Be diligent to know the state of your flocks, and attend to your herds; For riches are not forever…”
– King Solomon
At the time the above was written King Solomon was the richest (and most would say wisest) man on Earth, who had seen riches beyond your wildest dreams come and go. I’ll come back to the lesson in a moment. Bear with me as I think the biggest current lesson might be found at the bottom of this article.
Being a broker is an amazing gift. Not only can I be a blessing to others but I too can be blessed and I am not talking about financially.
I get to help people navigate through their (sometimes very) tricky circumstances and help people problem solve. When my wife asked me recently what I love about being a mortgage broker, I told her that I get to help people by using my problem solving skills. But upon reflecting on this and if I’m being honest the best thing is that I get to see some insight as to how successful and not so successful people manage their money.
So, my gift to you today is to explain how I think is the easiest way to manage your money.
When the RBA met today they made history by lowering the cash rate to 0.1%, so if/when the banks pass this on it will mean you will have more money in your pocket/bank than you did last month. That’s a great thing, but only if you manage it well.
To be able to do this, you need to start by:
KNOWING THE STATE OF YOUR FLOCKS
How much money do you have? And… Where is it? How much is your property portfolio worth this month? How much are your loan balances? How much equity do you have?
You would be amazed to see how many bank accounts the average person has…
Most of my clients have (at a guess) approx. 8 bank accounts, spread across 4 banks!
They also have a couple of credit cards, which on many occasions they don’t even use.
If I had a dollar for every time I met someone with >$50k in the bank but a credit card they don’t use, as it’s “just for emergencies”, well, I’d be on my way to being as rich as Solomon myself!
Not an indictment, purely an observation guys. No hate mail please.
Not that having multiple accounts, or banks, or cards is a problem in and of itself BUT if you are having trouble knowing exactly how much you have or where it all is, at any given time, then this could be a problem, as it’s evidently wise to:
ATTEND TO YOUR HERD
And how can you adequately tend to it, if you don’t know where it is?
If you have trouble with this, then my best tip for attending to your herd is this….
Have 1 x MAIN (“hub”) account, where ALL of your income goes into and all direct debits come out.
Setup a 2nd account, with a debit card attached. This is your EVERYDAY account. Work out how much your groceries, fuel, coffees, eating out etc costs you each week/fortnight etc and set up an AUTO-TRANSFER from your MAIN account into this account.
Setup a 3rd account for savings for a rainy day (3mths living expenses).
You can always setup a 4th account for saving for something awesome (eg holiday, Christmas, etc)
There you have it. Max 4 accounts. Only the EVERYDAY account has a keycard.
This will require you to set a budget but it’ll be rewarding and only possible if you first know the state of your flock.
In our house we attend to our herd by doing a monthly net-worth calculation (asset values minus liabilities) and reviewing the transactions from our MAIN and EVERYDAY accounts.
If these last few months of lockdown has taught us Victorians anything it’s that we shouldn’t take anything for granted. Especially hugs from our parents (or grandparents) or even money in our bank account.
As sadly anyone without a job during this period will tell you, getting a weekly paycheck is not a given.
That money doesn’t just magically appear. If you’re lucky enough to have a job you have often worked hard for the income it pays.
So, when it does appear it’s important to treat it with respect by saving or investing it. I can say from experience it’s not what you earn that matters most, but what you save AND what do with it.
Do you have surplus cashflow? If we’re being honest, even if you don’t think you do, you could probably find some…
Now that you’ve found it what are you doing with it?
In closing, I just want you to know 5 key facts…
1. Confidence is at it’s highest level in 8mths, as government stimulus seems to be working
2. The RBA just lowered rates, to further stimulate the economy (and confidence)
3. Responsible lending obligations are on-track to be wound back in March, further fuelling the access to credit
4. At Fidget we have been doing more refinancing than we ever have before BUT….
5. It’s Home BUYERS lending that is at historical highs
I’ll leave you with this…
It was King Solomon’s wisdom and not his riches that were his greatest asset. His downfall came when he misdirected his riches without remembering who or what he was investing for.
We can all learn something from that.
So, that’s your homework. Sort out your bank accounts and consider who or what you’re investing in and for. Then, consider, are the tea leaves pointing to now being an awesome time to buy or should you sit tight?
If you made it this far, I’d be keen to hear your thoughts
Until next time,