This year around a million Australians will default on their home mortgage.
Coincidentally, around the same number of people have by now read Scott Pape’s iconic book The Barefoot Investor.
Clearly personal finance is an area that most people need a leg up in. And yet who do you go to for advice and support on budgeting if you need it?
Experts that you can go to for assistance in this area are thin on the ground, but there is now help available if you find you just don’t know where your money went at the end of each pay period.
This year I’ve been able to help dozens of local people get control of their finances so they can start saving for future goals and dreams, like home ownership, children’s education, travel or retirement savings, and that gives me great joy.
We have our own personal story of digging ourselves out of a financial hole 10 years ago and so I’m very passionate about helping others get on track.
One of the major reasons for our collective lack of control around money is that we’ve never really been taught how to budget.
It’s really not our fault that we can’t save money though. We’ve never really been equipped with the skills we need to put together a watertight spending plan and stick to it. We didn’t learn it from our parents, and school financial education is pretty woeful.
People who come to see us are generally earning good incomes, but finding that they just don’t know where their money went at the end of every month. They often rely on credit cards to help them meet bill repayments.
This month I had the great pleasure of being featured in an article in Money Magazine about a new type of money coach called a Spending Planner, who helps people set up a customised spending plan (a dynamic budgeting tool) that helps you pay off debts and save faster for your financial goals.
Here’s a startling statistic: 20 years ago credit card holders were using credit cards an average of 30 times per year. By 2016 that figure grew to 159 times per year – about three purchases per week that are now charged through credit cards! And most of these purchases per week are not being repaid at the end of each month, leaving many of us feeling the pinch on our wallets.
One of the factors that really derails people’s savings efforts is unpredictable expenses.
It’s one thing to plan for our regular predictable expenses like rent or mortgage payments, but it’s often challenging to budget for things like car repairs, computers or fridges.
People just don’t factor in these types of expenses, so they might be saving for a holiday or home deposit and then all of a sudden be hit with an expense that seems unpredictable (like the car breaking down) but actually is something that will happen at some point in time.
We need to have a pool of funds ready for such events, and most people are overspending in areas like groceries, eating out and online purchases, and not saving for these unpredictable expenses.
There are a multitude of books and budgeting apps on the market now, but in many cases people are in need of a personalised solution, support to help them make sense of their finances and the tools for managing their money going forwards.
I love Pape’s book and recommend it to all our clients, but I believe that a book or an app, in many instances, just raises people’s awareness that they really need help in this area.
Generic advice is useful, but most people need a personalised solution and someone to sit down with them and work it all out. Once they have a system in place then people can manage really effectively on their own.
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