A serial spender’s guide to managing money

When you’re a young person that feels as though you’re locked out of the property market, it can be tempting to distract yourself with luxury purchases. Here, financial advisor Tim Henry shares tips on how to refocus your energy on long-term savings goals.

Many young Australians are struggling to break into the housing market. When confronted by this mammoth challenge, it can be tempting to spend money elsewhere – especially on luxury expenses that provide instant gratification. Unfortunately, this behaviour can lead to a cycle of consumption that can send your bank account yoyo-ing from paycheque to paycheque. Aspire Planning’s Tim Henry is familiar with this scenario, and he’s developed a strategy to help combat it.

According to Tim, the first thing that you’ll need to do is set yourself up with something to aim for. “Goals are thrown around as a bit of a feel-good thing, but they’re what’s going to keep you on track in terms of priorities.”

That means sitting down and coming up with a list of things that you want to achieve, both in the immediate future and further down the track. The key is to make sure that your goals are genuinely aligned with your passions – and not a result of other’s expectations.

“If people come to us and say they want to buy a house, we have a lot of conversations around why they want a property. If that fundamental desire isn’t strong, then it’s likely to fail because you won’t be willing to make sacrifices to achieve it,” he says. Once you’ve written a list, arrange them by priority.

Now that your goals are clear, it’s time to make a plan. This is a crucial stage, as it’s where you can break down seemingly unachievable goals into smaller steps – the ‘eat an elephant one bite at a time’ principle.

It’s also at this point that people’s resolution tends to falter. “Any time that you feel that your goal is unattainable, that’s when you’ll opt for instant gratification,” Tim warns. “Unfortunately, millennials tend to get a bad rap for this – but all generations do it. It’s the same as a 50-year-old who earns two hundred grand leasing a Ferrari – it’s still a waste of money.”

Try and remove emotional elements from your goals and break them down into realistic steps. Start small, and build from there. Remember, once you’ve established a plan – then it’s simply a matter of following it. The hard work is done.

A big part of achieving your goals will be finding ways to reduce your expenses, and there’s not a one-size-fits-all solution to make that happen. “People come into our office expecting us to pull out a book and say, ‘Right. If you pay us some money will give you this instruction manual,’ but that’s not how things work,” Tim says.

In the same sense, the oft-repeated advice of cutting back on small luxuries (AKA: brunch) isn’t necessarily the best strategy for establishing some savings. “If something feels like a punishment, then you’re not going to get far with it. I have one client who loves wine, so me telling him not to spend $40 on a bottle that he really enjoys isn’t going to be helpful.”

Instead, Tim suggests auditing your expenses and then writing them down in a column from most important (rent, food, bills) to least. Then, it’s a matter of comparing your goals against the ‘least important’ items on your list to identify where you can cut back.

Look for a gym membership that’s gathering dust, or a subscription that you’re not making full use of. This way you’re making a conscious decision about your actions, rather than trying to follow someone else’s directive. The emphasis here is on small sustainable changes, rather than dramatic shifts, that will help you to gain momentum. “Once you start saving $100 a week, it’s amazing how quickly you can turn that into $150.”

There’s a plethora of apps, sites, and programs that promise to help you stay on track with your saving goals. Fortunately, that means that millennials and generation Z can engage with their finances in a historically unprecedented way.

Tim provides myprosperity to all of his clients, but any software that allows you to measure your progress will work. “Tracking your goal is as important as setting it – that’s what gives you the motivation to continue,” he says.

When you do tick off a goal, no matter how small, it’s essential that you celebrate that win. Acknowledging your accomplishment gives you a chance to reset your focus and prepare to reengage with the next series of steps.

We’re socialised not to discuss money, and that can be detrimental to achieving what we’re aiming for. Reviewing your finances with a trusted person (whether a partner, family member, or a professional) can help make you accountable and more likely to stick with the plan. “It’s easy to justify impulse decisions to yourself in passing, but it becomes much harder to do when you’re sitting in front of someone,” says Tim.

If you’re considering engaging the services of a professional, Tim’s advice is to take the plunge sooner rather than later. “People always say, ‘I’ll come to see you after I get things looking a little better.’ That’s like saying, ‘I’ll join the gym as soon as I lose some weight.’ Just bring what you’ve got, and we can start moving on it.”

Staff writers come from a range of backgrounds including health, wellbeing, music, tech, culture and the arts. They spend their time researching the latest data and trends in the health market to deliver up-to-date information, helping everyday Australians live healthier lives. This is general information only and is not intended as medical, health, nutritional or other advice. You should obtain professional advice from a medical or health practitioner in relation to your own personal circumstances. The information in this article is general information only and is not intended as medical, health, nutritional or other advice. You should obtain professional advice from a medical or health practitioner in relation to your own personal circumstances.

Disclaimer:
The information in this article is general information only and is not intended as financial, medical, health, nutritional, tax or other advice. It does not take into account any individual’s personal situation or needs. You should consider obtaining professional advice from a financial adviser and/or tax specialist, or medical or health practitioner, in relation to your own circumstances and before acting on this information.