Sometimes it’s best to do things the old fashion way and use cash. 

In the movie Skyfall Money Penny catches James Bond about to shave and says, “Cut throat razor, very traditional.” Bond replies, “I like to do some things the old fashion way.”  

Sometimes the old ways are the best, like using cash.

‘Cash is king’ and using cash can be a better way of keeping control of your money.  In the old days there was only cash.  These days with banks card we tap and go, tend to spend more and have a lessor idea of how much money we have.

Have you ever been embarrassed and inconvenienced when you’ve tapped your card on the Eftpos machine and it’s been declined?  You know the money in there, but it’s been declined! Insufficient funds! Have you ever been confused by the bank slip coming out of the ATM machine that gives you both current and available balance for your bank account? 

When times are tight, and the bank account is running on fumes you need to be aware of your balance.  But which balance?  Banks will give you two balances: available balance and current balance. Current balance is often the bigger amount that includes everything. The available balance refers to the amount available to without any restrictions. But even if you disregard your current balance and go with the available balance you can still get caught.

Available balance is the lower amount because cheques haven’t cleared or there are pending withdrawals or authorisations on your account.  Withdrawals don’t necessarily hit your account when you tap the card.  They can be delayed if your make purchase overnight or purchase from a business that for one reason or another doesn’t post the charge to your account straight away.  The cost of coffee at McDonalds has often hit my account two days later.

Using cash will give you more control over your cashflow, and help you live within your means.  Having a good budget and knowing you spend $100 per week on groceries, withdraw the $100 when you get paid and keep it in your wallet or purse.  When you do your grocery shop use the cash.  You will measure it out for the different shops you like, see where its’ going and your spending habits, and you’ll know when you’re about to over spend. How different is this to the tap of the card with a wish and prayer!

Put a $50 note in your wallet for lunches and coffees.  When is gone it’s gone; you’ve spent your budget amount.  Put a $20 not in your purse from alcohol.  When is gone it’s gone; you’ve spent your allocation.  With tighter control over our money we will not robbing our savings or eroding our financial future.

So use cash.  Sometimes the old fashion ways are the best. 

For more help on managing your budget or any other money matters, contact your local financial adviser or myself at Turtle Securities.

The financial services industry speaks a language not readily understood by all.  Our young people are particularly vulnerable.

AIA Australia wrote in an article I found in the Investment Magazine stating we need to do more to engage younger generation. The financial services industry especially needs to do more to improve outcomes and meet customers’ experiences.  AIA said, “As life insurers, we need to better engage with a youth audience, using clear, simple language and meaningful communication methods.”

I know as a financial adviser is constant challenge to me. It’s easy to get lost in the technical jargon so how can I engage my younger client?

The language barrier causes a disconnect and discourages people from engaging and going further. AIA wrote “What is needed is a conscious effort to address issues such as the legal tone of documents, jargon, lack of visuals and a clear checklist, lack of reliable calculator tools, having too many options, and long lists of terms and conditions.”

Failing to get a financial education at school or in the home, young people enter the workforce totally unprepared to make financial decisions, albeit while talking in an entirely different language.  The lack of financial literacy causes financial institutions and advisers, to be portrayed as the Ogre: daunting and frightening, and entirely in a world of their own, and to be left alone.

AIA quotes research showing that only about 30% of Australians are aware they have life insurance in superannuation. They add when made aware of the life insurance, more than 70% see its inclusion as a real positive. Although more than 90% of the working population have some type of insurance coverage (largely within their superannuation), there is still an underinsurance issue in Australia, and equally, people may have cover and don’t need it.

Financial illiteracy is often blamed on the lack of financial education in schools. We all know more could and should be done to provide a basic understanding of finance in schools. But what’s alarming is the absence of financial education in the home.  When financial issues are not discussed in the home this impacts negatively on ones’ ability to make sound financial decisions as adult.

Young people are confronted with a number of financial decisions when they leave school, but few are prepared to make decisions about insurance, credit cards, home loans and superannuation. Without basic knowledge of how financial products work, the benefits they offer and the risks they entail, they fail to see the financial challenges.  

By on large, the younger generation are almost bystanders of the financial system.

Consequently, they are vulnerable and easily exploited by the shrewd mortgage broker or bank lender. We need to speak a language that educates and empowers our younger generation so they have the skills to make sound financial decisions.

If you have any questions on money matters, contact your local financial adviser or myself at Turtle Securities.

If you've ever struggled with sitting down and doing a budget, you're not alone.  

Whichever budgeting system you choose, it can be really useful to spend a couple of weeks doing a money diary, where you list everything you spend — from big bills to coffees. This gives you a useful overview of where your money is going and where you might be able to cut down on any expenses.

The key with budgeting is to start out with some goals.  What monthly amount do we need for our fixed expenses?  What amount do we need for discretionary spending: takeaways and entertainment?  What are we saving for?  When do we need the money?  Therefore, how much should we put aside each month?

"The key is to do something that works and you're going to stick to it.  

1. The cash envelope method

This was the first method I was introduced to way back in the 1970’s.   Actually, it dates dates back to the 19th century!  These days it's more useful for managing daily expenses, and the big bills pay electronically.

Essentially, you divide your expenses into fixed spending, discretionary and splurging.  But you can have as many categories as you like.  For example, you'll probably have one for groceries, eating out, fuel, children's sports, etc. For example, you might put $100 into your grocery envelope.  When say, you go to the supermarket, you take the groceries envelope with you.

This is similar to the method advocated by the Bare Foot Investor, Scott Pape.  Use jars!  Mark the jars as for each expense category.

This method is simple to use and will physically stop you overspending.  But hide those envelopes!  If you start to accrue a large amount of money in an envelope it’s best to pop in a term deposit at the bank and earn some interest. 

2. Balanced Money Formula

This budgeting method is much like the 5:2 diet where you eat carefully for 5 days and fast for 2.   

The idea is to take your income, and spend 50 per cent on your needs, 20 per cent on savings and 30 per cent on wants.

So, what does that mean?  Structure your pay so it automatically goes to the right bank account: 50% to the account for your needs, fixed repayments etc, 20% to your savings account and 30% to your everyday spending account.  Needs are things you can't live without — so your mortgage, or rent, bills, school uniforms, groceries, petrol, healthcare, insurance etc.

In Australia, you might have heard a similar method created by The Barefoot Investor recommends a slightly different breakdown that includes 60 per cent for daily expenses.

This method gives us the 'big-picture' budget with just three or four categories to worry about.  We can manage it all online.  But it’s easy to over spend with this method.

A slight variation to this is call the Money Tree I discovered many years ago.  It was particularly good for debt management.   70% for all your fixed and variable spending.  20% for your normal debt repayments. And the last 10% to make extra repayments on the loan with the highest interest rate.  Using this method over time will reduce the amount you pay interest.  “Always pay-off the debt with the highest interest rate first” is a good general money rule.

 A traditional budget can be useful for looking at your spending habits in detail.  There are many budget templates online and generally they ask you to fill in your fixed expenses and variable expenses and what’s left you can delegate to savings, debt management or splurging.

Some of these templates are quite sophisticated and list all the necessary categories and you don't have to worry about annualising expenses — it does these calculations for you. All you do is gather up all your paperwork and fill out your income and expenses, it then calculates whether you spend more than you earn, or have any money left over.

But you need to review it regularly.  Go back and check it — what’s missed doesn't get managed.  Is it accurately measuring what I spend?  Am I on track? Don't expect to be perfect, but with this method you’ll be looking more like an accountant on top of things.

You will have a detailed picture of what your spending habits are, but this method is more time-consuming.

For more help on managing your budget or any other money matters, contact your local financial adviser or myself at Turtle Securities.

1. Get an accurate picture of your finances - assets; debts; income; expenses - can you afford extra credit? More borrowing may put your assets such as a house or car at risk.
2. Resist the 'Buy Now - Pay Later' hard sell - if you buy on credit, that mobile phone, latest fashion, DVD player or car is likely to cost you double - could be 'Buy Now - Pay Forever'! Ask yourself "Do I really need it?"
3. Don't assume that because creditors will lend you money, they know you can afford it - their assessment processes are very poor.
4. Be careful of offers to automatically increase the limit on your credit card - you may just be getting into deeper debt trouble. Don't get a loan to pay out your credit cards and just run them up again.
5. Credit card debt is expensive - if you only paid the minimum monthly payment and borrowed nothing more, your current debt could take you over 20 years to pay it off.
6. Don't sign up for anything you don't fully understand whether it's a mobile phone, a credit card, insurance or a refinance of your mortgage - ask questions until you do understand - take a day to think about it - take the contract away with you - get independent advice.
7. If you are going to buy on credit, shop around for the best deal for the credit just as you would for the goods. Credit offered at stores and car dealers usually has a high interest rate.
8. If it sounds too good to be true it probably is! 12 months interest free - No payments for 2 years - Pay off your home loan in 5 years - there's likely to be a sting in the tail - they want to sell you the product but they won't tell you what's in the fine print.*

For more help on managing your debt management or any other money matters, contact your local financial adviser or myself at Turtle Securities.

*See Financial Counselling Australia, Jan Pentland Foundation. Compiled by Jan Pentland.