Part I
Seizing the Day
âThis morning I bought a little note pad to record every cent I spend. Already I see that I need to reduce my spending or buy bigger note pads.â
Glenn Lumsden
In this part . . .
When I tell people Iâm writing a book called Sorting Out Your Finances For Dummies they invariably say, âI need help like that.â If youâre putting off sorting out your finances because theyâre just too complicated, too time consuming or too boring, youâre not alone. On the other hand, if youâve got that niggling feeling that your money could be working harder for you, then youâre not alone there either.
Part I gets down to basics. Setting financial goals and costing them, understanding your attitudes towards money, drawing up a budget to find out where your money comes from and where it disappears to each month, planning for different stages of your life and seeking help. You can find tips on organising your finances whether youâre a student, single, part of a couple, with or without kids, an empty-nester or a retiree. In short, Part I shines the spotlight on you. So indulge in some self-reflection before you turn to the nitty-gritty details of managing and investing your money later in this book.
Chapter 1
Taking Stock, Setting Goals and Chasing Rainbows
In This Chapter
Examining the changing face of money
Uncovering your attitudes to money
One overarching theme as we move into the third millennium is the need to take control of your own destiny. And, increasingly, successful navigation of lifeâs twists and turns means getting a good grip on your personal finances.
Gone are the days of a straight march through life from childhood and education to a job, marriage, family and then retirement on a government pension. Now getting through life is more of a high-speed spin down the motorway, with a tantalising choice of destination at every major junction and tollgates at regular intervals to make sure you pay as you go.
In recent years, the user-pays philosophy has been extended to everything from roads to tertiary education and health care. And, thanks to declining birth rates and an ageing population, successive governments have encouraged people to save for their own retirement via superannuation to avoid a skyrocketing welfare bill.
The nature of work is also changing. Rather than giving unswerving loyalty to one employer in return for benefits such as sick leave, paid holidays and a job for life, employees are jumping from job to job and taking responsibility for their own career paths.
As an ambitious young finance journalist starting out in Sydney, and later as the producer of a top business television program in London, I had no idea that one day Iâd be living in a New South Wales coastal town, self-employed and writing from home surrounded by Lego and plastic dinosaurs. Employer-funded superannuation and an expense account are distant memories, but working in shorts and T-shirt and being able to dash across the road to pick up the kids from school are more than compensation. In ten yearsâ time, I may be back in the city â or not.
In this chapter, I introduce some concepts to assist you in your quest to take charge of your personal finances. You need to find out where you are now and what you want to achieve so that you can plan where to go from here.
Finance Is a Personal Issue
In todayâs world, personal lives seem more complicated than was the case in the past. People are more likely than their parents to divorce; they also have fewer children (or none at all), and many live in blended families or live alone.
Many of you probably combine several of these lifestyles over the years. With each new phase in your life, you may require different housing solutions. You may start off adult life sharing a rented flat with friends. Ten years later, you may be married and paying off a mortgage; in another ten, looking for a new, larger house to make room for a growing family.
As your housing changes, so do your needs. For example, you may decide on a few days a week child care for your youngest, and you may choose to hire a house cleaner to give you and your partner time to enjoy your leisure hours with the kids. All these decisions require your finances to be planned according to your needs.
Retirement also isnât as simple as it used to be. The population is living longer and people expect more from retirement. These days, retirees are just as likely to buy a four-wheel drive and head off around Australia as they are to tend their roses and watch the grass grow. Needless to say, a fulfilling retirement requires years of saving and planning.
Money matters in the third millennium
Whichever way you look at it, money is a personal issue these days, in a way that it hasnât been for previous generations. Everyday decisions about education, health care and retirement mean you have to manage your own financial affairs if you want more than a basic level of service. Little wonder that people today know more about their rights as consumers than they know about their rights as citizens.
And these days many people marry more than once, often raisin...
