Jane studied English literature in university, finished school with a 2:1, started working with a good company, met and married mister right who worked with a multinational oil and gas company. All started well, good husband, 2 children and they both agreed she would leave work to raise the kids after the second child.
Jane’s husband handled everything so they never actually discussed money. This was fine for her because even growing up, money was never something she really had to deal with, someone always took care of things for her. All was going well in life and then her husband was suddenly was incapacitated due to an accident. Tragically her husband died and she was left reeling and confused, not knowing what to do next. There were some funds left to her in his will, but she’s asking for advice on how start her financial journey.
Here are a few things for Jane to consider:
- Step one is for Jane to understand her money philosophy: What does money actually mean to you? What money means to you unconsciously affects the way you treat it. Our money philosophy is usually based on what we heard/felt growing up and how much we want to stay close to or get as far away as possible from that feeling. To understand your money philosophy, go through your bank statement for the last 3 to 6 months and reflect on what you did with the money that has passed through your account. It’s always an eye opener believe me!
- She needs to have a goal she’s taking ownership of: There’s something about having a goal that drives people to perform at their peak. Setting a goal helps you operate at a higher standard of life. Set your goals in crystal clear terms of how much you earn, how much you have invested, right down to how many holidays you take a year and where you go. Set realistic time frames and be disciplined about achieving the goals. Remember, a goal without a plan and a deadline is just a wish.
- Jane needs to assess her Net worth – Detailing all your assets (what you own – cash, house, etc), liabilities (basically your debts) gives you your Net Worth. A positive Net Worth means your assets exceed your liabilities and a negative Net Worth means your liabilities exceed your assets. Whatever the result is should fit into your financial plan. Click here for your free Net Worth calculator which you can download, fill and get a complete view of your finances.
- She needs to follow the money: This means create a budget and stick to it. Sounds simple enough right? Then how come there almost always seems to be more month at the end of the money rather than the other way round? The rule of thumb is to spend no more than 75% of your monthly income. There’s a magical thing that happens when you deliberately set out to do this: you survive on less than you thought you could! Because life throws us things we didn’t plan for from time to time, setting 25% of your income aside gives you a buffer when these ‘shocks’ happen.
Over the next few weeks we’ll look at how Jane can start creating and implementing her budget and creating sources income.