Get the right financial strategies in place
We believe that getting the financial foundations in place – and sticking to them over the long term – will build financial success. Financial foundations include managing your cashflow, sticking to a budget and keeping debts under control.
Manage your cashflow
For many people, cashflow is the key to building wealth. At first we generate an income through working. But in time, if we’ve planned well, our money ends up working for us. Fortunately it is a very hard worker – working 24/7 without taking a break!
Passive Income is the income that you receive without having to work for it – such as rental income from property or dividends from shares. Expenses are the essentials that we need to live – paying the bills, food, running the car and insurance premiums. Eventually, we think you should aim to achieve enough passive income to allow you more discretionary spending – including holidays, dinners out, gifts, travel – or any other goals that you would like to achieve.
The ultimate goal is Financial Freedom – when your passive income is great enough to allow you to work less, or stop working altogether if you wish, but still allow you to cover your expenses, some luxuries and allows you to achieve all your goals.
Boring but essential budgeting
Boring we know, but essential to make a difference to your financial future. We believe that it is irrelevant how much a person earns, it is how much they get to keep that matters. In our experience, the best plan has the following elements…
- A budget based on estimated saving and spending
- A system for recording all transactions that actually occur
- Periodically checking the budget vs actual (plan vs reality), and making adjustments accordingly (either adjusting the budget, or adjusting spending).
Manage your debts
There is nothing more disheartening than looking at credit card or home loan statements where the balance never goes down! If you have lots of different loans – whether they are large or small – getting on top of them will give you that psychological edge to get ahead.
Milestone supports a ‘debt snowball’ approach to repaying debt. This involves putting your debts into an order based on how quickly they can be repaid and then focussing all surplus debt repayments into the first priority debt. Once you’ve done this, get a pair of scissors and cut up your credit cards and don’t use them again! Milestone’s Financial Bootcamp seminars which are run during the year can provide more details regarding these strategies.