Do you feel guilty when you buy a cup of coffee, thinking you could have been well on the way to making your first million if you only didn’t like caffeine so much? Does the health of your financial plan tick away in your mind? Do you struggle to find the balance between living in the moment and saving for the future?
What am I doing? You think, as you are heading out of the office to buy yet another coffee or fork out $15 for a sandwich at the local café. You have told yourself time and time again to make your lunch, to make an instant, and to write down how much you actually spend on items you don’t need…
You arrive at work. New day, new opportunities. Plow through your morning priority tasks and bingo! It’s time for a coffee. You don’t feel like that thing you brought in for lunch today… You have a meeting so you need more coffee… By the end of the day you end up spending $25 just on coffees and lunches!
Is this OK? Does it matter? One financial expert claims that you’re wasting up to $1m by buying a cup of coffee a day over 40 years, as having invested that money instead could have made you a millionaire! Talk about guilty!
It’s true that many of us think we should be smarter about spending, and try not to think about how much we actually are spending on goods and services we probably could go without. But life is to be lived right? What’s the point of working hard if you can’t take 10 minutes and $4 out of the day to grab a nice cuppa with a work friend?
So what is the ‘right balance’ and how do we happily tap tap tap away when we’re collecting our cappuccinos? Let’s take a look.
This debate, is in essence tied up with our financial well-being. Financial well-being is about three things:
A financial reporter from the New York Times quotes that there are some environmental factors in our finances that are hard to control – wages growth vs the cost of living, health insurance costs, housing prices and associated costs, child care, and the cost of education. The fact that we can’t control these costs lends itself to think about what we can control – our spending, i.e.:
There are a few ways to get a clearer picture in terms of what is important to you to live a happy and financially healthy life.
Second, it’s about budgeting, planning and taking control of your financial future. What this looks like is different for all of us, and is something sadly many Australians don’t invest enough time in.
According to the Australian Securities and Investments Commission (ASIC), fewer than 40% of Australian Adults have ever used a financial planner. We know first hand that families who work with our advisers have more clarity around their goals and situation, confidence for their future and the information they need to make smart informed choices about their money every day.
Third, it’s about the ‘doing’, the implementation, the tracking of your goals and dreams, and the path to get there. This is where financial advice can really help. As well as clarifying your goals and dreams for the future, advice can map out an example of future cash-flow and show you what you have to work with in the months and years to come. It helps you understand the impacts choices made today will have for your future. Will they be significant? Or not?
A recent article in Money and Life magazine states that consumers with an active relationship with a financial adviser feel more organised, are more confident when making financial decisions and are less likely to suffer from financial stress.
Fourth, Money and Life goes to say that it is about changing some behaviours to ensure you can continue on the path you have set for yourself. Money and Life points to three key elements for changing behaviour – reminders, repetition and rituals. Setting a reminder, say monthly to review an element of financial advice, sets a repetitive action, that in turn creates a ritual once the repeated behaviour is learnt. Perhaps you’ll be too busy to buy the coffee!
Investments are a great way to save over the long-term, and acquire an asset that can provide you with valuable returns. They also have the potential to put you in more of a long-term mind-set, where you can think about how your life might look like in the future. It is true that a dollar invested today will be worth more tomorrow, but whether the price of a cup of coffee is limiting you from achieving your important dreams and goals depends on your cashflow. We think that knowing is 90% of the battle. If your budget allows for daily luxuries then spend away and do that guilt free! If it doesn’t then you know you are choosing today over tomorrow. Either way, we believe it is important for you to inform your choices so you don’t end up with a bucket load of regret down the track. In essence, it’s important to think deeply about your finances. You can take our financial health check to get started and understand where you are today.
We have many articles on investing in our Knowledge Centre and regularly publish market updates. Check out our popular article whether to invest in property or shares and recent article on how to know if your investment fund is underperforming.
Try these quick ideas to keep money in your everyday account so you can spend more on the things you enjoy:
Another great way to track your spending is to keep a daily diary of the things you buy that you don’t necessarily need. This will help you learn what it is you can go without. Learn about other surprising ways to save.
Whilst the above can provide some great savings ideas for the short to medium term, the key to unlocking financial freedom is focussing on the bigger picture. We hear so often from clients who have attended our meetings that they wished they had have acted on seeking financial advice earlier, as they would have been able to see their ten-year horizon then and there! The first meeting with a financial adviser can be daunting, however we have seen the good, the bad and the ugly! Clients often feel a sense of relief after the first meeting.
The clarification of your goals can put you in a more confident position to know what you can and cannot spend, that will give you the focus you need to make better financial choices. Our process starts with understanding you, and your most important goals, dreams and values.
In summary, however, how you feel about your spending comes down to your relationship with money. Different Money Mindsets exist, that can help us understand why we spend money the way we do.
Put it this way, if you think you can stand in the middle of the see-saw and balance both sides, then you probably feel like you’re doing OK financially. If you need someone to stand on the other end, or even if you both stand a bit closer towards the middle, then you probably need some help to clarify your future picture and see how you can set yourself on a path to financial security.
And as for the coffee, I don’t know about you but it seems a lot less relevant!
 Andriessen, Jason: Vision Without Execution is a Daydream, Money and Life Magazine July 2019.
What you need to know
This information is provided by Invest Blue Limited (ABN 91 100 874 744). The information contained in this article is of general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice with regards to those matters and seek personal financial, tax and/or legal advice prior to acting on this information. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relations to products and services provided to you.
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