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Reply to: It all starts with a PLAN!

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Replying to: It all starts with a PLAN!

Money is a source of stress for most people, they either don’t have enough (that’s the problem for the majority of folks) or they are scared of losing what they have. It is not a very complicated process to manage your stress around money, no matter what your problems are. Unfortunately, just because something is simple, does not mean it is easy. The only sure-fire solution to money problems is a plan. More importantly, once you have a plan, you need to stick to it every day of every week of every month. If you want to get fit, you cannot train very hard for one day a week and hope to see results, you need to stick to your routine consistently. Solving your money problems requires the same consistency, you need to do the right things constantly for a period of time to see results.

My wife and I decided to lose weight after our wedding eight years ago and so we met with a dietician who worked out an eating plan for us. We planned all our meals weekly in advance and stuck the plan on our fridge door so that we knew what we were going to do for every meal. We also started running and set a goal to run our first half marathon in six months’ time. With our end goal in mind, we worked backwards to set interim goals for ourselves and put them in our diaries. By breaking down our goals into a series of small steps, we made the task of running 21.1km seem much less daunting because it all started with a 20 minute walk around our neighbourhood. I am happy to say that we both managed to run our first half marathon on time and we lost the excess weight. I am even happier to report that eight years later, the 13kg that I lost has not returned and that I still run regularly.

The same basic discipline that you apply to getting fit and eating healthily can also be applied to taking control of your money.  You can start very simply by writing down some goals for yourself e.g. be debt-free in 5 years or save for an overseas holiday, send the kids to private school or just have more money than expenses at the end of every month.

If your problem is that you never have money at the end of the month, you need to start by understanding how you spend your money before you can figure out how to fix the problem. Once you have tracked how you spend you can start to work out where to spend less. As with a running plan, do this in small steps by reducing your spending on specific expenses gradually. In this way you will get used to spending less and there will be less temptation to splurge. Set yourself goals on a weekly and monthly basis e.g. I want to spend R200 less per week. Or you could set the goal to save R500 per month by November. If you set a longer-term goal, work out how you are going to achieve the goal by breaking it into baby steps.

People that have managed to accumulate assets and are living in fear of making a mistake and losing it all, have a different but very real problem. Having money can be very stressful because one or two mistakes could cost you more money than you earned in a year of work. This fear of making a mistake can be paralysing which is a terrible state to live in. More importantly by making no decisions with your money, you end up leaving it in the bank, which means inflation destroys the value of your money over time. This type of stress can be overcome by developing a plan for your assets. The plan should include spending objectives and long-term investing objectives.

If you plan to have sufficient money in low risk investments to cover your expenses for two or three years, you can start to allocate your remaining money to growth assets that can be invested for long periods of time. When your growth assets lose value temporarily because of a stock market drop, you will be less fearful because you have sufficient “safe” money to cover your expenses.

Sadly, money troubles never resolve themselves. The only way to manage money troubles is to deal with them directly, starting with a plan. The longer you wait to deal with your money troubles the bigger they become, so start today!

Warren Ingram is an award-winning financial planner and respected personal finance commentator in the media. He is the co-founder of Galileo Capital and has been a financial planner for nearly two decades. He was the South African Financial Planning Institute’s Financial Planner of the Year in 2011. Warren is a regular guest on 702 Radio and Cape Talk’s The Money Show with Bruce Whitfield. In addition, he writes a monthly article for the Sunday Times and Moneyweb, as well as periodical articles for a range of other publications.

Warren’s book, Become Your own Financial Advisor will be published by Zebra Press in July 2013 and will also be available in eBook format.

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