Loud budgeting: amplifying your financial awareness
I’d always known that saving for my first home would require a bucket-load of discipline and sacrifice. And when I thought about the amount I needed for a deposit…well, it all seemed too hard. Whether it was a weekend away with friends, or the latest can’t-live-without gadget, I was too easily distracted and couldn’t seem to control my spending. The problem, I believed, was that long term savings goals felt so unattainable that I saw no reason to go without the things I wanted now. In short, I lacked motivation. While meeting with my financial adviser for my annual review, I expressed how frustrated I was by the seemingly unreachable sum required to buy a home, and my inability to save. That’s when Jennifer told me about loud budgeting. Loud budgeting, she explained, is a goal-oriented mindset. It starts with being willing to share your savings goals with trusted friends and family and being accountable to them. For me, it was like a light came on. It’s the opposite of how my parents managed their money; for them, discussing one’s finances was strictly taboo. But the transparency of loud budgeting is its driver, and definitely helpful when politely declining invitations to dinner or the movies, etc. So, after talking it through with Jennifer, I decided to give it a try. We discussed how much I would need for a home deposit and she guided me through these simple steps: Loud budgeting became part of my weekly routine. Each movement of my tracker pin along my chart was incredibly satisfying, and then there was a sense of empowerment with every milestone achieved. Fast forward about 16 months and my dream has become a reality. I have a deposit saved and am ready to reap the rewards of my hard work. Look, I’d be lying if I said it was easy. There was the trip to Rottnest I reluctantly opted out of, and there were setbacks like new tyres for my car and an emergency root canal. But I also learned a lot too. I learned that loud budgeting is more than just a savings concept. It’s even more than being accountable. It was about sharing my dreams with loved ones. It was about celebrating each milestone with them. And it’s about helping my sister set up her own loud budgeting plan. So while loud budgeting may not work for everyone, it definitely worked for me. And now, I’m off to meet with a mortgage broker Jennifer recommended, and I can’t wait!
Is FORO ruining your retirement?
FORO – the fear of running out. I’d never heard the expression until I met Mark and Susan. Of course I’d heard of FOMO, the fear of missing out, but never FORO. As the newly-retired couple sat across from me, explaining how they were so afraid of running out of savings that they were not enjoying the retirement they’d worked so diligently for, I grasped the meaning of FORO immediately. They rarely went out for dinner, bought anything new or – heaven forbid – took a holiday. After a lifetime of saving hard, paying off a mortgage and raising a family, Mark and Susan were naturally frugal, but FORO had left them feeling vulnerable and afraid of the future. After two decades as a financial planner, I’d come across this situation before, although, it is unfortunately becoming more common. Mark and Susan had never sought financial advice before and weren’t sure what I could do to help, but came to see me because they didn’t know where else to turn. When I assured them that there was plenty I could do to help, they visibly relaxed. I explained that the key to overcoming FORO was having a well-structured financial plan. After I outlined my 5-step strategy, they were eager to proceed. The steps we took were as follows: By thoroughly assessing their current financial position (superannuation, savings, investment and social security entitlement), I formulated a picture of where they were at, and their future cash flow projections. Working together, we identified essential living expenses and discretionary expenses, then allocated funding that balanced financial security with lifestyle goals. Next, we determined a retirement investment portfolio with a sensible withdrawal rate to support their retirement plans. In my experience, the what if factor is a major concern for retirees. What if…I become ill? What if…the fridge breaks down? What if…the car dies? These questions, and more, play on peoples’ minds to the point where they fall back into a FORO mind set. To ease their anxiety, I recommended they include a contingency fund in their portfolio to ensure that unplanned expenses were covered. That way, if something unexpected pops up, their retirement lifestyle strategy remains on track. FORO had been holding Mark and Susan back for too long. I explained that hobbies, travel and social activities are crucial to mental well-being. So once we had established a responsible financial plan, I showed them how they could afford to spend, sensibly, and enjoy themselves. I especially encouraged them to make the most of their early retirement years, while they were fit and energetic. The final step in the process was my ongoing commitment to Mark and Susan. Retirement planning is not a set-and-forget strategy; it’s a journey through every stage of life – physical retirement being one of those stages. By regularly reviewing their financial position, I helped Mark and Susan monitor their spending and investment performance, and made portfolio adjustments that kept them in control of their retirement plan. Last week I bumped into the couple on the street. They were glowing with excitement and told me they’d just booked a Pacific cruise. Of course, I was thrilled for them – it was a big tick off the bucket list! But when Susan said they’d turned FORO into FOMO and were living their best lives, well, I’ll just say it was one of those moments when I absolutely love my job!