Personal finance… sometimes it can feel like you’re speaking another language. A lot of emphasis goes into making money, but using, saving and investing your funds once you’ve made them is another story. So, how can we learn how to become fluent with our Finances, and what are the repercussions of living with our head in the sand with our spending? Our guest blogger, Louis Strange from Acute Finance is here to explain a little bit about this and how we can learn the language of finance.
What is Financial Stress?
Living in modern-day Australia we have greater access to a system that allows the accumulation of wealth. We have property rights and laws to protect what is ours, banks to save money, or borrow from, even the option of purchasing shares all with a click of a button.
This system also allows you to negotiate with your future self and lets you plan and work to improve your future prosperity. Because, at the end of the day, if you want to achieve financial freedom by the time you are 50, your present self has to be the one to make it happen.
Based on these factors, along with living in one of the wealthiest countries in the world, financial freedom should be a breeze!
Right?
Research by the Centre for Social Impact, unfortunately, shows a different picture. Two million Australians experiencing severe or high financial stress and a further 10 million have some level of financial stress. That’s a huge 60 per cent of our population in some form of financial stress.
The Australian Psychology Society research also confirms this, finding that financial issues are the leading cause of regular stress, with 49 per cent of Australians ranking it as their number one stressor (Stress and Wellbeing in Australia survey 2015). This stress, essentially, is caused by spending more then what is earned or that you have available to spend.
What are the Priorities?
To tackle this a little further, we’re focusing on a thing called the economic problem, which is how to best meet our unlimited wants, with the finite (or limited) resources actually available.
The core question to ask yourself when it comes to getting out of financial stress to reach financial independence is how much of your financial resources need to be used for achieving financial
freedom?
To put this into context, you may want to spend $10 a day on coffee or food, but over an average working life of 30 years this would be approximately $116,028 in total (accounting for inflation of 2.5 per cent p.a.). This seems like a lot, but what if this same amount was invested over this time period? That figure would be $324,200, assuming a return rate of 8 per cent per annum. The difference is being able to have a passive income of approximately $16,210 per annum (assuming an income yield of 5 per cent p.a.) or, not having to drink instant coffee.
Knowing the difference in these small choices over time, and how to work toward building wealth would help to solve a lot of financial stresses. However, with little taught in our education system with what do after we’ve begun earning an income, it’s no wonder people feel lost with what to do next.
How Can I Learn About my Finances?
This is where upskilling and learning comes in. Sometimes, you may wish to hire the assistance of a professional advisor to teach you about the language of Finance. However, if you’re more of an independent learner, there are some great tools available to teach yourself.
The Learn Finance course aims to provide a start to finish approach on the fundamentals of personal finance.
The course helps to create a picture of what financial freedom looks like to people and provides the tools and skills for them to take control of their financial futures. This all comes back to learning how to make smart money decisions, implementing strategies to manage your money, and reducing the hassle and stress in relation to money and investments.
This is incredibly important as it has never been easier to be financially independent but at the same time, it has become incredibly stressful and complicated.
The major benefits of being financially literate include having your frustration reduced through knowing you are making smart choices when it comes to your money while reducing your anxiety through being able to tackle any money issues head-on, which is always a good idea.
So, don’t put learning the language of Finance any longer, take control of your money and start working towards financial freedom today.
About Louis Strange
Louis is the Founder and Director of Acute Finance and specialises in helping his clients achieve their own financial success by focusing on their goals. Louis has always been passionate about personal finance and investing and helping others obtain their financial freedom. Louis also has a podcast, Finance & Fury, which is available on iTunes.
