As some of you may know, I'm writing a book! And it's my hope that this book will help families to improve their Financial Planning so they can enjoy more freedom in life. While I'm writing the book, I thought it would be helpful to share some of the chapters with the world.
STEP 2 - FINANCIAL STRATEGIES
Once you've found your Financial Aspirations, you're then ready to jump into the next step of the Moneyfulness Method which is the Financial Strategies stage. At this stage you’ll take what you’ve learned about yourself in the Financial Aspirations stage and use those personal insights to align your Financial Planning in a way that will best suit your unique situation and help you to progress towards your specific goals. This step is where Meaningfulness and Money really begin to interconnect because you learn how to manage your money in a way that best supports what matters most to you and your family.
In a nutshell, in order to improve your family's financial situation, there are 3 main Financial Strategies that you need to optimise, and they are your; • Spending Strategies • Safety Strategies • Saving Strategies But before we can jump into the specifics of what you should do to improve each of these Financial Strategies, I first want to introduce you to the two key concepts that underpin this stage of the Moneyfulness Method; • The M&M Concept, and; • The Financial Pyramid Concept The M&M Concept Most families wrongly assume that MAKING money is the best and/or only way to build wealth long term. So, they wrongly spend too much of their time and their life, chasing money in the form of obtaining extra education, climbing the corporate ladder and looking for ways get a promotion or pay rise. This pursuit of money often leads many parents into giving away up to 60-90 hours of their week to their work. To me, that seems crazy and is a clear example of people ‘living to work’ rather than ‘working to live’. And, unfortunately, in today’s Western World, that way of living (working) has become acceptable and considered to be normal. It’s very common to see families putting their kids into day care just so they can work and make enough money to pay the bills (and the day-care fees). I feel that is such a sad situation for families to be in because that means they are giving away their precious time to their employer rather than using it to enjoy life with their loved ones. But what are they supposed to do? Especially when the cost of living is at all time highs and it has become common place for many families to need two breadwinners in the home in order to make ends meet.
Well, whilst MAKING money is and always will be an important part of a family's Financial Planning, it is not everything. In fact, it only represents 1/3 of the picture. The other 2/3 are what I refer to as the M&M concept. One of those M’s stand for MANAGING your money and the other M stands for MAXIMISING your money. MANAGING your money relates to your Spending and Safety Strategies whereas MAXIMISING your money relates to your Saving Strategies. These two M’s are where families need to focus their attention (once they are MAKING money) if they truly want to build their wealth and achieve greater levels of financial freedom in the future.Unfortunately, many families overlook and ignore these two important areas of their Financial Planning and only focus on MAKING money. But in doing that, they unconsciously keep themselves trapped in the rat race of ‘living to work’ forever. That’s because they are working hard for their money and not making their money work hard for them.
For many families, finding themselves in this situation of trading their time for money is not their fault. They simply don’t know any different. It’s something they’ve been taught to do all their life. Think about it, as children all the way up to becoming young adults, we are put through an education system which is all about teaching us the skills for getting a job and making money. But no-one ever teaches us how to manage and maximise the money we make from our jobs. There aren’t any Financial Planning classes in high school… So, from the outset, most people are set up to fail because no matter how much money they make, if they don’t have the knowledge or skills to manage and maximise that money, they will always be trapped in the rat race of ‘living to work’.
On top of that, this idea of only focusing on MAKING money is also perpetuated outside of our school system. In society as a whole (and in the media we consume) we are constantly bombarded with subliminal messages that tell us that career success, socioeconomic status and income earning abilities are all we need to focus on in order to be happy and gain more self-worth. And hidden within those messages is a belief that hitting a certain income amount is all that we need in order to be happy. But after having worked with thousands of people during my career, I can tell you that is not the case at all. There is no magic number to reach. I have met many different people all earning different levels of income and no matter if they were earning $100,000 per year or $500,000 per year, if they weren’t managing and maximising their money properly, they were often in very similar situations – unhappy, living pay cheque to pay cheque and chasing more money because they believed doing so would fix all their problems. In my experience, people having more income does not necessarily mean they have more financial freedom. In fact, in many cases, more income usually just means more expenses and more debts. Unless people are focusing on the other 2 M’s (MANAGING & MAXIMISING), it doesn’t matter how much they MAKE, they are usually feeling financially stressed and living in the Financial Frustration zone.
The thing to remember here is that you don’t need to MAKE lots of money to achieve greater levels of financial freedom. Many of the clients I work with are regular families earning between $150,000 - $200,000 per year combined as a household. This usually means both mum and dad are working and earning ordinary incomes or one parent works for a high income while the other raises the family and works part-time or not at all. As you can see, these families are not MAKING tons of money. But once we start applying the M&M concept to their financial situation, they often see their financial stress levels go down and their financial freedom levels go up as a result. And, all without having to work any harder or put in more time at the office. Instead, by simply learning how to better MANAGE & MAXIMISE the money they MAKE, they can then optimise their Spending, Safety and Saving Strategies and achieve greater levels of financial freedom.
But how do they do that I hear you ask? By building a strong and stable Financial Pyramid!
Keep an eye out for my next post, where I'll be sharing details about the Financial Pyramid concept that I use to help families optimise their Financial Strategies.
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