With a good job and decent pay, it is often safe to assume your savings account should grow! When you find yourself struggling, even living paycheque-to-paycheque for a period, it’s frustrating. So, where’s all of your money going? Let’s find out!
Where is your money?
Money can be found going to four places at the end of each month: spending, saving, paying back debts, and investing. Generally, how you prioritize these four different areas would affect the growth or depreciation of your money. The way you think, then, directly affects the way you prioritize, and the way your money grows or depreciates. Borrowing Richard Kiyosaki, author of Rich Dad Poor Dad’s theory on the three different types of thinking will help narrow down the reasons why your money is growing or depreciating. The three different types of thinking Kiyosaki says are: poor thinking, middle thinking, and rich thinking.
Be a Rich Thinker
Based on the names of the three different types of thinking, it is obvious that your goal is to become a Rich Thinker (if you’re not already)! Rich thinking means you prioritize saving and investing your earnings, spending only what is left, and having a good financial plan. Poor thinking, on the other hand, is instant gratification. Poor thinkers often spend first, and only save and invest whatever is left. If yours savings and investments aren’t growing or growing as fast, you’re probably modeling poor thinking. It is best to sit down with a financial planner to actively become a rich thinker, and to identify your goals and how to reach those goals.
Start with a plan
A good financial plan is the start of long-term wealth! An income ratio is simply your expenses divided by your income. Your expenses will include things like mortgage, rent, taxes, gas, and groceries. Within your financial plan, you should have a budget sheet. A budget sheet will help you locate all of your expenses and to find out your income ratio. An ideal income ration should be 80 per cent or below, if you have expenses like rent or mortgage. Having a good financial plan will tell you where you are financially, identify your financial goals, and show you your path in reaching those goals. Checking in with a financial planner to set financial goals and to figure out whether you’re on track in reaching these goals is a great way to get started!
About author: Christian Dy is the senior advisor at Latitude-West Financial. For the past 10 years, he has been giving workshops to new couples and graduating students from UBC (Medicine, Dentistry, Law, Education, Business) helping them to understand their financial options before transitioning into their next stage of life. You can visit his website to sign up for his upcoming workshops.