How Long Could You Last?

A Life Changing Event.

By Geoff Doidge

This past year can boldly be called challenging as we witnessed the endless reports by the media ...

... regarding the doom and gloom of the ‘shockmarket’ crash, adverse comment on the property market, interest rates creeping up and then falling again dramatically and the impact on our economy compounded with the international credit squeeze. There has also been increased fears about affordability levels, tight credit, a potential decline in housing prices and unemployment. This is scary to most people and such a combination of events is obviously going to cause some problems for a number of people who are directly affected but it can also provide some real opportunities for savvy prepared investors.  

I often wonder how prepared Aussies are if things really go bad? What would happen if you lose your job or are hit by  unexpected expenses?  According to Citibanks Citi Fin-Q Survey, only 45% of Australians would have enough savings to last them just one month if they lost their job and had to pay their usual monthly outgoings. That’s a shocking statistic and shows how close to the edge many people are travelling. (Geoff's comment: Citigroup laid off over 50,000 workers recently so they should know!)

One month! But really we probably shouldn't be too surprised because I bet the majority of Aussies have no idea of how much they save or in fact where the money goes. I know this because I admit that I was one of them and the action I took to find out turned out to be my biggest life changing event.

Geoff's Life Change

From This!	To This!

I was going through a MLC (mid-life crisis) and MCC (mid-career crisis). I got a job in the Public Service (which got me nowhere), crashed my sports car and failed my engineering course. Going well so far eh?  I tried all the ‘get rich quick schemes’…nothing worked! And my efforts of making money on the ‘shock market’ were wiped out after a huge crash (Yes, I’ve been there). All of a sudden I was 40 years old with nothing to lean on except a history of failures. I had to take control of my life and my finances.

In 6 weeks I achieved more than I had in the previous five years - separating the “must pay” from the “choose to pay” and establishing a 10% savings pattern. The result of this was so profound that it allowed me to leave work forever and increase my assets by over 100 times… The answer was in the Money Finder, a formula for finding spare cash within your budget. It tracks down all of your spending and allows you to identify where all your hard earned income is going. I know this can save you money because I used it and found enough extra cash in one year to allow me to buy a block of flats. The flats were bought for $175,000 and are today worth $1,500,000. And it all came from the money found with the Money Finder.  Use it properly and you will find money you never had before.

Geoff's Extra Tips

(Note: this is what worked for me, but you do need to seek your own financial advice for your own particular circumstances)

• Complete the money finder and find out where your money is going.
• Save 10% of your income straight from your pay (Pay yourself first).
• Continue until you have a 6 month minimum buffer. This buffer must never be touched. The buffer is your life raft. It will keep you afloat and above water if the ship goes down.
• Establish ready access to funds via LOC (Line of Credit). You don’t use it but you have it if all else fails. How much interest do you pay on an undrawn Line of Credit? None!
• Set up a 100% offset account against your home loan and pay your salary in and your expenses out of this account. This has the effect of using every dollar to cut your interest bill but still having full access to the cash when you need it.
• Join Flybuys and pay all your bills via your credit card. If you can’t trust yourself with a credit card this is not for you. The idea is to cash in the points, not for a flight, no... you cash them in for a $100 cash card to get free food. Check it out. I pay my rates insurances etc and use the points to buy non-deductible food.
• Use fuel discounts religiously. Yeah, It’s peanuts but it all adds up.
• Cut back on the ‘big night out’. One big night out can absolutely blow the budget so until your finances are under control - Uh Uh.
• Buying your lunch. Most people think it’s the big expenses but it’s the little stuff that gets under the radar.A pizza here, a latte there and there’s fifty bucks gone.
• The Gym membership goes (walk your way to wealth), the magazine subscription goes (you read it at the library)... ruthlessly examine every unnecessary expense until you are in the black.

Then follow the instructions of the Money Finder saving 10% of everything you earn and you will be on your way.

Yes we have some challenges but take it from me if you have your finances under control and your life raft (buffer) in place you will weather the storm even if the ship goes down. The feeling of confidence of seeing that buffer build up is hard to describe and when you are ready you can use some for investment like I did for that block of flats. That was the starting point for me to leave work forever 6 years later.

Your Money Finder can be downloaded by clicking here.