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Financial Understanding + Responsibility Yields Independence

WE BREAK FINANCIAL INDEPENDENCE INTO SIMPLE, MANAGEABLE PIECES

Finance and Fury will be focusing on helping you define your aims, and increase your knowledge and ability so you can make the best financial choices.

Oct 22, 2018

Welcome to Finance & Fury!

Today’s we’ll be looking at how to start, once you’ve set your financial goals. This is the starting point for anyone looking to get a plan in place.

  1. We have talked about goals in past episodes, but we haven’t really gone into much depth.
  2. Goals and Reality – Setting goals and then making it a reality

So, where do you start? If you have your financial goals in place that’s a great start.

  1. It is about having a strong foundation for the plan and covering the basics.
  2. What are the basics to start a plan? We will look in depth at each one of these and what to do with them
    • Budget
    • Debt Management
    • Personal Balance sheet

The Foundation Building Blocks

  1. Budget: Cashflow is King
    • Cashflow Components - Income, Taxes, Net Cashflow
      • Gross income - What you get from employment or investments
      • Taxes (what is taken out) - Based on marginal tax rates which progresses in brackets
        • Tax Free Threshold - the first $18,200 at 0%, then the next tax bracket is 19%, etc
        • Then, you need to add on the Medicare levy which is currently 2%
      • Net Income/Cash flow – which is gross income minus taxes
    • Net cash flow uses
  2. Debt Management
    • Bad debts - Personal Debts or non-investment assets that have debt attached to them.
    • Avoid at all cost – it’s selling yourself down the river
      • Uses cash flow – To repay loan
      • Works like a negative investment – Costs you interest, up to 21%
    • Don’t get into too much bad debt – for example: Credit cards and personal loans
      • $10,000 of a personal loan
    • If you have personal debts make a priority to get rid of it
    • Good debt – Plan and manage
      • Negative gearing – Can be good for high growth investments
      • Goes against the budget metrics – Only as good as getting your marginal tax rates back
  3. Balance Sheet
    • Starting point – Types of assets
      • Lifestyle – Ones used for personal use – Personal Home, Cars, etc
        • The ones that Bad Debts are attached to
      • Investment – Assets for investments: Shares, Property, managed funds, etc.
        • Good debts are attached to investment assets
        • This should be a main focus
    • Targets for investment advice
      • Fill in the gap – The Rule of 20 allows you to determine roughly what you’d need in the future
      • This is where you can keep track of your goals

This is the starting point

Now you need to make a plan, and then implement it

  1. Get a budget in place – Increase what you’re putting towards your goals
  2. Stay out of personal debt – pay off debts based on level of interest. The higher the interest costs the more important it is to pay this off quickly.
  3. Use a balance sheet in order to keep track of your progress towards your goals.