Finance Roll

Most people are well aware that in order to improve their finances and even become wealthy, they need to follow a process that takes them from being in debt to having financial assets that provide them with an income.

If so many people are aware of this, why do so few ever acquire investments?

There are two reasons: firstly, many people are already living on more than their income each month, and so finding money to invest often seems unlikely. Secondly, there is a common misunderstanding that investing is complicated.

By following these five steps, you can easily save a regular amount of money sufficient to act as your investment money:

1. Reduce your entertainment spending - chances are, you don't know exactly how much you spend on entertainment each month, and the total is probably higher than you would guess. Common entertainment splurges are alcoholic drinks, cigarettes, nights out drinking, trips to the cinema, DVD rentals and family activities like bowling and swimming. All of these quickly add up, especially if you are paying for two (you and your spouse) or four (you, spouse and two children) people each time. Rather than seeing entertainment spending as a necessity, you must be realistic about the amount you can afford to spend on these things each month. What can you sacrifice to help your investment budget?
2. Take control of your collections - you may or may not be aware of your collections; the things you buy time and time again, despite having similar things already. The obvious cliche collection is the woman with 100 pairs of black stilettos. While this is an extreme example, chances are you have too many of a certain thing already, whether it be handbags, blue jeans, summer jackets, luxurious bubble baths, tea towels or power tools. Identify what your collections are and assess whether you need all of the items you have already. Sell any you don't use or pay attention to, and commit not to buy any further of these for six or twelve months. Be aware that when you are around these objects, you will feel a temptation to buy. Don't give in.
3. Watch your food spending - meals to celebrate someone's birthday, the weekly grocery shop, the chocolates to cheer you up, the lunch bought each work day, the ice cream while walking the dog, the Starbucks on the way to the office, the takeaway when you're just too tired to cook... food spending takes up a huge chunk of most people's income each month. Unless your end goal is to be obese and unhealthy, this is a habit well worth overcoming right away. Also, a shocking amount of food bought ends up being thrown away and wasted. You are literally throwing away a portion of your income each month by buying food that will not be used. To get your food spending under control, make sure you plan your meals in advance each week and buy accordingly, never go food shopping while hungry or without a list, and don't make the mistake of aimlessly wandering up and down every single aisle in the supermarket. Calculate how much your shopping will total and take that amount in cash - do not have a debit or credit card with you. If your shopping exceeds the amount of cash you have, replace some less essential items. Buy cheaper brands of cleaning products, toilet rolls and alcohol. Arrange alternative celebrations for birthdays and ring a friend when upset - don't treat food as a reward or comforter.
4. Buy less 'treats' and impulse buys - do you have a gym membership? When was the last time you used it? The majority of people who have a gym membership will actually pay less over the course of a year if they cancel the membership and pay for each gym session as they attend. Cancel your membership now - unless you really go several times every single week. Consider your magazine and newspaper subscriptions. How many of these can you access free online? How many do you not even get around to reading properly? With the amount of free information available online, there is rarely a need to pay for any magazines or newspapers. How often do you buy CDs or DVDs? Most CDs can be purchased at a lower price online, and as most DVDs are watched only once, switch to renting them for a fraction of the price. If you're wondering how you will manage without these 'treats', consider if you are trying to hide from some real pain that can be better managed.
5. Hide from the cash machine - give yourself a weekly budget and withdraw this amount at the beginning of the week. Then hide your credit and debit cards (or give them to a friend who will not give them back to you until the next week) and force yourself to spend just that amount. This will force you to closely examine your spending and will change the way you think about money and spending.

By following these five steps, you will have an extra amount of free cash each month that can be invested however you choose.

If you are new to investing, discuss your options with a Wealth Coach.

In no time at all, you will have an investment plan prepared and will be on the road to controlling your own finances.