Winning the money mind games
Success in generating long-term wealth has a lot to do with awareness of the tricks money can play on your mind. How many of these do you recognise?
Money and emotion are strongly connected.
Purchases often mean something to us personally. They broadcast our identity. They
make us feel special. They reward us for hard work. But in the background,
behind our most basic reasons for spending or saving, our mind plays further
tricks. If you become aware of these tricks then the added clarity will benefit
your wealth generation.
1. Bigger is better
Consider the purchase of a new car. You
have just spent $35,000, so when the salesperson offers you a special deal – a
$700 upgrade pack including a towbar, carpet mats and alloy wheels – it seems
like a bargain. But would you happily go out today and spend $700 elsewhere?
How many grocery trips does that represent? And many of us will grab the
opportunity to buy a $100 item that has had its price slashed to $50. But if a
$5000 item is discounted to $4950, then the $50 saving is not nearly as attractive.
Remember that a dollar is always worth a dollar, no matter how much or how
little the related purchase happens to be.
2. Discounted = good value
It is increasingly rare to see a price
ticket that is not marked down. But is the $130 jacket, marked down from $210,
actually better value or better quality than the $100 jacket in the shop next door?
Ignore the higher price (known as an ‘anchor’, intended to make the discounted
price seem cheap) and consider the actual value. This works in several other
situations. For instance, many restaurant menus offer a high-priced entrée and
main to make the other options seem cheap. And in your local electronics store,
the fancy $500 toaster is only really there to make the $140 toaster seem like
a bargain.
3. Gifted money is not worth investing
You receive money as a gift so instead of
adding it to savings, investment or retirement funds, you put it straight into
the spending budget. Your mind is de-valuing the money, because it was a gift. In
other words, you didn’t have to work for it, so it is somehow of less value or
not worthy of investment. But if you regularly invest a specific percentage of
your income, then consider investing the same percentage (or more) of gifted
money.
4. Small change is of little value
How much small change do we leave lying
around, or in a container, or in the glove box, then happily spend it on little
things without a second thought? But consider that a small money box for
children can easily hold $400 in gold coins, and suddenly that small change
becomes a very real driver of financial change. The same goes for small pay
rises, which may not seem to make any difference right now but can make a very
real difference over the long term.
5. Money buys happiness now
Buying something today produces a very
measurable result. Saving for the future and putting money into superannuation
or investments is difficult to quantify in terms of lifestyle. So make it quantifiable.
Figure out your average monthly expenditure and buy future months of happiness
with your savings and investments.
6. Reduced mortgage repayments represent a saving
In an environment of low interest rates,
many home owners have been offered a drop in mortgage repayments. That is great
for our household budgets, right? But consider that if you drop your repayments,
you will spend more on the mortgage in the long run and will lose more money in
interest, as you take longer paying off the mortgage compared to keeping your
repayments at the same level.
Changing your money mindset
If you want to know more about how to
separate money from emotion, your financial adviser should be the first person you
speak to. They will help you change your money mindset so you can recognise
traps and win the money mind games.
For more
information
Speak to us if you would like to
understand how this information might impact your financial situation.
Ridgway Financial Services
101 Neil Street,
Toowoomba QLD 4350
P 07 4688 9111
F 07 4688 9199
E count@ridgwayaccounting.com.au
W www.ridgwayaccounting.com.au
Toowoomba QLD 4350
P 07 4688 9111
F 07 4688 9199
E count@ridgwayaccounting.com.au
W www.ridgwayaccounting.com.au
Important
information
Ridgway Financial Services are authorised representatives of Count Financial. This document contains general advice. It does not take account of your objectives, financial situation or needs. You should consider talking to a financial adviser before making a financial decision. This document has been prepared by Count Financial Limited ABN 19 001 974 625, AFSL 227232 (Count) a wholly-owned, non-guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124. Count Wealth Accountants® is the business name of Count. Information in this document is based on current regulatory requirements and laws, which may be subject to change. While care has been taken in the preparation of this document, no liability is accepted by Count Financial, its related entities, agents and employees for any loss arising from reliance on this document. Count Financial is registered with the Tax Practitioners Board as a Registered Tax (Financial) Adviser. However your authorised representative may not be a Registered Tax Agent. Consequently, tax considerations are general in nature and do not include an assessment of your overall tax position. You should seek tax advice from a Registered Tax Agent. If you do not wish to receive direct marketing material from your adviser, please notify your adviser by email, phone or in writing.
Ridgway Financial Services are authorised representatives of Count Financial. This document contains general advice. It does not take account of your objectives, financial situation or needs. You should consider talking to a financial adviser before making a financial decision. This document has been prepared by Count Financial Limited ABN 19 001 974 625, AFSL 227232 (Count) a wholly-owned, non-guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124. Count Wealth Accountants® is the business name of Count. Information in this document is based on current regulatory requirements and laws, which may be subject to change. While care has been taken in the preparation of this document, no liability is accepted by Count Financial, its related entities, agents and employees for any loss arising from reliance on this document. Count Financial is registered with the Tax Practitioners Board as a Registered Tax (Financial) Adviser. However your authorised representative may not be a Registered Tax Agent. Consequently, tax considerations are general in nature and do not include an assessment of your overall tax position. You should seek tax advice from a Registered Tax Agent. If you do not wish to receive direct marketing material from your adviser, please notify your adviser by email, phone or in writing.
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