Because I help people who are struggling with debt and money problems, about twice a week I receive a phone call from a first-time caller in financial difficulty.
My first question to them is “Can I help?” And during our conversations, they tell me what they have done to try to improve the situation.
Here are some of the things they usually say:
- I had my mortgage reviewed to get the lowest rate possible
- I worked out my needs versus my wants
- I tried to budget but it’s not working
- I do my grocery shopping online so I can stick to my budget, not buy on impulse
- I prepare a weekly meal plan and only food shop once a week
- I stopped buying cigarettes and alcohol to save more money
- I switched to the cheapest mobile phone plan I could find
- I grow my own vegetables, and I recycle whatever I can
- I have a separate envelope for each bill, and each holds the right amount for when the bills arrive
- I found all of the bills for the last 12 months, and worked out the total annual amount for each bill. I divided this amount by 52 and added 15% to come up with the amount I would need to put aside each week to ensure I pay all my bills. I then set up BPay or direct debit for each bill. Now I only have a small balancing amount to pay when the bill arrives.
All of these ideas are really good, and I admire anyone who goes to this extent to try to improve their own situation. It takes a lot of courage to not only acknowledge the problem, and its gravity, but also to call a stranger to seek guidance so you can find a solution that would work.
I really encourage anyone who finds themselves in financial difficulty to please call. If you call me, you’ll soon realise that your money problem may be only in your head!
What do you mean it’s all in my head?
Have you ever watched a zombie film late at night, and then you started to hear weird noises as soon as you climbed into bed? Like the dripping tap that you thought was the sound of the zombie axe murderer coming to kill you. You become afraid because you’re playing the scenes from the movie over and over in your head. You didn’t get up to investigate the noise. If you had, you wouldn’t have needed to worry about the zombie all night.
Well, it’s the same with money problems. When we have a problem, it’s human nature to go over that problem again and again in our minds. We stress because we often exaggerate the problem so much that we turn an ant hill into a mountain.
But do you know why we think we can’t solve our money problems? It’s because we only know so much about solving our problems!
That’s why I encourage you to call me. We’ll look at what you’ve tried so we can work on a new plan.
Until then, here’s a quick guide to help you get back on track.
How to start your own money plan
This guide is a simple tool I developed to help you in this situation. I call it The I.C.E Pack (In Case of Emergency).
Here’s how it works:
First, write down the problem and break it down into five sections:
- What I Own
- What I Can Sell
- What I Owe
- My Superannuation
Now we’ll work with each section.
Section 1: Budget
A budget is a listing of the amount you’ve got coming into your household and the amount going out – what you spend on a weekly, monthly or annual basis.
Money coming in includes salary and wages (after tax), maintenance from an ex-partner (for you and/or your children), investment income, and any Centrelink benefits.
Money that you spend includes:
- Housing costs (mortgage or rent, building and contents insurance, and service charges)
- Housekeeping (food, toiletries, school dinners, meals at work, cleaning materials, pocket money and pet food)
- Council rates and strata fees
- Utilities (gas, electricity and water charges, TV costs, and cable TV)
- Telephone and internet (including what you pay for your children)
- Travel expenses (public transport and cost of running the car, e.g. the rego, insurance, repayments, servicing fuel)
- Insurances (private health and any other insurances)
- Childcare and school costs, including uniforms
- Medical costs and vet costs for the pets
- Birthday and Christmas presents
- Small cash expenses when you’re out and about (coffee, lunch or Friday night drinks)
The purpose of the budget is to show, on a regular basis, whether you have a surplus (your income exceeds what you spend) or a deficit (your income is less than what you spend).
Once we know this we can determine how to move forward.
So if you have a surplus, how can we use it to help you reduce your debt?
And if you have a deficit, then are there any expenses which can be reduced?
I will be covering more on budgeting in my next blog.
Section 2: What do you own?
This is the positive side of your personal balance sheet.
In the next section, list everything you physically own and when it was bought, how much you paid for it, and what it is worth now. Also note any associated debt.
Include everything like the property, cars and bikes, boat, caravan, jet-ski, furniture, jewellery, surf boards, computers and electronic goods.
Section 3 – What can you sell?
From the list of what you own, make a new list of what you can do without that you can sell through a garage sale, on Facebook or on a website like Gumtree. We all have a shed, garage or roof space full of unused junk. Go through yours and build your list.
Include a description, realistic value, priority (can you sell it now or later), how you plan to sell it, plus any associated debt which has to be cleared.
Be brave, get it out, dust if off and put it up for sale! This is such an easy way to raise some quick cash to pay off an overdue credit card.
Section 4: What do you owe?
Your debts are the negative side of your personal balance sheet.
List everything that you owe – all of your debts from mortgage, credit cards, personal loans – everything. Who do you owe money to, who in your household is responsible for the debt, amount outstanding, interest rate, date due, ongoing repayments, frequency of payments, and any break or exit fees due.
This section needs some extra work to make it of value. With your debts, the devil is in the detail. So it is important to put the work in here to get this information together and for it to be accurate.
If your assets are more than your liabilities (debt), then things may not be as bad as they first appeared. But if your assets are less than your liabilities (debts), there will be trouble ahead. You should get some help.
Section 5: What’s in your superannuation?
Superannuation is important because there are conditions of release which may allow you to access some money to help when things are really bad. For more information search “Early access to your super” on the website: www.ato.gov.au.
List all your funds including provider, account number account holder, balance and any other notes. Where possible, get online to obtain a current balance.
Do your money plan to get back on track
When you have finished the ICE Pack look at:
- Your budget – is there excess spending that you can trim to give you a surplus?
- Your budget – if you have a surplus, then you can start tackling your debt.
- Your assets vs liabilities – do you own more than you owe?
- What you can sell – can you pay off that overdue credit card or debt with a garage sale?
- Your superannuation – do you have multiple funds you can consolidate. If your back is “against the wall”, is there scope to access your super early?
Having surplus cash flow is so important, because it allows you to deal with your debt, live the life you want and to start building some wealth. I talk about this in my blog “Life ate my dreams”.
The objective is to be in the position to spend what is left after saving.
If the ICE Pack shows that you really are in trouble, then any reputable source of advice or help is going to need this information to help you to deal with the problem.
Nothing is easy. And after you’ve put in the hard work to get your ICE Pack together, you’ll see how much it was worth the effort. You can get your finances under control, and you can move closer to the life you want to live.
Want the ICE Pack template instead? Ask me today
If you’re trying to get your money on track, we can work together to create a plan to help you to achieve your financial goals.
Call Mark Chaston on 9524 2529 to obtain your free copy of the ICE Pack template or send a quick email with “ICE Pack” in the subject line. Do it now, while you’re still here.
Information current as at 18 May 2016 –
Mark Chaston is an Authorised Representative (No. 263236) and Chaston Financial Solutions Pty Ltd ABN 18 091 037 366 is a Corporate Authorised Representative (No 1244249) of ClearView Financial Advice Pty Limited ABN 89 133 593 012 AFS Licence No. 331367 GPO Box 4232, Sydney NSW 2001. The information provided on this webpage is intended to provide general information only and the information has been prepared without taking into account any particular person’s objectives, financial situation or needs. Before acting on such information, you should consider the appropriateness of the information having regard to your personal objectives, financial situation or needs. Please click here https://financialplannerbaldivis.com.au/ to find out more about the services we offer.