Episode 32

The Foundation Building Blocks of your Financial Future: Budget, Debt Management, and your Balance Sheet

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.

Say What Wednesday: Baby on Board! The Ultimate Guide to Maternity Leave

Welcome to Say What Wednesdays, where every week we answer questions from you guys, the listeners. This week the question comes from Mary; “Hey guys, love the show. Just wondering about what entitlements, I can receive if I go on maternity leave? I’m currently...

Say What Wednesday: The relationship between shares and property in Australia

Say What Wednesday The relationship between shares and property in Australia Welcome to Finance and Fury’s ‘Say What Wednesday’. Today’s question is from John. John asks, “What is the relationship (if any) between shares and property in Australia? Should we expect the...

Assets that will survive a financial correction

Welcome to Finance and Fury. Today’s we’ll be talking about what assets will survive a financial correction. The assets that that people still have confidence in. Confidence is key! In any asset, confidence is what is required.     Why is confidence important? If...

How do I make an Investment Philosophy?

Welcome to Finance and Fury Today we are going to talk about how to implement an investment philosophy. It is a coherent way of thinking how you fit into your investment plan. It is a mission statement to follow when investing. It can help with understanding the types...

Porsches, Paintings and Property Prices: Alternative investments and what they can mean for property and the economy

Episode 18 Porsches, Paintings and Property Prices: Alternative investments and what they can mean for property and the economy Alternative investments and what they can mean for property and the economy Classical Car Index The CommSec Luxury Vehicles Index lists the...

Furious Friday: Is social media at a tipping point?

Furious Friday Is social media at a tipping point? Today we’re looking at the market environment for Facebook, Google, Twitter, YouTube etc… their costs are going to far outpace what their revenues will be. Are they on their way up, or on their way down? EU copyright...

Does Democracy incentivise demand side economics?

  Welcome to Finance and Fury, the Furious Friday edition I have identified a thread through history in the emergence of demand side democratic societies. Where there is a centralized authority, there is a need for ever increasing demand of the mobs and its path...

Will enforcing recycling legislation help to save the environment?

Welcome to Finance and Fury, the ‘Say What Wednesday’ Edition. We recently had an awesome email from Zoe about a potential market solution following the ‘Solution for pollution’ episode last week; “We sort our cans from our mixed recycling in our Sydney CBD office...

Furious Fridays: How the Fair Go mobilises Australians

Welcome to Finance and Fury the Furious Friday edition. This is part 4 of the mini-series. Hope you all had a good Christmas. In the last episode, we talked about how the population is mobilised in a political spectrum. Today we talk about what the population is...

Say What Wednesdays: Should I lock in a fixed rate on my home loan with interest rates so low?

Say What Wednesdays Should I lock in a fixed rate on my home loan with interest rates so low? Welcome to Say What Wednesdays – Where we answer your questions about personal finance and the economy! This week’s question comes from Michael. His question related to...

Pin It on Pinterest

Share This