Managing And Protecting Your Money

It sounds simple but it's a principle that's very often forgotten when it comes to money. If you spend more than you earn, you'll end up in debt. Spending as much as you earn probably won't land you in debt until or unless you end up with an emergency you're not prepared financially to cope with. Spending less than you earn on the other hand has many rewards – financial freedom, room to invest, a next egg to cope with emergencies, and so on.

The mining industry pays well but so many mining employees and their families still wind up in debt. It's very easy to get carried away and start spending up when there's a lot of money coming into the bank account on a regular basis. Plus there's the fact that mining, especially if you're in a FIFO role, can be a hard life that 'encourages' substance abuse as a coping mechanism. Those 'substances' don't come cheap and people can wind up blowing a major part of their income on them.

All financial experts will tell you coming up with a budget is the first step to managing your money properly. Therefore, when you land your well paid mining job, that's the first thing you should do if you want to manage and protect your money. A good budget or financial plan has 4 main areas.

First, you need to factor in your set expenses and allocate enough money each month to cover those. Typically, this may be around 50 to 60% or more of your income. Fixed expenses include rent or mortgage payments, electricity, gas, phone, groceries, school fees and other expenses that remain consistent from month to month. It's a good idea to set up direct debits to pay as many of them as possible; that way you don't have to worry about remembering to pay them.

The second consideration in a good budget is implementing a savings plan for both short term and long term savings. Consider saving at least 5 to 10% of your income to cover holidays, large purchases, and emergencies. If your employer will do it, get them to put a certain amount of your pay into another account away from your spending account. Otherwise, look into setting up something like an automatic recurring transfer to move it into another account when you get paid. Again, if you make it so it's done automatically without requiring you to do it manually you stand a far greater chance of having it happen regularly!

The third part of good financial planning is getting your money to earn you more money. A good idea is to start out by budgeting to save around 10% of your income with a view to investing a portion of it once there is enough for something like a term deposit or an investment fund. There are plenty of good investment plans around. Most banks offer these types of long-term investment accounts but if you shop around you can compare rates and returns. Alternatively, you can talk to a financial advisor. Even simple, low risk investments with their lower interest rates will make money for you and the longer you leave it there, and let the interest roll over into the principal amount, the more money you'll end up with. Adding additional funds to it as your savings permit is also an excellent way of investing and saving for your future. If you want higher interest rates and returns, you'll need to look at higher risk investments. Carefully weigh up all your options with these though because, whilst they may pay better interest, there's always the risk of things going wrong and you could ultimately lose the lot.

Finally, the fourth part of a successful budget is a bit like those diets that allow you to indulge every once in a while. Quite simply, if you factor in some spending cash that you can blow how you want, it takes away a considerable amount of the 'pain' of watching your hard earned cash disappear on bills! If you've allocated around 60% for bills and are putting 10% into a savings account and 10% into investments, you'll have 20% left for spending on other things like entertainment and buying those things you don't really need but really want.

Don't think you can spend that much on having a good time? If you're earning a good wage, and many in the mining industry are, then consider upping the amount you put into your savings or into your long-term investments. Your future self will thank you!

However you manage your money, the most important considerations are being able to pay your living expenses, and planning for the future. For someone in their 20's and even their 30's, the 'future' seems a long way away but those who have reached that future will tell you the older you get, the faster time rolls by. Therefore, the earlier you can start implementing good money management policies, the better off you'll be when that far distant future is suddenly the present.

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Wednesday, 25 November 2020
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