Hi, and welcome to this week's episode of Money with Alpha. This week, I wanted to talk about the overarching pitfalls to avoid when it comes to money. Its something I see quite a lot, so I'll run through. There are five main ones I wanted to go through today, and then I'll unpack each of them. So these are the five main pitfalls to avoid when dealing with money. The first is not reflecting on how far you've come. Number two, underestimating the power of compounding both in debt and in investing and savings. Number three is thinking change is in the big actions that you take. Number four is confusing the avoidance you have for looking at money with a lack of ability to actually manage money. And number five is, is judging yourself for not having done something sooner. Those are, I know there's, there's mindset and some practicality kind of built in with that, and there's, each of them have an element of both, which is why I really tackle mindset and the pragmatic side of money together, because to me, they're interlinked. You can work on your mindset, but then unless you actually know what to physically do with money, it becomes quite frustrating because then you're like, okay, I'm working on my money. I'm, I'm starting to, to feel more abundant and, and powerful here, but I don't actually know what to do still. So that's why I look at both. So I'll go through each of those and I call them pitfalls because they're the ones I see the most holding people back. And I sometimes wish I could just, like, grab some, some of my clients by the shoulders and just go, you can do this. There's so many things that are holding you back that are not even real. Real. They, that you feel like they're real. So the perception is reality, but I, I don't, I see different possibilities and different capabilities for you. So take this with love, what I'm going to say. And some of it may resonate, some of it may not. And you may have moved past some of this already, but there's, there's elements in there that even I learned from as well. When I, when I record and write my stuff, I'm like, yeah, I, I, there's some lessons in here for me too, because, you know, we're humans and we're constantly evolving. So that first one I mentioned, which is not reflecting on how far you've come, this is a really big one. And I probably didn't fully appreciate that until I read the book the Gap and the Gain by Dan Sullivan and Dr. Benjamin Hardy. If you haven't read it, fabulous book. I tend to read it at the end of every calendar year. I didn't this year, though, because I felt like I didn't need to this year. I may again next year. But I've read it for the last two sort of Christmas holidays in, In a row. And I got more out of it, obviously, the second time, because, you know, there's some growth that happens and things that we're ready to, to hear and read. But a lot of us, I notice, and, and this is, this is where there's a. There's a mismatch between the beliefs that we have, who we believe we are, versus the reality. And sometimes it takes a third party, someone outside of your sort of close realm to actually point that out. When you go through the things that you've actually achieved and then you start to reflect on them and you're like, oh, hang on a minute. So some of these beliefs that I have, they're actually not true anymore. And I used to believe that you had to believe something different. To what, that you change your belief in terms of. I want to believe this about myself. And then you'd work towards that, but it's actually a bit of both. So sometimes you've actually disproven things just by the mere fact of, of living your life and growing and evolving and having experiences and pushing yourself as as a human, that you kind of look back. Oh, right. Look at all those things. That's, that's pretty cool. Like, I'm actually quite capable. I like this. And then you look at your beliefs and you're like, oh, okay, so if I believe that, then how can I have made that happen? The two don't match. So it's, it's. And then sometimes it's a little bit of like, I'm. I feel like there's a belief holding me back and I, I haven't disproven it yet, but I need to believe that I can. So there's, there's looking at both. So that reflection exercise is really, really good because it also bol. Bolster you. Bolsters you in those times where you lack confidence, where you lack that belief in yourself, possibly because there are people around you who aren't necessarily going to help support you in the journey that you want to be on and the business that you want to grow and the life that you want to lead, in which case find a better group or a different group. And if it's your family and you can't do much about it, then just limit the conversations that you have with them. I've had to do that too over my lifetime as well. And it sounds a bit sad that you have to curate some of the things or conversations that you have with loved ones. But we're not all on the same path. And just because we're part of the same sort of gene pool DNA of a family doesn't necessarily mean that we're going to actually be aligned in a lot of things. So find your tribe. And whether that's clients or colleagues, I would suggest both. But that reflection exercise is really important because it helps to point out where things might be, A, missing or B, there that you didn't acknowledge in the way that actually is going to serve you going forward. So that's number one. Reflection number two then becomes, and I'm reading a little bit here to make sure I don't miss anything, is underestimating the power of compounding. This is compounding, when I talk about it here, is, is actually part of the financial vernacular and it is very much about compounding interest and compounding returns. So when you think of if you have a mortgage, you're paying compounding interest. So if you actually look at the life of the loan, you look at the value of the property that you've purchased, and then you look at the interest that you pay and then the principal, hopefully it's a principal and interest loan that you've got. And then you actually look at overall what you've paid for that property. Like, oh my gosh, yes, the faster I paid off because it becomes a tipping point when you're, you're paying off, paying, paying, paying, and you're paying more interest than principal at the beginning. And little by little that starts to tick over and you're paying more principal than interest over the life of the loan. And once you start, when you see that tick over that tipping point change, you'll see you pay off that loan so much faster. So the, the, the value of compounding then is working for you in the beginning. If you're not paying any extra off, compounding is working against you. Hopefully that if you can see my fingers, if you're watching this and you'll kind of see how things are flicking around. But then, same thing goes for whether it's saving or investing. Obviously the the rate of return is Different. So the interest rate for savings in Australia at the moment it's around 5% is probably the, the highest that you can get. If you're in the share market then you're probably between seven, well depends, you know, at any given moment it change on average around the 10% mark of a return. So obviously the, the value of your money grows at that rate over time. So the more, the bigger your balance, the more that compounding impacts it. If you're paying interest, the bigger the balance, the more interest that you're paying. But if it's in a saving and investing environment, the bigger the balance, the more returns you're earning. So that's, that's a really, that's a really important. If you don't get any other concept and when it comes to finances, compounding is one of the most powerful ones to actually understand. So please let me know if that has not made sense and you would like me to explain it again. I'm happy to because it's so important to understand that so reach out and I can even do an entire episode on that if if there's a few people who would like me to do that. So the power of compounding really important to understand and the reason that it's important to understand is that when you're making choices about your property, do I pay off my home loan first and do I invest? What is my, what is my interest rate? What am I paying? It's, it's important because you can then make choices about where you want to put your money. So if you have a certain amount of money, and I'm not saying it's finite because it can grow, especially if you're a business owner, that we want to grow and build our income our profitability in particular, but you want to be able to choose and you know, where do I put it? And it's important to be able to pay off your debt while building wealth at the same time. Because if you think about interest rates, even though in Australia they're still relatively high, they're around, most banks are charging around the six and a half, seven percent mark. That is still lower than the rate of return you could potentially get in the share market. And again it's, it's, you know, there's so many variables to that and there's markets and we can't predict the markets and historical returns, no guaranteed future, all of that kind of thing built into it as well. But we're looking at comparisons here. So if you think about that, you're like, okay, but I've got this huge loan balance or this big loan balance, and I've got a smaller amount sitting in in investments. Compounding, obviously will be more powerful the bigger the balance, but the percentages will still apply. So it's important to be able to look at, okay, well, I'm going to pay off this debt, but I'm also going to put some of it aside into investments so that I can grow that money as well, so that I'm doing sort of this at the same time. So you've got two going in different directions. One is grow, the balance of the loan is decreasing. And then the more you can pay that off and get to a certain point in your life that you can, you've paid off your home and then you can just invest and then whatever, and this is important, whatever you are putting into your home loan, start to invest that. It's very easy for lifestyle creep to kick in. And I have experienced that myself. Theres always something else that will, will be needed. And and then all of a sudden you're like, how on earth did I ever afford to pay for a home loan when my lifestyle is just barely breaking even? So it's, it's important to keep your eye on the ball with that one. And like I said, I have fallen into that trap myself. So compounding is a very important concept. Number three is thinking that the progress that you make is in the big changes. It actually isn't. It's in the incremental small changes that you make here and there. When I look at my, my money situation at the, at each year, and I tend to do it, interestingly enough, I do, I do some planning at the end of the financial year. But then, because in a financial year and calendar years are actually different, they're offset by six months. Whereas in other parts of the world, like in the UK it's March, in America it's December. So your, your years will all change. So at the end of my calendar year is when I tend to look at my overarching kind of budget breakup. And I use a pie system where I have percentages for where my, my net profit goes. Both in my business and my personal life. Because I still, I actually look at my personal finances like a business and I have like a net profit that I use for that concept as well. But I, it's little things like literally just as an example of how micro changes can make a difference about seven years ago. Now I think it would be micro investing. I started an account which just did roundups about 18 months ago. I decided to add in $10 a month just to see what would happen. The balance grew exponentially from there, and now I'm close to $9,000. And that's just literally, kind of. And I had actually, funnily enough, I had a goal of where I wanted to be with my. My investment portfolio. And I was looking at just my general investments. I hadn't factored in my micro. And I have a couple of micro investing accounts. I hadn't factored in my micro investing account. And then when I. I started put it all together, it's like, oh, I've actually exceeded my goal already. Huh I need to, like, boost this and make a new goal. Because otherwise. You kind of get a bit complacent and it's like, oh, wow, okay. So this is, again, that's leading back to the value of reflecting as well, because I had to have look at things holistically, which I do do, but I hadn't actually really connected the dots. So it's really interesting when you start to do that and it's those, those little changes, all those little, little things that you do on a consistent regular basis that actually will make the biggest shifts. Even just paying your home loan fortnightly instead of monthly actually makes a really big difference. I, I have an episode where I talk about that and it can literally shave off years and like tens of thousands of dollars off your home loan just by making that one change, you're still paying the same amount every month. You're just paying it fortnightly instead of monthly. Which sometimes is a bit of an adjustment from a cash flow, cash flow perspective. But once you get that nailed, it makes a big difference. And then you're like, oh, if I just add a little bit. And sometimes it can be as simple as adding $50 a month over the life of a 25 year loan that actually can save a few years. And who doesn't want to pay that loan off? Like, imagine paying it off at the age of 55 instead of 58, for example. You can do so much then in those three years. So it's the incremental changes that we make. Putting, you know, a hundred dollars a month into an investment account, putting $50 a month away for an emergency, putting another $50 a month away for holidays. Depending on the holiday that you want, you may need to put a bit more in there. And I, I do this review of my, my pie slices or buckets, if for one of a better way of expressing it, of what I do with my money. And this year I actually added one because I was like, you know what? I, that having all of these things in one area is still a little confusing. So I, I put, I carved something else out and created another slice in my pie. Obviously the whole pie still has to end up at, you know, 100% of of what I have available. Otherwise I'm overspending or over allocating. But and then I was like, great. And I've had a couple of bills come in that actually relates to that new slice that I made. I'm like, okay, yep, I'm so glad I did that because now I've got that money eyeballed aside for that and I Don't have to dig into another account and it can stay there and tick along for something else. So it just makes things easier when you can see all the key elements in your life as a category in various categories in your, your money management system. So, but it is the small changes. I'm a big advocate for that. I mean, obviously, yes, the bigger things happen, it makes it more obvious. But over time, compounding. And those small changes will definitely be more beneficial and easier to manage to mentally. The mental load is easier to put $50 away than to save for $50,000. If we have that in our minds, we will never actually even start because the idea of the 50,000 is just too much. So. But starting with $50, that's like, oh, I, yeah, I can find $50 and off you go. And before you know it, you're halfway there. 50,000 of monthly basis might take a little bit longer. And you can up at them. You can test the boundaries of what you're capable of financially. And then if you're looking at it every. I look at mine every quarter. You can look at it monthly as well. I do look at my business monthly, but I do my personal reflection quarterly. And then I'm like, okay, well that's, that's fine. Now I've upped that amount. Now I can see. Well, could I up it even more than that? Because I'm not feeling any squeezes anywhere. So off we go. So it's, it's about just that little. Pushing those limits little by little and then having that end goal and then you can marry the two up and get yourself there. But yeah, so that was. Number three is thinking that the that the big actions are actually going to make a difference. I had my little visitor come in and see that I'm on a podcast and go away. And. And so number four, then is confusing avoidance with a lack of ability. And I see this a lot because there's so many beliefs that we have around our ability to manage money. I hear a lot. Oh, I'm not good with maths. I was like, well, that's actually okay. And a. What does that even mean? For starters, most of us can do like, basic math anyway, and that's all you really need. It's just knowing what to do and understanding some of the fundamentals. Like, probably the most complex is the concept of compounding, really. Otherwise we know that 50 plus 50 is 100. Okay, that's great. If not, then you can use spreadsheets. You can use your calculator on your phone. You can ask ChatGPT if you want to, to calculate something for you and say, okay, well, if I have this amount now and I want to do this in the future, then what will I have? I personally prefer using calculators like in the Money Smart website. Its a lot easier and but it's. So it's up to you. I just like those better because they're dedicated to financial calculations. So don't confuse the fact that you're avoiding things with your lack of ability. We often can combine those two and go, oh, I'm avoiding it because I'm just no good at it. There's a deeper concept there. And there's a deeper reason behind it. So don't let that hold you back. Unpack why you're avoiding it, and don't make it about your ability. So then number five is judging yourself for not having done something different sooner. So this is something that we, as humans, and particularly as women, we do this a lot. We make judgments about everything around what we aren't doing well, rather than acknowledging all the things. And this is why that, number one, which is reflection, is so important. Its really, really important to actually have that reflection and that acknowledgement of what we're capable of. And rather than going, oh, I'm not good at this. Oh, I should have done this years ago. I hear the word should a lot. I would love to remove this word from our vocabulary because it is destructive. Because it's. It just. It stops us in our tracks. Oh, I should have done this, or I should have done this today. Oh, I didn't get to that. I should have bubble. Whatever it happens to be that comes after, I should have Just stop yourself in your tracks. Listen, have my words in your mind and go, okay, no, I'm just going to park that and go. Right. Okay. What will I do? Not what should I do or what should I have done? Because the past is the past. We can't. We can't change the things that have happened. And if it's going to cripple you, making decisions and taking actions for your future in the present, then it's got no place in your world. Absolutely no place at all. So look at what is going on and question why you want the things that you want. Because sometimes we avoid or we judge ourselves because it's not something we actually really want. We're kind of doing things because somebody else has suggested it or they've had an opinion about something, because everyone has an opinion. Or, you know, there's. You've read an article that says, oh, women at this age should have this much in their retirement account or their superannuation. And you're like, oh, my gosh, I'm nowhere near that. So then we go. We get so down on ourselves and go, oh, my goodness, I'm never going to catch up. So I'm just going to freeze because I don't know what to do to get there. And then this links back to thinking that all actions have to be significant. And then we underestimate the power of compounding, which is over time. So we don't do things. And we're like, oh, no, no, I have time still of some sort, so I need to do something now so that that time can still work for me. And then we don't reflect on the things that we have done, which actually disproves a lot of these negative beliefs that we're judging ourselves about. So see how all these pitfalls are actually interrelate. And there's a, a money component and a mindset component to all of them. And ultimately, it's your journey, your life. What do you want as a human? Why do you want what you want? Do you want the grand house? And if it is, that's okay. We're kind of taught to dream. Dream big, but also imagine big. Dream big, but don't, like, share that, because if it doesn't happen, then. Then I'll look like a failure. Well, you don't have to share it anyway, because nobody needs to know. It's your dream. It's your desires. You don't have to share it with anyone. The only thing that makes it help is if there's people along the way who can actually help you get there. If there's guidance, if there's support. That's when you can say, you know what? I. I'm gonna have a go at this because I really want to know what it feels like to aim for this goal. That doesn't make you a greedy person. If you. So if you want the mansion and you want the boat, you want a jet or whatever it happens to be, or you're like, you know what? I actually don't want the big business with lots of staff. I really just want myself maybe one other person, and just keep it, you know, keep it manageable. And then I just enjoy my life. That's okay, too. It's. No, it's not good or bad either way. Whether you strive for the big thing or you really just want the small, simple thing. It's okay either way. And anybody who makes you feel bad about that is someone that you don't tell your dreams to. You very much like filter and limit the amount of information that they get. Because again, I've grown up in that environment too where I had lots of criticism, lots of opinions, lots of judgment. It's a very, I shouldn't say very European thing because lots of cultures do it. So I'm not going to limit it to that. But there's, there was, there was a lot of that in my world between family members, you know, towards me. And it took me a long time to release those shackles and go, you know what? I don't really care if you're, you know, judging slash teasing me about my 20 year old car or, you know, judging the fact that I changed from one profession to another, even though I had invested so much in the first one. And then all sorts of. It's ultimately your life, your, your goals to set and your dreams to have. And you owe it to yourself and your children and those around you to bring your gifts into the world because somebody needs them desperately. And so I'm hoping this resonates. And there's, there's a whole lot in there, there's a lot of undertone as well. And I love, I love being able to, to bring some of this to light and being that sort of ch. Cheerleader if you need it to just go and pursue the things that you want to do. But please don't avoid because you think you can't. Don't judge yourself for something that you haven't done or should have done or, yeah, the word should gone and, and reflect. Write your list about what you have actually achieved. Doesn't matter how small it is. You may have won a prize in high school. Write it down. It's part of your journey, it's part of who you are. And it's important to acknowledge and take action. Doesn't have to be big, small actions are perfect to take. Clarity is important and this is where you need to make sure you know where you're headed. And even if not just do a little bit, even if you're trying to figure it out along the way. Just do little things. Put, you know, get a micro investing account, put some money in a bank account and just do that regularly and have, you know what this is, this is my vision account. Not entirely sure what the vision is yet, but this is my vision account and you will find yourself connecting to that vision even though it's not particularly clear. Although I think if you really dig deep enough, you know what it is. We always have the answers to this. We just might not necessarily have articulated it yet or be really wanting to acknowledge or share it. Totally. Okay, so let me know if that resonated. Please share this with somebody if you would like to. I will be doing a a money mindset masterclass coming up in the next month I think around the 5th of March. I was looking at doing it maybe a bit later. Anyway I will be sharing the details of that but keep an eye out for that. But in the meantime have a wonderful week. Please review, share and you know check out. I've got some freebies on my website as well if anything there resonates with you too and I will catch you again next week.
