Motley Fool Australia

How to have the right mentality with your money

Personal Finance

Money is one of the most important aspects of our lives, so it’s integral to build the right mentality with your money.

Only so much money will flow into your bank account over the course of your life from working. Whether that’s $1 million over a lifetime, $2 million or more – it’s a set amount, we just don’t know what the number is until we stop working.

When you think about it in those terms I believe it’s easier to have more respect for your finances. If you let all of your money slip through your fingers like a sieve with nothing to show for it then you’ve lost some of your life’s financial firepower.

Obviously there are things worth spending money on if they are truly important to you. Travelling with family, seeing movies at Village Roadshow Ltd (ASX: VRL) cinemas or eating at a restaurant could all be described as good quality times or a waste of money, depending on what you value.

However you spend your money – and I’m not trying to judge – is up to you, but I think everyone needs to have a bit of a saving attitude with money. Like I already said, if you don’t save anything then you’re not building for anything and not helping out ‘future you’.

Saving 10% of your income, even if it’s just into a National Australia Bank Ltd (ASX: NAB) Ubank savings account, is a good idea. Spending 10% more than you earn will lead to financial disaster.

If you are consistently squirreling 10% (or more) of your income into savings over your whole life then you’ll do very well indeed, if you are able to. I know for some people their level of income would make this quite difficult. 

You’ll be even better off if you put some of your savings into shares for the long-term. Don’t forget, you don’t need to take on debt to invest in shares and can start with as little as $500.

Foolish takeaway

If you have a saving mentality then it’s almost unavoidable that you’ll become fairly wealthy after a decade or two.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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