Recently I explained to David Koch how my most successful clients balance their budget.
In my role as a trusted and independent financial planner, I am lucky enough to have wonderful, thought provoking discussions with all manner of successful and inspirational people.
David Koch recently asked me to be the resident financial planner expert for his Money Makeover program, a full financial overhaul and transformation setting Australians up for financial freedom.
I hope you enjoy our series of discussions.
Transcript of David and Claire’s discussion
David Koch: I checked with Claire Mackay, our resident financial planner, and asked how she gets her clients to balance their budget.
Independent financial planner Claire Mackay: But what gets everyone is the $5 here, the $10 there, the birthdays that they forgot about. And funnily enough, birthdays come round every year.
David Koch: Claire, good to see you. Now, how do you advise people to set financial goals? How do you go about it?
Independent financial planner Claire Mackay: Well, the first thing is to find out what they really want because I can’t give a client a goal. They have to really want it. And once we understand what money is the means to, the end, then we can work backwards as to how do we get there. So really understanding what’s the most important thing to them. Is it a family holiday next year? Is it paying down the mortgage faster? Is it retiring early? Really exciting things. And then we can set goals to get there.
David Koch: Right. And it is so exciting to set a goal. It’s a dream. It’s fantastic. Then sticking to the program is really hard to get there. [chuckle] What are the tips to make sure you reach the end, that you don’t get bored along the way or get a bit wayward?
Independent financial planner Claire Mackay: Well, I love chocolate, and I can’t have it in the house, and anyone who’s gone through weight loss will know that there are weeks where you feel strong and you feel good…
David Koch: Yep, I’ve done that.
Independent financial planner Claire Mackay: And other times when you don’t. So it’s about setting bite-sized goals. So short-term, medium-term and just keep at it. You might have a bad week, you might have an off month, but it’s not the end of the world because we’re looking at the bigger picture, the trip to Fiji, the retirement holiday at the end. So having manageable, smaller goals to work through and rewarding yourself along the way. So when I say…
David Koch: I like that bit. [laughter]
Independent financial planner Claire Mackay: So when I sit with clients, I say, “Okay, once a month, we’re tracking it, and have a bottle of wine sitting there, waiting for you. After you’ve done your tracking, you’ve agreed as a couple that, ‘Yeah, we’re on track and we were a bit soft on that one, but we can do better next month,’ then enjoy your bottle of wine.”
David Koch: So you should review it every month, review your financial goals every month?
01:51 S2: If you’re starting out, it’s like weight loss. Check regularly. So not every day, but maybe once a week at the beginning until you get into good habits.
David Koch: Okay. So what are your top tips on actually setting a goal?
02:03 S2: Well, I’m never gonna go on a Paleo diet, so be realistic. If it’s the first time you’ve done this, set it so that it’s a stretch, but it’s not Everest. Yeah? So having it so that it’s a stretch, it’s a little bit harder but you can see that you can do it. The second thing is, tell everyone. Tell everyone, friends, family, that you’ve got this goal, and you’re really aiming towards this really important thing because it’s accountability. And the third is, write it down. If it’s not written down, it’s actually not a plan at all. You’ve got to write it down.
David Koch: Hang on. Everyone says, “It’s all up here.”
02:36 S2: Yeah, I know, no. If it’s not written down, how can you then go back and check how close you are to it? If it’s written down, each week or each month you can go back and say, “Am I close to it? Did I get there 100% for this week or was I at 90%?” So writing it down is absolutely critical.
David Koch: Good to see you. Thank you.
02:52 S2: Pleasure.