Whether we like it or not, money makes the world go round.
But for a staggering number of Australian adults, it seems their world may hardly be turning at all.
In fact, new research announced on the Today Show recently revealed that an astounding 75 per cent of Australians are living with debt.
Equally alarming is the revelation that a startling 50 per cent of us are saving nothing from one month to the next.
Startling new research reveals worrying patterns in Australian’s savings (or, rather, the lack thereof)
The worrying statistics show that two in five Australians are living from pay check to pay check, with no savings whatsoever.
And the average overdrawn Australian owes a staggering $600 by the end of every month.
Discussing the issue on the Today Show, Australian financial adviser and business expert Jackson Millan believes that we need to understand what type of spender we are before we start trying to save.
Mr Millan, self-proclaimed ‘wealth mentor’ and author of ‘Enjoy The Journey: Creating Wealth and Living the Life You Desire’, has classified consumers into seven distinct groups of spending.
Jackson Millan (pictured), wealth management mentor and business expert
1. The Cash Splasher
Do you like to ‘make it rain’? Are you always first to the bar ordering drinks for a table of people who you don’t know? Does money come in one hand and fly straight out the other?
If you answered yes, then signs on it, you might be a cash splasher.
Although these people are typically generous to a fault, Jackson Millan warns that they are a category of spender who can struggle to save.
Mr Millan says that while cash splasher’s can throw themselves into penny pinching in order to reach attain a specific goal, without a clear aim or significant event to save for they often lack motivation and throw their money around recklessly.
Advice: Pause before swiping that card or parting with stacks of cash. Consider whether or not you really need to spend this money, and keep focused on long term goals such as paying off existing debts or buying a property.
Drinks for everyone: The cash splasher doesn’t discriminate with their generosity, which can leave them seriously short at the end of the month (stock image)
2. The ‘Cash Makes Me Happier’
We’ve all felt it at one point in our lives – the adrenaline rush you get from making a spontaneous purchase.
Jackson Millan describes ‘cash makes me happier’ spenders as people who experience genuine elation when clutching handfuls of freshly bought merchandise.
Retail therapy is a special treat for everyone, provided that it remains an occasional one and not a weekly occurrence. The more regular and frivolous the shopping gets, the more dangerous it becomes.
Advice: Mr Millan recommends keeping a week-by-week diary of outgoings for this kind of spender. ‘It is important to have the right cash flow structure in place to ensure you put a cap on your discretionary spending,’ he warns.
Mr Millan advises these people to make retail therapy a rare treat, not the norm
Poll
What kind of spender are you?
- The Cash Splasher 0 votes
- The Cash Makes Me Happier 0 votes
- The Cash Stasher 0 votes
- The Ignorer 0 votes
- The Chicken Little Investor 0 votes
- The Midas 0 votes
- The Points Accumulator 0 votes
3. The Ignorer
We all know them: that person who is in total denial about the mounting pile of bills on the kitchen counter.
Unfortunately, the Ignorer often allows their financial woes to spiral out of control to the point that they are seriously struggling to make ends meet.
So, what does the expert suggest?
Advice: Mr Millan’s message for people who shy away from reality and responsibility is to wake up and take note of where their money is really going. Identify areas where you can make savings and always begin by paying off outstanding debt, says the finance guru.
4. The Points Accumulator
Are ‘free’, ‘bargain’ or ‘discount’ your favourite words? Do signs announcing ‘buy one get one free’ offers set your heart racing? Do you get a thrill from swiping your credit card just to rack up shoppers rewards points?
The ‘Points Accumulator’ generally has a tight control over their expenses, checking every receipt, bill and bank statement for errors. This type of spender is risk averse and has what Jackson Millan calls a ‘scarcity mindset’, an outlook which limits potential financial growth opportunities.
Advice: Curb your obsession with earning ‘points’ and write down your major long-term financial goals. ‘Centre this plan on what you ultimately wish to achieve,’ Mr Millan urges.
Reward hungry: Financial advice author Mr Millan urges shoppers obsessed with collecting loyalty points to make a clear plan for their financial goals
Jackson Millan (above) guides struggling savers down the path to financial security
5. The ‘Chicken Little’ Investor
People who get their kicks from investing and who can often be found reading finance magazines are what the wealth management expert refers to as ‘Chicken Little Investors’.
These types of spenders are prone to bragging about their investment skills, but usually share stories about their wins rather than their losses – which makes it easy to lose track of how much they are making and most importantly, spending without return.
‘The problem with the Chicken Little Investor is that they aren’t clear on what they’re are working towards and will treat the investment itself as the destination,’ explains Jackson Millan.
Advice: Mr Millan says that people who identify with this type of spending should define their short-term and long-term goals in order to map out a viable financial plan. ‘Don’t be afraid to reach out to an expert for guidance,’ the adviser added.
6. The Cash Stasher
Mr Millan says that cash stashers are usually people from the Baby Boomer generation, who have lived through incredibly challenging periods of economic recession.
Life experience has made these spenders risk averse, and they would much rather save money than think about investing it.
Cash stashers are typically low in debt or debt free altogether, living comfortable lives and passing comments like ‘the bubble will burst soon’. Cash stashers can be genuinely frightened of potentially lucrative investments because of what they have witnessed.
Advice: ‘Set goals, get educated and speak to an expert,’ Mr Millan says. The expert advises stashers to assess possible avenues of financial growth rationally to ensure that they are not missing out on opportunities for exponential growth simply because they are afraid of loss.
Pinching pennies is usually a good thing, although Mr Millan cautions that it can mean losing out on lucrative long-term financial opportunities
7. The Midas
According to Mr Millan, there are two sides of a coin to the person with the Midas touch.
The Midas lives a luxurious, materialistic and fulfilled life, doing great things to build their wealth and work towards the future, but they are often blindsided to how quickly their cash pile is depleting, warns the expert.
Midas spenders are ‘the ones who incorrectly perceive that everything he touches turns to gold,’ Mr Millan warned, adding that they are often not as well off as they believe.
‘You don’t have a motivation problem, you have a vision problem and because of this, you find it hard to defer gratification or sacrifice your day-to-day lifestyle given you haven’t worked out what you really want,’ Mr Millan said.
Advice: Take time out to make a list of what is fundamentally important to you, and write down the financial goals you hope to have accomplished in five or ten years time. Rank these aspirations in order of priority and significance, and structure your savings towards each aim accordingly.