The humble wallet is the latest item under threat by disruptive technology as smart phones and electronic and online payment systems make banknotes and coins redundant. Technologies that make it easier to spend our money also tend to make it easier to lose track of how much cash we spend and the impact it has on our savings. American economist Milan Zeleny coined the phrase disruptive technology in 2009 to describe how any given technology evolves in a life cycle to be replaced by a new core technology. A classic example was Henry Ford’s 1908 launch of the first massed produced car, the Model T.
The Model T spelt the end of the horse drawn carriage. In Australia coach operator Cobb & Co played an important part in the development of the nation from 1850 until the turn of the 20th century. It went into receivership in 1911 due to the proliferation of rail networks and automobiles.
While it’s an interesting note in history it raises a larger issue. When we finish our education and embark on a career we hopefully have a reasonable idea about our future occupation.
What we are unlikely to think about is how technology or other events may one day interrupt our employment and ability to earn. It’s likely many of us are not planning our wealth strategy in full recognition we live in a dynamic and changing environment. From the demise of traditional media, to the irrelevance of CDs and paper books, and even the rise of online dating services to replace the pub or club as a social meeting place, we see change everywhere.
Rapid change means you don’t know what the future holds for your career. So it has never been more important to take control of cash flow today, and start making it work for you, to achieve and protect your goals and aspirations.
And it does all start with cash flow. For most of us, when we think about how to become financially independent we draw a line from savings to an investment property or shares. But with some simple planning you can not only make the whole process smoother it will also be more effective – and in the long term that can make a huge difference to your wealth.
The first step is getting organised. A cash hub should be high on the list of preparations. Typically, a cash hub accrues interest on a daily basis and acts as a central point from which to pay all your bills through BPAY, direct credit and direct debt, while also managing your deposits and how your cash is dispersed.
A financial planner is another vital component in your long term financial security. Australia is an acknowledged global leader in wealth creation, in part due to the massive $1.7 trillion superannuation industry that has formed since compulsory superannuation was introduced in 1992. Around this wealth of funds has grown a deep pool of knowledge that spreads across all aspects of wealth creation and wealth planning.
And studies show, using a financial planner will yield results. A report by international research group Morningstar1 in late 2012 put the value a financial planner adds to your financial planning at 1.82% a year. To put that in context, if you put $30,000 into a cash account and earn 6% a year compound interest for 10 years the cash balance would grow to $53,725.43. If a financial planner added 1.82% to that annual return it would grow again by an additional 18.5% to $63,696.35.
You never have to face decisions alone. Whether it be setting up a savings plan for a child or embarking on your work career and planning a family. From designing your self-managed super fund (SMSF) to the day you retire and beyond.
Think of a financial planner as a life coach. Unlike most of us they have been trained to manage cash and to grow investments over the long term. These are the key components to making your cash work harder to allow you to achieve the bigger financial goals in your life, and to eventually reach the point where the returns from your assets match and exceed your expenses and liabilities – welcome to financial independence.
Disclaimer and Disclosure
Information in this article has been provided by third parties has not been independently verified and BT Financial Group is not in any way responsible for such information. While the information contained in this document has been prepared with all reasonable care, BT Financial Group accepts no responsibility or liability for accuracy of information from third parties is accepted.
1Morning star report- http://corporate.morningstar.com/ib/documents/PublishedResearch/AlphaBetaandNowGamma.pdf