Unless you tell your money what to do it will simply go walkabout. As a pilot working as a very busy professional you will at times struggle to designate spare time to draw up a budget. Despite, being often time poor it is highly important to make creating a budget a top priority. Having a personal budget is essential for anyone who is wishing to secure their financial future.
It is even more important when you are experiencing situations where your income exceeds your day to day living expenses, which may be the case if you are currently in a high up position of employment. Creating a budget as a high-income earner will serve as a vehicle that will keep you from spending funds that should ultimately last you a lifetime.
Here are some basic principle of budgeting that you should aspire to follow:
Set Spending Targets and Stick to Them – Some of the most budget related problems stem from people who disregard this rule. It would be possible to live beyond your means for a few months or possibly a couple of years but keeping this type of lifestyle will eventually lead to some form of financial difficulty. The purpose of a budget is to make sure you don’t find yourself in a position where you are spending money you do not have and cannot afford to spend.
Avoid Unsecured Debt as Much as Possible – It is pretty much unrealistic for the majority of people to go through life without taking on any form of debt. The important thing to remember is that not all debts are created equal. Some kinds of debt for example a mortgage can have a positive impact on the long-term financial health as it ensures that you are able to secure capital assets. There are other kinds of debts such as; high interest unsecured loans, credit card debts and ‘high end’ vehicle finance’ that are guaranteed to keep your personal budget from balancing.
Make the Most Of What You Have – One of the most common financial mistakes that people who are not in debt make is to simply assume that a lack of debt will automatically translate into a secure financial future. This is definitely not true. You will still have to take care of your money with long term investment goals in mind. Not doing so is almost as bad as leaving your cash in a box under your bed.
Be Prepared for Emergencies – Even the best organised financial plans can go to waste if you are unprepared for an emergency. It is important to put aside some of your money into an emergency savings fund just in case you experience a life changing event that prevents you from being able to continue work or in case you experience sickness or illness that makes you unable to work for an extended period of time.
Savings and Investments
At Vault Accountants we believe that the key investment focus of pilots should be long term wealth creation. This means following a very conservative strategy geared towards securing a steady income after your flying days are over. Your investment strategy should also ideally deliver lump sum income to deal with major life events such as your children going to university, major relocations and retirement.
Only if you feel satisfied that the ‘bases are covered’ by using a more conservative wealth creation and preservation strategy should you even begin to consider more aggressive speculative investments. There are way too many investors who have burnt their fingers at exactly this point. You can avoid getting burnt yourself by doing the following things:
• Being highly suspicious of ‘get rich quickly’ schemes. Responsible investment is much more of a ‘get rich slowly affair’.
• Diversifying your risk. Putting all your financial eggs in one basket is asking for trouble and should be avoided at all costs.
• Always making use of the services of an independent and professional financial adviser before making a major investment decision.