Why good money management starts with self-awareness

Max Phelps says the key to successful money management is being self-aware of your relationship with money, your habits and your knowledge.

Max is a money coach, mortgage broker and author who focuses on helping investors take control of their spending habits.

He told KnowHow’s Bushy Martin on Property Hub’s Get Invested podcast how investors can better manage their money through accepting their behaviours, controlling their access, and being open to seeking help.

Money management tip 1: Accept your behaviours

The difference between a great money manager and a poor one is accepting behaviours and putting structures in place which will then help reach a position of being able to generate passive income.

“Investing is a learned skill. But certainly the great money managers accept the fact that they’re never going to be very good with money. So don’t try and change yourself to be good with money. It’s not going to work. You can’t change your own psychology. Instead, accept that and then put in place structures to make it difficult for you to spend your own money,” Max said.

“The second thing is then invest. Invest in something. If shares is your thing, go invest in shares. Buy something, but buy it for the long run. Don’t buy it and go, oh I’m going to buy some shares this week and then sell them next week because they went down in value.

“It’s going to work if you stay the course. And so that’s what great investors do, they chart a course and then stick to it. But most people don’t start that first step of actually even charting a course. They don’t set themselves any goals. And if you don’t set any goals, what are you hitting?”

Money management tip 2: Control your access

Spending limits and access to money is a key driver of successful money management.

“My mother put everything in little purses. So the best decision my dad made was going, you have the money. Because money in your pocket makes no sense. Most of us manage money in an awful way at the moment. Go back to when we got paid cash, people knew you had to take the cash home and hide it. Now, we open up a bank account. When we get our first job, we have a debit card linked to that bank account. We have a pay going into that bank account, and from there on in, we never make the change away from that stupid habit. We’ve also given ourselves access to all of our money, just like as if my dad put his whole pay packet in his back pocket and it doesn’t make any sense. Take the money home, hide the money at home, walk out the door with a little bit. How do we mimic that in the modern world?” he said.

“Now credit cards, well there are not enough pairs of scissors in the world to cut them all up. They’ve got to go. They’re awful things that mess with your head. Some people don’t understand why, and the psychology tells us why. They don’t understand why. It’s because they believe that they are a sane, sober, rational human being, and therefore they make sane, sober, rational decisions when they use a credit card. And all of the studies show that they don’t.”

Money management tip 3: Seek help

Max encouraged investors to build a reliable network from the beginning to help gain confidence in their journey.

“Find some good people. It’s not hard nowadays to find a good mortgage broker, especially someone like yourself or myself who cares more about the client’s outcome than lining our own pockets. And it’s all about, well what do I know that I can share with someone that will help them feel like they’ve got the confidence to do what they need to do to make stuff happen? Because sitting on the side lines is a poor man’s game, and I don’t regret the things I bought,” he said.

“I might have bought that property up in Grimsby in the north of England, but I still made £30,000 on that place, which is about $50,000 on it. I still made rent every year on that property, even though, relatively speaking, it was a bad investment compared to what I could have done instead.”

Listen to the full interview here.

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