Jason Cunningham asks the question "Where's My Money"?:

Jason Cunningham is the author of "Where's My Money," a great book which explores all the aspects of how to balance a home budget. He is also part owner of a financial firm called The Practice in Victoria which helps people achieve their long-term financial goals. Jason was kind enough to talk to us and enlighten us with some of his ideas. To learn more about Jason, why not visit his website www.thepractice.com.au

So for our readers who have never heard of you, can you give us a background on yourself and how you came about writing your book?
We started our business on the 1st Dec 1997. I started my practice with my business partner which is an accounting, wealth management, and financial solutions business.

In our first year of business we turned over $60,000 and only had two employees. But fast forward to today, we have 40 employees and turnover around six million dollars. The business has grown and we have been focussed on helping our clients hit their money goals.

How I got into writing a book; I had been doing a lot of public speaking and I was approached by a publisher who asked me to write a book. And after 8 months, we had a book.

One of the guys who I have helped and wrote quite a bit about it in the book is a bit of a celebrity. His name is David Schwarz. I have helped him with his journey. He was a chronic problem gambler and ex AFL footballer. When I met him he was down to his bare bones and I helped him through that. He then wrote the foreword to my book.

Now I work on radio (SEN116AM) with him once a week. Giving out financial advice to listeners and call in people.

Do you have clients who come to you who have the nice car, nice house, live in the good suburb, but have little net worth?
No doubt. What I have found through my 14 years of advising, not only to individuals but business owners, is typically we have the same traits. And one of those traits is the more we earn, the more we spend.

Even when you get a part time job after school and earn $100 a week, $200, or even $300 a week, most of us spend all of our money.

Then fast forward to when people are all grown up and have full time jobs. I have people who earn $50,000 who have significant debt to what they earn. But there are also people who earn $500,000 a year who have very significant debt to what they earn. And even though they are earning a lot, they struggle to pay their debts monthly.

Were you always smart with your money or was it something you had to learn?
Fortunately for me I learnt a lot of lessons when it comes to money both directly and indirectly. In fact one of the first lessons I learnt was watching my parents lose everything they had at a very young age. I was only 11 or 12 at the time, and they had to sell everything up and work very hard to pay everybody back. At one stage we needed to sell our house and moved in with my grandmother. From a dignity perspective, this took a toll on my mother and father. My dad was about 35 years old with three kids and a wife. And to have to put his tail between his legs and move back home with his mum was a big challenge. But he rebuilt himself and turned his life around. He started a new business and now he is a very successful man. So I learnt a lot of lessons from witnessing that journey.

But also the best way to learn I believe is to become a teacher. So the number of lessons I have learnt from running a business has been amazing.

If someone came to you really drowning in debt?
This situation happens quite a bit. They need to take stock and tell me the whole truth. Just so I can get a complete understanding of what their situation is.

Once we take stock, we work out the plan of attack. Some people can't be helped, and so much so we need to look at bankruptcy or insolvency.

But with other people and I'm talking about 98% to 99% of people, the old saying of where there is a will there is a way is the case. If you are happy to do the hard yards and sacrifice a number of different luxuries, and sacrifice a number of different wants. If you can just focus on the things you need to have like food, clothing, and shelter, then anybody can get themselves out of situations like this.

But the will has to be there, and you have to be able to visualise your goals. The best way is to write down your goals with a timeline of when you are going to achieve them. But then tell people your goals so you have accountability.

What is your opinion on credit cards?
I think that if they are used correctly, they are a great way to manage your money. I add this disclaimer in there, if you use them correctly. Because with some people, giving them access to credit could be a recipe for disaster.

For example, for the bloke I mentioned earlier who was a chronic gambler; credit cards are not a good thing. It would be like waving a needle of heroin underneath a heroin addict. And gambling is an addiction, and it's a chronic addiction.

But people who are disciplined and can manage their money or are given the tools to manage their money. Using a credit card

1. Allows you get access to other people's money and get an interest free period of up to 55 days.

2. Gives you the opportunity to be able to track your expenses next to a budget, because you can go through and look at what you're spending your money on. Then put this into a budget template.

3. Also it gives you the opportunity when reviewing your credit card transactions, to see if there has been any errors made while processing your payment.

4. And finally, if you get the right credit card you can get attached to this the correct reward points. E.g. Qantas or Virgin frequent flyer points. So you can actually get them to make some money for you.

But there are some people who should just keep right away from credit cards. And if you don't pay the debt every month, the interest rates are a killer. E.g., Interest on the average home loan ranges from 6.5% to 7%. When you compare a credit card to this, it can be 21 or 22 percent. It's over three times the rate the home loan is. So if they are not used correctly and paid down at the end of each period they can kill you.

When people get a windfall of money (for example, a work payout) they have zero debt and own their own home. Where would you suggest they look to invest it? And as a 2nd part, what do most people do in this situation?

The first thing, there is no general answer to this question in the first part. Because it really depends on people's goals and objectives. Also their adversity to risk and where they are in their life.

For example, if someone who was 65 years old got a lump sum of money compared to someone who was 35, there would be two different answers to this question. So I cannot provide a general answer to it. But what people need to be doing is seek a trusted financial adviser who can help them work through what their goals and objectives are. Then they can come up with a personal plan to help them achieve those goals.

To answer the 2nd part of your question. Most people unfortunately never seek professional advice. If they get a work pay out or win the lotto, they end up blowing that money. They buy boats or holiday houses, things which really do not generate income for them.

I would much rather see people pay down debt. Even though in your example they don't have debt. So therefore they should look at individual investments which are targeted towards their overall strategy.

Maybe you could talk about a special case of someone who really sticks in your mind. Someone who you helped out of deep debt.
Sure this one is from my book. The name I have used in my book is Sarah. This is not her real name. But when I first met her she started working for me. She came from a hairdressing background. And one of challenges of being a hairdresser is when you start working and doing your apprenticeship you really do not earn much money at all.

To cut a long story short, she was probably only 23 or 24 when she started with us and she was only earning around $30,000 a year. But I could tell by being around her all the time there were challenges going on outside of work. She seemed to be upset. After developing a friendship with her she told me she had personal debts of $38,000 and she was barely covering the interest payments, let alone chipping away at the debts.

So I worked with her very closely. She had a mix of credit cards and personal loans which had been spent on clothes, shoes, and furniture. We worked together on a plan and after about two and half years she eradicated all that debt. She closed down all the credit cards and now she has bought a house.

The cornerstone of any debt eradication plan is to develop a good workable budget. There are two types of budgets out there. One is a top down budget, and the other is bottom up budget.

The top down budget is the one most people use. They work out their income; subtract their food, clothing, travel, rent, home loan, work and having fun, and then save all they have left. But typically a lot of people spend all they earn. So a lot of people save next to nothing.

The other way to look at it (e.g. bottom up budget). Work out exactly what it is you're trying to achieve and I will use the example that you are earning $1000 a week for the sake of this argument. Your goal is to save $10,000 in one year. Then you need to take to saving $200 a week from that $1000. The best way to do this is to take the money away yourself. Because if you don't have the money you can't spend it. Put this money in a high earning interest account and don't touch it. Now just live off the $800 opposed to the $1000.

If your belief is big enough and your goals are realistic, you will find a way. And this bottom up budget is what we did with Sarah. She also got a second job, sold some things on EBay and in less than 2 and half years she paid out the money.

We have all made mistakes with money, what has been your biggest money mistake?
Around 11 years ago I started going very big into the share market. I used to think I was a share market trader, but what I was doing was gambling with a suit on.

And I will never forget the 17th of April 2000; I lost about $80,000 in two minutes. That day was the tech wreck (internet bubble). For the previous nine months prior to this, I was getting tips from wherever I could. I was getting share tips from cab drivers, doormen, and chefs in restaurants and I had invested in companies like voice net and secure net to name a few. I was buying them on a Monday, around 4 or 5 thousand dollars and selling them on a Friday for double my money and I thought, "How good is this" because everything I touched turned to gold.

But I got a fair way ahead of myself and threw a whole heap of money into a couple of stocks. And when the market had a little bit of a heart attack, my shares went down by $80,000, which taught me not to be flippant and foolish and also not to invest in something I had no idea about.

To add insult to injury this all happened six months prior to my wedding. So it was not a terribly exciting experience. But now I fast forward and I have learnt my lessons from this. And now I never make any investment decision unless I completely know what I'm doing.

Thanks for your time Jason.