Anytime is a great time for a financial health check
I know what you’re thinking. Reviewing your finances is about as interesting as watching paint dry…. But the thing is, annual personal financial planning gives you a real opportunity to set realistic financial goals. Quite simply, if you set goals, you can establish a secure financial footing – and avoid spending more than you should.
Working towards specific goals not only helps you to become disciplined about money, it means that you won’t feel the pinch when big bills come in (wouldn’t that be nice?) or, more importantly, feel an even greater pinch down the track when you’re ready to stop work and retire.
While you have earning capacity, you can really make headway towards getting out of the credit trap, clearing debts and saving for the future. What’s more, with some focus, you can become more financially comfortable now. Planned spending will help you be able to take that overseas holiday, or renovate the house, buy an investment property, or start the business you’ve always dreamed of. Whatever your financial goal is, you can achieve it with a little forward thinking.
‘Money makes the world go around’, folks, and the big difference between those who ‘have it’ and those who feel like they don’t, is planning. And commitment.
The New Year is a great time to review your financial situation, but you can do it anytime. It’s as easy as writing down your goals and working out how to achieve them. Like anything, small, consistent steps in the right direction, will make a big difference in the long term, to your financial stability and security.
Short-Term Financial Goals
Setting and achieving short-term financial goals can give you a real confidence boost, as well as the knowledge (and good habits) you need to achieve larger, longer-term goals.
The first step is a budget – work out your income and your spending. The only way you can begin to plan, is by figuring out where you are at right now. A good way to do this is write down what you think you spend, then collect your bills and bank statements from the previous three-month period and write down what you actually spend. You might be surprised at how (and how much) money is slipping through your fingers – the daily coffee, the takeaway lunches, the ‘incidentals’ – a magazine and a Snickers bar when you fill up the car with petrol – they all add up to money you could potentially be saving.
Other quick short-term goals include creating an ‘emergency fund’ specifically for unexpected expenses – you can start with as little as $500 or $1,000.
Paying off credit cards and any other expensive credit (rent-to-buy, car finance, hire purchase etc) is another highly achievable short-term goal. And it can be a real game-changer to your finances because when you’re not paying high interest, you’ll have more ability to save.
Mid-Term Financial Goals
Good mid-term goals include checking your insurances, and your mortgage. It’s a healthy habit to review these periodically. Most Australians aren’t adequately insured for possessions, health or income, or emergency, and that’s predominantly because insurance can be complex. But adequate insurance makes all the difference when you need it.
The key is not to rely too heavily on the ‘generic’ policies that are part of your bank loans or superannuation. Tailored insurance will not only work better for your personal circumstances in the long-term, but it will save you money because you won’t be wasting it on unsuitable policies, paying for insurance you don’t need. Your mortgage too, should come up for regular review. And with interest rate rises a possibility in the coming months maybe it’s time to shop around for a better home loan deal. Get professional advice – it’s worth it.
In amongst the mundane of mortgages and insurance, take time to dream. What do you really want to achieve? A long overseas vacation? A swimming pool? Going back to study? Buying property? Find out what it’s going to cost, and then start to make it happen, by creating a financial plan to work towards it.
Long-Term Financial Goals
The most important long-term financial goal is having enough money to retire. While most Australian workers have compulsory superannuation contributions as part of their employment packages, studies have shown that even for people on higher-incomes, this won’t be enough by itself to let you live comfortably in old age.
Women, in particular, who tend to earn less overall, and take time out of the workforce to raise families, usually returning only part-time, need to pay particular attention to superannuation. Simple strategies can be put in place to make sure that you’re maximising the potential of your super fund.
At MoneyLink we have the expertise to help you whether your goal is a big hairy audacious one, or a relatively small one. If you want help, talk to us.
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