Whether you're the type to make short-term plans or long-term plans, the operative word is “plan” and it’s always the best way to start!
Did you know that statistically speaking, around only a quarter of Australians have a long-term financial plan in place?
This is a deeply concerning statistic when you consider the fact that the other three quarters are going to be faced with difficult hurdles to overcome financially when they reach retirement. Planning for your financial future is the best advice you’ll ever receive, and we’d like to share a few ways in which to go about getting started when it comes to managing your finances and sticking to your guns right through to the end!
Okay, so how do I get started?
1. Improve your financial decisions
Perhaps you procrastinate or perhaps you make decisions based on emotion? Before you make any financial decisions, take a few moments before making them and go through a list of smart questions that will aid you in making the optimum decision for your future. Ask yourself, “will this positively impact my future or negatively impact my future?”. It should start becoming second nature and after some time you might not even need to ask yourself these questions at all, you will just naturally be inclined to make healthy financial choices!
2. Cater to your long & short-term financial requirements
For the short-term plan, you might want to take a look at your current financial situation and strategize a way in which to minimize your debts or get out of debt all together. You might also want to open a small savings account for purchases you wish to make in the near future that you can’t afford all in one go. For your long-term plan, you can and should research policies and annuities and start investing immediately! It’s never too late to start and acquiring a policy for later years in life is a sure way to safeguard yourself from coming up empty-handed when your working days are over. Look for a broker for advice if you aren’t comfortable going through this process on your own. A broker will do an analysis on you and your needs and will guide you in the right direction.
3. Write out your financial goals
Many busy people have a problem doing this, but it’s so enlightening and beneficial to the end result to write your goals and plans down. In fact, it has been statistically proven that those who write their plans and financial goals down have better outcomes than those who were just winging it day in and day out. Let it be a reminder, so in other words, put it up somewhere and let it be visible to you at all times. You’ll be amazed at how your focus will improve once you’ve written down and clarified your goals.
4. Start manually tracking your spending
Go through your grocery slips, your daily spending and your budget, and establish what the fat is going towards and begin trimming! This will help you to find out exactly what the bulk of your money is going towards and will assist you in cutting costs. This will all help you make financial headway and improve your finances. There are even apps to track your spending and personal loan repayments and many users have given great reviews on how it helped them get to the bottom of their poor spending habits. It is important to note that tracking your spending will be futile if you don't analyse the information and use it to make changes to your spending.
5. Get a reasonable budget going
Budgeting is probably the most vital component to managing your finances. We’re all aware of that and roughly half of Australians who have a budget are found to mostly stick to it! So, what is the other half holding out for? Good question! Once again, there are so many apps that one could use in order to budget if you were struggling to manage your budget on your own. Understanding the breakdown of your money into compartments of spending is hugely conducive to managing your money and you’ll be amazed to find that you’ll start having more at the end of the month.
6. Figure out your net worth
Take what you own less what you owe and you’re left with your “net worth”. Once you have this figure, you will have a clearer idea of what you are able to do with your money in order to begin saving. While four out of five Australians were said to have saved money last year, one in ten investors confirmed that they lost money they couldn’t afford to lose. Understanding the dynamics of investing is an integral component of investing itself. You’ve heard of the saying “don’t keep all your eggs in one basket”, well, that’s true for the outcome of that basket developing a hole and all your eggs smash to the ground, leaving you with no eggs at all!
7. Maximise your super fund
Get into a habit right now if you haven’t already, of going to your super fund’s website and check your balance. (Three-quarters of Australians know the exact or rough balance of their super account). That’s a better statistic as far as stats go. At the very least, make an effort to view the statement. An example to get yourself set up adequately for later is to look at combining your super account. Deposit additional contributions to these funds, not enough Australians do this.
8. Get your assets insured
We all love having assets and are proud of what we’ve accumulated, yet fail to make provisions for the loss! It seems such an obvious part of the process, yet many fall short on this insurance. So, now that you are going to get this done, you will need to ensure that you have a substantial amount of cover on these policies, etc. Consult the right brokers and get quotes before making your decision.
9. Last but not least, stick to the plan!
It’s important to stick to all the plans you have made, written and invested in. Monitor your spending, watch your budget and keep saving, you can’t go wrong if you adopt this simple habit and you will reap sweet rewards in the end!