Finances are not always straight forward. Depending upon your financial personality and your personal situation, your first whiff of your own cash most likely went one of two ways: you were either overcome with a sense of freedom and extravagance and blew it all in one hit OR you became Scrooge and stocked it all away. Ok, so perhaps it was somewhere in between, but you get the drift!
So how do you go about gaining financial knowledge?
The simplest way is to seek professional advice. It doesn’t cost a fortune to speak to a financial adviser and to get help to put a plan in action. Over time your outlay for advice will pay for itself many times over. If you’re more of a ‘do-it-yourselfer’ make sure you consult the appropriate government websites and keep up to date with financial news and changes to government policy.
What’s important to know?
- Work to your ‘financial personality’ and personal situation To put a plan in place to suit you, you need to work it around your personal situation and personality. Some things to consider are: are you a saver/a spender/a splurge/or somewhere in between? Are you single/in a relationship/or have dependents? Do you have a mortgage or other significant debt?
- Set yourself an achievable budget and stick to it Keep track of your spending, start reducing your debt (HECs, credit card, car loan) and start building some savings. Easily said, but you have to plan, budget and, most importantly, stick to it! If your debt is already under control, start saving a small amount every time you get paid. Don’t forget to reassess your budget annually as well as when any significant changes occur, like a pay rise, a new job or changes to your personal circumstances.
- Pay off debt as quickly as you can and reduce outgoings In this consumer driven world, often the perceived solution to not having enough money is to seek a job that pays more money. Of course this is one avenue to consider, however it adds pressures like finding the right job, having a probationary period and taking on more responsibility at work. Having a good look at your outgoings and cutting spending is a great alternative (or perhaps something to do in addition) to seeking a new job
- Salary sacrifice where possible Depending on your employer, your type of work and other factors, you may be entitled to make repayments or pay for an appropriate purchase before your income is taxed. This makes a significant impact on your after tax dollars over time. Ask your employer or HR department about salary sacrifice options.
- Consolidate your super Apart from it being an administration nightmare, having multiple superannuation accounts means you’re probably not maximising your super earnings. It might seem a long time before you will retire, but it’s important to start saving towards your retirement now. Make the most of having spare cash to top up your super and, if you’re eligible, take advantage of the government’s co-contribution scheme – where the government matches your additional payments into your super account up to a certain amount.
- Protect yourself and your money with insurance Income Protection Insurance, Trauma Insurance and, if you have dependants, Life Insurance – all just another form of forking out for nothing in return, right? Wrong! For a small outlay each month (some premiums can be paid from your super account so you’re not out of pocket), these important insurances protect you in your time of need. Imagine becoming injured or ill and not being able to work for a period of time – months, perhaps even a year. Would you be able to keep up with the bills?
Essentially, the actions you take now to set yourself up for the future, will take the pressure off down the track. Educate yourself and prepare for a better future.