It’s easy to feel overwhelmed and anxious about financial security in the current economic climate.
However, the reality is having a negative outlook on money and ignoring your financial goals only creates more of a problem. The first step to take to become more financially secure is to switch your mindset to be more open and positive. How can you approach money, income and financial goals in order to be more resourceful and money smart?
# 1. Tackle debt
Assess your debt and credit card expenses and think about how you can spend less, get a better deal and cut down on debt. This could be something as simple as doing your research on credit card interest rates and looking around for the best offer. Better yet, switch to a zero per cent interest rate card for six months or more and use this time to pay off as much of the debt as you can. Do your cards have late fees? Set up a direct debit to at least cover the minimum payment each month. Then ensure you remember to pay extra off your debt manually. Or work out a realistic extra amount you can afford to pay off. Even an additional $20 per week will make a big difference over time.
# 2. Get educated
Although it might be easy to revert to the ‘ignorance is bliss’ mentality, there is power in taking positive action and feeling as though you’re in control. The more you learn about how to get ahead and how money works, the better off you’ll be and the more interesting you’ll find the subject. Why not pick up some books with tips on personal finances and investment strategies from the library? Follow a personal finance pod cast or watch a program that opens a discussion on money management. This will get you thinking and give you some great tips and ideas to apply in your daily life.
# 3. What are your financial goals?
Dedicate some time each month to focus on what you want to achieve, on top of paying bills and doing your financial admin. This way you can actually assess how you’re doing financially and can adjust your behaviour or budget if needed.
When creating a budget make sure its within your means and takes your personal circumstances into consideration. Be realistic. Just start doing it and ensure you follow through. Setting a budget is a positive sign that shows you are taking control and putting a plan in action.
Allow yourself the freedom to adjust your budget in the first few months to ensure you get it right and there is enough wiggle room for a few treats such as coffee from your favourite café, nights out, presents and more. Having a budget isn’t about total deprivation. It’s about taking control of your financial future so you have enough money for what you need (and a little of what you want).
Working together towards the same goal can help you feel closer to loved ones
# 4. Save 10 per cent of your income
If you get into the habit of saving 10 per cent of your post tax income you’ll notice a huge difference over time. If you’re earning $50,000 per annum this will be a little more than $4,000 saved per year. Secure a high interest savings account with the best interest rate possible, and ensure that you don’t use this account for anything else. Consider setting up an automatic debit from your transaction account to a separate investment account.
This ensures you set aside money regularly. This can be a savings account for a big holiday, new TV or a rainy day fund to draw on when extra medical or household expenses inevitably come up. It will give you a great head start without impacting your ability to pay for bills and other expenses. If you follow good money habits, then it will also be the key to not ever getting into debt.
ASIC’s MoneySmart Financial Guide suggests dividing your income into three categories:
1. Your needs: basic necessities such as bills, rent, food and living expenses
2. Your goals: paying off loans and debt or saving a deposit
3. Your wants: extras such as holidays, new outfits, entertainment and gifts
# 5. Negotiate the best deals
You could also look at working on negotiating for the services you use. Checking in with your bank, phone, Internet, electricity suppliers on a regular basis could lead to reduced bank fees and better deals all around. Stay informed about the products available and any competitors to strengthen your bargaining power. Don’t feel embarrassed to open up a conversation. Simply call or write and ask if you are currently on the best deal and if there’s anything they can do for you.
# 6. Safeguard your future
It often seems as if we’re bombarded by expenses that don’t seem quite as important right now. Superannuation and insurance might seem like something you can avoid thinking about temporarily but a super account is still the single biggest asset for many Australians. It may seem a long way off but it will help fund your retirement. Unfortunately, most of us aren’t sure what fees we are paying or how much super we have. Lost super is a major problem in Australia so locating and consolidating your super accounts is important in order to keep track of finances and fees as well as your safety net for retirement.
# 7. Get insurance
Insurance might seem like a lot of money now for cover that might not be necessary but when you consider the alternative if you’re caught out then it doesn’t seem so bad. Shop around, make an effort to understand your policies and read the fine print. Make sure you are adequately covered and think of this as a manageable expense broken down in small increments over time rather than an enormous bill that could cause great financial hardship.
Make an active choice to ingrain positive financial habits into your life and you can turn your mindset and your finances around. It’s a lot more fun than you think!