If you do not feel like a financial fitness athlete, you are not alone. Over 50% of Australians are financially stressed and this stress affects marriages, costs organisations and impacts individuals’ health. At F-Empowered we are very passionate about building financial fitness and have outlined six practical steps to improve your financial resilience, regardless of life stage.
For me, this is the fundamental first step to making decisions with your money.
This is about knowing how much you earn as a family, how much you spend and the difference.
If the difference is positive – the next question is, what do we want to achieve? how can we best contribute this amount?
If the difference is is negative – what can we do to increase our income or reduce our expenses to get this into positive territory?
There are really cool apps/websites like Money Brilliant or Pocketbook that can help you get more familiar with your finances.
If you have a partner, this is an important conversation for you two to have – and can open up allot of opportunities and questions.
Here’s a guide to get the conversation flowing – http://www.abc.net.au/news/2018-03-02/questions-to-ask-your-partner-about-money/9349162
I’m a big advocate for saving ‘folders’ or accounts.
This can be for something specific (e.g. a holiday, car etc) or an emergency fund (that may really reduce the amount of pressure at a difficult time) and is named with the goal in mind. I contribute money each week into each of my kids’ saving accounts (with their names as the account names) and until recently we also had a “Kids Education” savings account.
This was a high interest earning rewards savings account with my bank and even small contributions
make a huge difference over time (the magic of compound interest!).
Also, you need to do step #1 to know how much you have to work with!
Note, if you have a home loan, offset accounts can help at this step and some banks offer multiple offset accounts attached to one loan.
For additional help on how to automate your savings, see: – http://www.abc.net.au/cm/lb/9409536/data/how-to-automate-your-money-data.pdf, or call your bank / financial provider and ask them to help you.
We (as consumers) borrow money through two main banking products, credit cards & home loans (and personal loans, but we’re not covering those here).
I’m all for racking up points on a Qantas FF Credit Card – but only spending what I can afford.
Living beyond means, means credit card debt which can really hurt and take in some cases, years, to rectify.
Listen to http://www.abc.net.au/radio/programs/the-pineapple-project/demolish-your-debt/9489818
for a real life account of a woman who got into allot of trouble living beyond her means with a large credit card bill.
For my own home, I am a big advocate of getting rid of home loan debt ASAP. This is probably due to my moderate risk profile and also the fact that I’d rather not be paying the bank thousands of dollars in interest every year.
Some tips to reduce your home loan:
The AFSA recommends a single person will need $545k and a couple $640k in retirement to be comfortable. This means, saving for retirement – AKA your super, starts early. The good news is, the earlier you get on top of it, the greater the compounding affects.
A few tips to get super sorted:
If you can, start thinking about investing money beyond savings accounts. Pending your risk profile and amount you want to invest, you could start small, with for example a Raiz or FirstStep Account which invests loose change (by rounding up purchases and investing the difference) for a fee.
Otherwise investigate different asset classes: property, crypto-currency, shares, bonds or go for an ETFs or managed funds….. or enlist an expert to help. The only (general!) advice I would give you is, do not invest in anything you do not understand.
With so much of value transfer done virtually rather than with physical cash, teaching kids the value of money presents some challenges – and opportunities.
Here are some of the things I do with my 5.5 year old son to help teach him the value of money: