How can I get financially fit?

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.

1. Know your position

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

2. Save for something

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.

3. Reduce your debt

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:

1.  Opt for principal and interest (rather than interest only). This will mean that you are paying off part of the actual debt (that is the principal, the amount you need to borrow), not only interest costs (money you pay the bank to borrow money from them).Right now, interest rates are cheaper if you opt for a principal & interest loan. This will enable you to get rid of your debt faster.
2. Pay your home loan as frequently as possibly (i.e. opt for fortnightly payments rather than monthly) – this will mean extra payments each year and the benefits of compounding.
3. Open an offset account and put your day to day money here – and you’ll pay less interest (you only pay interest on the difference between your loan and the amount in your offset), for more info on offsets –https://mozo.com.au/home-loans/resources/guides/offset-account-explained/153.

4. Get your super sorted

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:

1. Check the fees you are paying – there are many low fee options out there
2. Consolidate all your super accounts into one account (consider those with lowest fees, best performance etc.)
3. If you take time off work when you have a baby, investigate options to still contribute to super (e.g. can your partner contribute?)
   Want more information, listen to The Pineapple Project podcasts on super:
   http://www.abc.net.au/radio/programs/the-pineapple-project/become-a-super-woman/9623670 and
   http://www.abc.net.au/radio/programs/the-pineapple-project/why-women-need-to-think-about-their-super/9636214

5. Invest for the future

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.

6. Get your kids involved

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:

1. I let him pay at stores with both my credit card and cash. – this teaches him that when you want goods/services, you need to pay. Plus basic mathematics (when get change from cash)
2. We have a piggy bank system – He is sometimes rewarded with “points” or “money”. He saves up his points to buy something (learning to save for something he wants & delayed gratification). This teaches him that to get something, you need to work (or earn it!).
3. I encourage him to give to those in need – whether it is money in the charity box each week, a portion of his birthday money, getting him to choose some clothes/toys to give to those in need or speaking to him about gratitude – this one is really important. More information –
   https://www.moneysmart.gov.au/life-events-and-you/families/teaching-kids-about-money