We need to talk about money

It’s important to know what your budget is if you’re to ensure you are spending it wisely. First, tally up your earnings and your expenses – right down to the nitty gritty. Even small expenses, if they are repeated across a year, really add up. Do this for a period of months to get a sense of your spending patterns. Figure out if you’re typically over or under your budget.  Then, go to step two.  

Once you fully understand your budget, you can start to analyse your expenses and whether they are a worthy investment or a cost you can do without. 

Consider each of your outgoings. Are your utilities expenses the best deal for you?  Are you spending too much on a particular item that is otherwise affecting your finances? Think about each item in your budget and ask if it’s a necessary expense or the best value, and whether it could somehow be reduced.

Debt can come in many shapes and sizes, and how we tackle them can impact how we are faring financially. Home loans are designed to be paid off over a longer term. Car loans and personal loans tend to be set over a five-seven year range. These require a regular, long-term budget plan. But what about credit cards or buy-now-pay-later options? These require payment over much shorter time frames to avoid fees, interest or other penalties. Getting on top of these quickly will free up much needed cash.

Also, make sure you don’t kick the can down the road if you find yourself struggling to keep up with loan repayments, no matter how small. These can lead to bigger issues if left unaddressed, so reach out to your bank or a financial advisor as soon as you feel you need help.

So, consider prioritising the repayment of debt in line with its urgency and nature. Where possible, focus on reducing those short-term debts. Once they are paid, that part of your income can then be directed to your longer-term goals, or into savings plans.

Life can throw up many unforeseen events. Job loss, ill health, emergency home or car repairs – these types of challenges are stressful enough without adding the financial strain they can cause into the mix. So, if you can, be prepared for the unexpected by keeping an amount aside to help you weather life’s storms. Aim to keep your rainy day fund at a level you feel is sufficient enough to ease your financial worries, so that you can focus on dealing with personal matters if the worst happens.

They say knowledge is power, and the same is true when it comes to being in charge of your finances. Take some time to learn the terms and options available to you at each step of your financial journey. Also, talk to friends and family about current economic and financial issues to test other views, and your own, and consider obtaining professional financial advice. After a while you will develop a keen radar of what you need to know, and where to find the knowledge. It’s important to stay across current matters which can impact you financially.

You’re on top of your budget and have money to invest? Great. Time to decide exactly what it is you want to do and how. As with the previous steps, be intentional with your decisions. Whether you are going it alone or with the assistance of a qualified financial planner, know why you are investing, what your desired outcomes are and when you want to achieve them. Understand your tolerance to risk and what an investment loss might mean to you. Once you know this, carefully select assets which align with your risk appetite, return requirements, and investment timeframe.  It’s never too early to start, but it’s also never too late.

While we are in the neighbourhood, tax planning can make a huge difference to investment outcomes. Your circumstances will determine which options are most tax effective for you. Take some time to understand what’s out there. If you’re unsure, speak those in the know.

You’ve nailed your budget and put aside money for a rainy day. You’ve built up a knowledge bank and perhaps even an investment portfolio. Time to put some protections in place to guard your income and assets.

Insurance.  It’s likely that your car and home are insured. But what about your income? Your health? Your life? Each can impact you or your loved ones and make a material difference to your financial wellbeing.

Fraud protection. Anyone can fall prey to scammers. Educate yourself about the latest scams and always be cautious about sharing personal and financial information to avoid losing your hard-earned money.

Estate planning. Do you have a will with designated beneficiaries? If not, why not? These are all key to peace of mind for your family and loved ones and also can have tax implications.