Top 5 tips to be financially healthy, wealthy and wise
Financial health, wealth and wisdom aren’t exclusive to the billionaires of the world – every Aussie can use these tips to live happier and more secure lives.
The old saying goes ‘Early to bed and early to rise, makes a man healthy, wealthy, and wise.’ I believe this refers to more than just sleeping habits and speaks to the importance of a good routine and planning ahead. ith that in mind, here are some tips to ensure you and your bank balance remain on good terms:
1. Build strong foundations
There are five financial foundations I recommend which form the building blocks for a strong relationship with money:
- Emergency fund
- Spending and investment plan (more in-depth than a budget)
- Superannuation
- Adequate insurance cover
- Estate planning
Having these foundations in place allows you to build wealth to enjoy a good lifestyle, protect you and your family against any unexpected disaster or loss of income, and plan for a comfortable retirement.
The earlier you put them in place, the more time you have for them to work in your favour (think back to your schooldays about the benefits of compound interest!)
2. Take charge – it’s YOUR money
Do you know your current superannuation balance? The interest rate on your mortgage? How much you spent last month?
Many people don’t – often because they leave the finances up to their significant other. It’s a risky move.
What if your partner invests unwisely? Develops a gambling addiction? You split up?
Sadly, many people have faced financial ruin simply because they wrongly believed their partner had everything hunky-dory.
It’s important to be actively involved in your finances – know where your money comes from and where it goes. Don’t just leave it up to someone else, no matter how much you may love them.
3. Avoid runaway debt
Unpaid bills, late tax returns, missed Afterpay instalments and credit card repayments – they all accrue interest and can quickly snowball until you’re buried under an avalanche of debt.
Find ways of managing repayments that work for you. That could be:
- Setting reminders in your phone and/or on your fridge to pay bills by their due date.
- Using a mortgage offset account to reduce your payable interest.
- Paying with cash/debit rather than credit/buy-now-pay-later (convenience typically costs more than transparency).
If you’re struggling, tackle your most expensive debts first (those with the highest interest rates).
You may also be better off consolidating your debts into one, such as your mortgage – to pay less interest overall and to cut the number of repayments to keep track.
4. Don’t ‘set and forget’
Your income, expenses, debts and taxes all change as your life and circumstances change, meaning they should be reviewed regularly.
Update your spending and investment plan whenever you change jobs, move house, expand your family, get a payrise etc.
Scrutinise your expenses to cut wasteful spending – like that gym membership or TV subscription you no longer use.
Examine ways to reduce your taxable income throughout the year, such as extra contributions to your super and keeping records for allowable deductions.
Beware the ‘loyalty tax’ – banks, utilities and insurers typically offer better deals for new customers than existing ones. If you don’t review those at least once a year, or simply pay the renewal without comparing, you’re probably paying more than you need to. (If you do switch providers, double check that you are getting a like-for-like service – read the fine print carefully.)
5. Look after yourself
‘What does self-care have to do with money – apart from costing lots?’ I hear you ask.
My response is – who can really afford to be sick given how fast healthcare costs keep rising! Not to mention lost earnings and other impacts.
Looking after yourself – physically and mentally – means you’re less likely to need to pay for medical care, treatments and medications. Plus, you’ll need less sick or unpaid leave from work. And you’ll reduce your chances of a debilitating condition which could cut short your ability to earn a living, such as a stroke or heart attack.
Then there’s the benefits of better cognitive function – making smarter decisions about money and better productivity at work (increasing your prospects for promotions and higher incomes).
Invest in self-development too. Learning new skills and gaining extra qualifications aren’t just good for mental health but help you earn a higher income.
Hence looking after yourself means lower costs AND higher income. What’s not to love about that?!
Helen Baker is a licensed Australian financial adviser and author of the new book, On Your Own Two Feet: The Essential Guide to Financial Independence for all Women (Ventura Press, $32.99). Helen is among the 1% of financial planners who hold a master’s degree in the field. Proceeds from book sales are donated to charities supporting disadvantaged women and children. Find out more at www.onyourowntwofeet.com.au
Image: Getty Images