Go Business Tips
Money management is a tricky subject. For many, the topic’s accompanied with a feeling of apprehension. Maybe you’ve put off saving for retirement for a bit too long. Or, perhaps, you’re worried about not having an emergency savings cushion. Whatever your concerns may be, there’s no time like the present to get a handle on your finances. It’s best to get started – as soon as possible – on good financial habits. Luckily, we have 9 Financial tips to get you started.
9 Financial Tips for Building Good Habits
1. Understand it’s in your power to have a positive relationship with money
A change in our financial situation starts with a change in how we think about money. Clearing out any negative feelings like insecurity or fear about money can help remove the blockages that may prevent improving your financial well-being.
Australians worry about money more than anything else in life. Finances regularly top our list of concerns, according to research from the Australian Psychological Society.
Your relationship with money is not fixed. It’s one that can evolve over your lifetime. Here are three important things about the psychology behind your relationship with money:
- Money is about emotions, not just finance.
- Anxiety or avoidance of money issues may create a vicious cycle.
- Your upbringing may affect how you manage your money.
2. Know where you’re spending your money
Taking small manageable steps can help you to develop a new behavior or habit. Try tracking everything you spend for a short period of time, like over the next month. Why? It can give you insights into how you spend money now and may highlight how spending even small amounts adds up over time.
3. Set savings goals and budget to achieve them
Goal setting starts with seeing something in the future that doesn’t yet exist. To get an idea of what this future looks like, visualize it in as much detail as possible. By visualizing what your goals are and the timeline within which you would like to achieve them, it is easier to create realistic steps to chip away at them over time.
When planning your goals, it is essential to consider the following:
- What’s important to you about your money?
- Where do you want to live?
- What would be your ideal lifestyle?
- What is the right balance for you between work and lifestyle?
An effective way to help you to achieve your goals is to set Specific, Measurable, Attainable, Realistic, and Time-bound (SMART) goals.
4. Consider adopting the three-category approach to budgeting
One of the keys to a successful budget is to keep it simple. First, you’ll need to know how much is coming in – which may be through your after-tax income from work or investments such as interest income from your savings. Then you need to see where your money is going out – your expenses. When you look at your expenses, there are three essential categories:
- Commitments: This includes payments you have very little control over as they represent a legal obligation to pay, such as your rent, loan repayments, phone plan, plus utilities like your electricity bill.
- Everyday expenses: Include things like your groceries spent on food.
- Occasional expenses: Everything besides your commitments and everyday expenses falls into this third category. It represents expenses that we can control with our behaviors. It includes money you spend on fashion, gifts, and entertainment.
5. Apply the pay-yourself-first strategy
Saving on a regular basis is one of the most potent savings tips to help you become more financially resilient and achieve your lifestyle and financial goals. One of the best ways to do this is to pay yourself first. This means automatically putting aside a specified savings amount from each paycheck at the time you receive it into a separate savings account. In other words, you are remunerative yourself before you begin paying your monthly everyday expenses.
By using an adequate budget, you may be able to begin a savings plan with your leftover monthly cash after your expenses. Most savings accounts generally offer a higher interest rate than transaction accounts and can help you save by giving you less access to your money. And, if you leave the interest earned in your savings account, it can grow through compounding interest. Compounding can create an increased effect as the original investments plus the income earn from those investments grow together.
6. Plan for the unexpected
Some call it ‘saving for a rainy day,’ but it’s essentially planning for the unexpected by having an emergency fund set aside. This is the money to give you peace of mind that if something unexpected crops up – the car break-down or you chip your front tooth – then you’re able to deal with it. Choose an amount that will cover your lifestyle and an allowance for mishaps, and once you have that amount set aside, continue to save for your other goals.
7. Work towards reducing debt
Debts may not always be a bad thing, significantly when you are leveraging them to invest in yourself or your financial future. However, over the course of your life, you might be amazed by how easy it is to get into liability and how difficult it can be to reduce it. According to the Australian Bureau of Statistics[iii], in 2018, 74% of Australians held some form of debt. The most common forms were credit card debt and home loans.
8. Maximise superannuation contributions
What’s your retirement plan? Let’s face it, retirement may be a long way off and feels even longer for someone who has recently started their working years. With life expectancy increasing and the craving to maintain current lifestyles into retirement, the amount needed to support your retirement is growing. That’s why the need to plan, and to do so sooner rather than later, is essential.
Superannuation can be a tax-effective way to save for your retirement for those in the higher income tax bracket. The superannuation guarantee is the amount an employer is required to pay into a super fund on behalf of an employee.
9. Consider investing as part of a broader financial plan
When it comes to financial investments, if you contribute to your superannuation and already have a regular savings plan, and you still have some spare money, then you might want to consider putting it into other investments to maximize your long-term returns.
When you start looking at investing options, it’s easy to become overwhelmed by all the information. Therefore, it helps to get expert advice. The more informed you are, the more confidently you can make decisions. A great source of information and expertise is a professional financial planner.
Conclusion
Financial tips are advice on how to manage your money wisely. They can help you save money, pay off debt, and reach your financial goals. By following these tips, you can improve your financial situation and achieve your financial goals.
