Being your own financial planning expert
Having worked as a financial planner for over 25 years I have certainly seen both the good and bad side of how people handle money. Unfortunately, money skills don’t get taught much at school, so most of what we do know is “do it yourself”.
But when it comes to securing your financial future, it sometimes doesn’t hurt to listen to a voice of experience. And after 25 years of watching over client’s money, I certainly know what areas need the most attention. And truly, if you can get these right, everything else becomes pretty easy.
So for all you ‘financial planners’ out there who want to kick your finances into shape, here are the 11 areas to get stuck into.
# 1 Make sure you are being Paid What You’re Worth
Yes, this could be easier said than done, but it is important to know that your skills are being valued correctly. Employers, no matter how friendly and caring they may seem, will always try and reduce their costs. And payroll is usually one of the biggest.
Check job vacancies online to get a feel for what companies pay for similar positions. Employment sites also compile job remuneration tables so do a bit of searching and check these out. If you dis- cover that you are not being paid a market rate, you have two courses of action. Ask for a raise or look for another job.
# 2 Examine your Cash Flow and Create a Budget
Examining your cash flow allows you to know exactly where your money is going. It will help you pinpoint areas where you can save by either eliminating or reducing. It is certainly a tedious exercise, to begin with, but the value of the information you get from it will be more than worth the time spent doing it.
There are many online tools to assist you scattered around the internet so do a search. You can even do it the old-fashioned way with pen and paper; it will work just the same. Once you know what you’re spending your money on, create a budget. Stick to the budget and regularly revise the budget.
# 3 Always Spend Less Than You Earn
Spending more than you earn is a very simple matter these days. Your friendly banking establishment will gladly assist with a multitude of loan types on offer. But like any pact with an ‘evil entity’, it comes at a price. And in this case, a particularly high price via an interest rate that is always in double figures!
And once you are indebted, chances are you remain indebted. Having worked in banks for many years I have seen first-hand how much trouble people can inadvertently get into when they over commit. Don’t let it happen to you.
# 4 Contribute regularly to your retirement fund/superannuation
I know, most workers have compulsory super but you also need to look at adding more. Either salary sacrifice or with some after-tax dollars, the more you add now, the better your retirement. And it is a very good idea to check your super account regularly for performance and costs.
# 5 Pay Off Credit Card Debt
This type of loan is way too expensive. Interest rates are currently at historical lows. But banks insist on charging from 15% up on their credit cards. Go and check out some introductory offers from other banks. Particularly look for introductory 12-month interest-free periods.
Make the move to pay it off, and then, tear up your card. Concentrate only on paying down the debt, not making it larger. So do your best to get rid of your outstanding balances and keep it like that.
Credit cards only benefit one party and you know who that is!
# 6 Create a Savings Plan for Yourself
Once you have your budget the next step is to analyse it. Look for the areas you can create savings. You know the usual stuff you are always meaning to forego, one day! Giving these up will generate surplus cash. Use some of this surplus to pay down existing debt, and save the rest.
Build a cash buffer of 3 months’ salary, and keep it at this level at all times. Use term deposits and savings accounts to hold this money. Just be certain it can be readily available if and when it’s needed. And remember there is a difference between saving for something and investing. Have a look at this post.
# 7 Build Long-term Investments
Once you have created your cash buffer and your debts are under control, it is now time to create some long-term investing. I always recommend that any long-term investing should use money that is not required for a future expense. Take a look at this post to get an understanding of what I mean. And by long-term investing, I mean, long-term. At least ten years and more because wealth building does take time.
# 8 Know all Your Employee Benefits
Lots of companies provide employee benefits that are not always common knowledge, particularly to new employees. Get to know exactly what your employer does for staff and take advantage of it. Oh, and make sure to participate in staff share schemes when you work for a good company. (Yes you can afford it – take another look at long-term investments)
# 9 Review Your Personal Insurance
This is important to ensure that you and your family are adequately protected against all events. Life, home, and car insurance will protect your assets. And don’t forget regular reviews which may also save you money.
Your financial situation does change, which could reduce the amount of cover needed. A reduction in your cover means a reduction in the premiums you pay. Insurance can be rather boring, and probably so is this post but have a look to see everything about personal insurance.
# 10 Make/Update Your Will
Estate Planning is incredibly important no matter how much money you have. Estates without wills are decided by Government legislation which means relatives who you may not have wanted to benefit, may in fact benefit.
Make sure your final wishes for the disposal of your worldly goods is decided by you and not a Government formula. If you haven’t made a will, make sure you do and for those who have, keep it current.
# 11 Make sure to keep accurate records
Good tax records are a must to ensure you can claim your maximum deductions. The tax department is now very sophisticated with their proof capabilities compared to the good old days. So, as a friend of mine who worked there used to say, “You must have a nexus between the expense and your income – and be able to prove your expense!” So get a system in place that captures proof of all deductible expenditure. Oh, and then ensure you use it!
So there you go, my 11 personal financial planning tips. Work on each one and you will be a lot further ahead than many of the clients I saw over the years.
Thanks for reading and see you next time – Homepage
Check out the infographic of this post – click here
