Tag Archives: Financial Health Check

6 steps to help you feel more positive about your finances

By Robert Wright /July 16,2021/

With one in four Australians reporting more financial stress after COVID, it’s no surprise many of us are concerned about the future. Between mounting bills, unexpected expenses and a lack of understanding around our needs in retirement, getting our savings on track and seeing the big picture can seem overwhelming.

It doesn’t need to be. If you break things down into small, manageable actions, you can create a simple plan to take immediate positive steps towards a healthy financial future.

Assess your debts

Debt is a reality for many Australian households, whether it’s a home loan, credit card, student loan, car finance or personal loan. It’s not uncommon to lose track of how much you owe and how much interest you’re paying as a result.

Understanding your debts can help you put a plan into action to pay them off sooner and in the optimal order, potentially saving you a lot of money. There are steps you can work through to manage what you owe and work out your priorities – such as making a list of all debts and their sums and categorising each as ‘good’ or ‘bad’.

Plan how to pay your bills

Some 14% of Australians report they have been unable to pay one or more bills on time in recent months, a reality that may be compounded through winter as extra heating sees utilities skyrocket.

One way to manage irregular bill amounts and unexpected rate spikes is to consider bill smoothing, a process where you establish automated payments of a set (and known) amount to cover utilities over the course of a year.

Establish an emergency fund

Putting aside extra money for that rainy day sounds simple, but it’s one that many Australians neglect – in fact, one in four of us believe we wouldn’t be able to raise $2,000 in a week if we needed to do so in an emergency.

If you are that one in four, it’s a good idea to set up an emergency fund as a separate account  – it acts as a buffer from debt, helping you prepare for life’s curve balls. Keeping it away from your day-to-day savings account means you’re not tempted to dip into it for known, budgeted expenses such as rent or mortgage, groceries or school fees.

Look at your super

The government’s Early Release Scheme in 2020 saw 3.5 million Australians take advantage of the ability to dip into their super early. For many, having access to these funds helped ease immediate financial stress. If you’re not sure how to build this money back, you’re not alone – 30% of those who accessed their fund report a lack of awareness of how to recover their balances.

A good first step is to calculate how much money you’ll need in retirement – there are various online tools to help you do this – then you can consider some of the ways you could rebuild your super and work out which one suits your circumstances.

Work on a savings plan

Deciding to pay yourself first – say, 10% of your income – is one simple way to boost your savings and improve your financial future, making you contribute a set amount of money into a savings account before you manage other household expenses.

 It’s also a good idea to set up a separate savings account with a high interest rate. Then make sure that set amount of your salary, as well as any surplus in your day-to-day account, is automatically rolled over into your savings at the end of the month. Automating your accounts allows you to set and forget, so your nest egg will automatically grow every time money is deposited.

Think about any long-term financial goals

At what age do you want to be able to buy your first house? When do you want to retire? Do you know how much you need in your superannuation fund to retire comfortably? Many of us sweep these big questions under the carpet, but understanding them can help you prepare for your financial future.

Once you’ve mapped out your current financial position and established your long-term goals, you can use a range of online tools and calculators to help you get there.

You can also speak with your financial adviser to help get your savings goals on track and make sure you head toward retirement with peace of mind.  Source: AMP

How to save for retirement in your 60s

By Robert Wright /June 11,2021/

Your 60s are the time in which you’re most likely to retire – according to the Australian Bureau of Statistics, of the Aussies who are planning their retirement, the average age they intend to retire is 65.5 years. But just because you’re getting close to retirement age, doesn’t mean you can afford to stop being proactive about building your nest egg.

Alternatively, you might decide to follow through with your plans, and accept that your retirement income might be smaller. No matter which approach you choose, keeping an open mind and a flexible approach can make it easier to adapt to the current global economic situation.

Have a financial plan for your dream retirement

Many people love what they do and may not be looking forward to the prospect of walking away from full-time work. Others might be counting down the minutes until they can leave the office behind or be keen to scale back to part-time hours. Regardless of which category you fall into, as you start planning for retirement more seriously, now is the time to start picturing what your dream retirement will look like.

You can also use this time to turn your skills and hobbies – such as consulting or mentoring others – into additional retirement income. Whether you’re looking for part-time work or a hobby that brings in a little extra, why not get creative, keep busy, make new friends, and earn extra cash on the side, all at the same time?

Learn to live more frugally

Just because retirement is in your sights doesn’t mean you no longer need a retirement budget – in fact, retirement planning becomes essential in your final years in the workforce. To make sure your retirement savings are sufficiently healthy to support you through the rest of your life, it’s a good idea to revisit your budget and look at all the extra ways you can cut back on spending to give your finances a final boost.

Switching to online banking and shopping can be a sound way to keep track of your income and expenses so you have a better idea of where every dollar is being spent.

Now that you’re less likely to have dependants living with you, consider downsizing into an apartment or a smaller home – you’ll save money (reduced utility bills) and time (less space to clean). Think about selling furniture and other objects that you no longer need, including big-ticket items like a second car. Tightening your belt on the big things means you’ll still be able to afford the luxuries you’ve been counting on enjoying in retirement.

Fine-tune your passive income in retirement

Having a passive income stream – that is, income you earn from an investment, such as property or shares, rather than income you earn by working – is a great way to maintain your finances when you’re no longer in full-time employment.

Start by working out what style of investor you are, and then consider the type of portfolio that will best match your risk tolerance and the number of years you have left in the workforce. Talk to a financial adviser if you need more guidance on how to structure your investments.

Set up an emergency fund

Unexpected costs arise at all stages of life, whether related to your property or your health. In fact, recent research estimates that an Australian couple will spend between $4,700 and $9,500 a year on healthcare in retirement.

When you no longer have a steady income stream, dealing with these potentially hefty expenses can mean dipping into your savings. To avoid this, set up an emergency fund to cover any unplanned bills. Based on the average healthcare amounts mentioned above, you should be budgeting around $25 a day for an individual or, for a couple, $780 a month. Here’s how you can plan for unexpected healthcare costs in retirement.

Stay insured when you stop working

More than 70% of Australians with life insurance hold it through their superannuation. But in most cases, this ends when you turn 65. If you haven’t taken out separate life insurance, you may want to do it before you stop working.

The purpose of this type of insurance is to provide you and your family with financial security if you were to die or become terminally ill. Your premiums will be higher in your 60s, but you’ll have financial peace of mind knowing that things like living expenses will be taken care of if there’s an emergency.

Source: AMP

How to reassess your spending and budgeting habits

By Robert Wright /June 11,2021/

There’s no denying the pandemic has significantly affected the finances of many Australians. Some of us are spending more, some are cutting back on non-essential spending and for others, the uncertainty has challenged us to save money for a rainy day, like never before.

According to AMP research, around one in 10 Australian employees feel that 2020’s unusual economic circumstances have had a positive impact on their financial health. However, 42% of employed Australians believe COVID-19 has had a negative impact on their financial health, whether through unemployment or underemployment.

Whichever category describes you, it’s likely you’ve seen your spending habits change over the past 12 months. This means that if you’re still working with your pre-pandemic budget, now might be a good time to review your situation and reassess your spending, so you can manage it with a revised and more realistic budget.

Changing spending habits

Over the past 12 months, have you been spending less money in restaurants, bars and department stores but more on food deliveries, online shopping and streaming? Or have you cut back across the board and started a savings surge?

With lockdown orders forcing many of us to stay home more, it’s unsurprising to learn that in December, our spending on transportation was 41% lower than the pre-pandemic norm. We did less eating out in restaurants and bars (down 30%) and are perhaps prioritising outdoor or in-home fitness over going to the gym (spending for this is down 19%).

But – stuck at home – we are spending on home improvements, 25% more than before the pandemic, plus we’re kitting out our home offices and spending on furniture, with these categories up 58%. We’re also consuming a lot more alcohol and tobacco (up a notable 53%) and relying on food deliveries – these have surged a staggering 245% on pre-pandemic figures. (All expenditure figures have been taken from the AlphaBeta and illion research.)

It’s generally thought to be a good idea to take a deep dive into your overall financial health at least once a year. And at a time when circumstances are changing so fast, there’s an opportunity to review your spending and saving habits and reassess your goals and budgets.

How to track your spending

Think about your spending habits; there’s likely to be a variation each month depending on how much you’ve earned and what your expenses are for things like rent, mortgage, car maintenance and insurance. So, to get a well-rounded picture of income and expenditures, try tracking your spending over a two to three-month period, then apply it to a full year.

How to do it? First, choose a method that’s convenient for you to quickly and easily maintain. This could be as simple as a paper ledger or Excel spreadsheet. Get into the habit of noting every dollar you spend. The simplest way is to review your bank and credit card statements, but don’t forget cash transactions such as a coffee or the vending-machine snack you grabbed on the run. Make a note of the item, amount, date and category, plus whether it’s an essential expense or a discretionary one.

If you want help tracking and analysing your data, there are plenty of apps and software that can help, depending on your goals. Some apps enable you to sync bank accounts, credit cards, loans, superannuation and more, with additional features to monitor larger expenses including bills and insurance payments. Others notify you of possible tax deductions and churn out easy-to-read spending habit reports. A number of these apps are free, while some have monthly charges – it depends on the depth of insight they offer.

How to create a budget

Once you have a good understanding of your new spending habits, it’s time to reassess that pre-pandemic budget and plan your financial future. If you’re not sure where to start, brush up on the basics and learn how to create a working budget.

Source: AMP 

Change your spending habits and boost your happiness

By Robert Wright /March 10,2021/

After living through a year when our collective mental health took a beating, 2021 has brought with it a fresh sense of optimism and relief about what the future may hold. Like many people, you may be planning to do things differently this year.

But before you work on a wish list of things to buy and changes to make, you might like to take a look at the growing body of research into what we should spend our hard-earned cash on to bring us happiness.

Experiences, not consumption

Dr Thomas Gilovich, a professor of psychology at Cornell University in the US, has been exploring the relationship between spending and happiness for more than 20 years. After publishing a number of studies and reports, he offers important insights about how much happiness we can expect from buying stuff compared with spending on experiences.

“There’s a lot of work in the area of well-being and happiness showing that we adapt to most things,” Dr Gilovich says. “Therefore, things like a new material purchase make us happy initially, but very quickly we adapt to it, and it doesn’t bring us all that much joy. You could argue that adaptation is sort of an enemy of happiness. Other kinds of expenditures, such as experiential purchases, don’t seem as subject to adaptation.”

Not only do experiences leave us with lasting happy memories, anticipation of an experience can substantially increase your happiness, often more than the experience itself.

What kind of experiences?

If experiences define who we are, how can we determine what sort of experiences we should be having to make us happiest?

Much of the recent research on happiness has revealed that it’s “inextricably linked to having strong social ties and contributing to something bigger than yourself – the greater good.”

So it makes sense that experiences you share with others bring you more happiness than solitary ones.

Author and leading expert in positive psychology Martin Seligman has another theory. He divides experiences that bring us happiness into two categories: pleasures and gratifications. Pleasures bring us immediate contentment and enjoyment – things like a delicious meal or glass of wine, a massage or relaxing in a warm bath. There’s no doubt we’ll enjoy these experiences in the moment and remember them with appreciation, but they won’t bring us an enduring sense of satisfaction the way gratifications can. By challenging and engaging us, things like rock-climbing, dancing or restoring an old armchair can have a much longer lasting impact on our happiness.

Getting the best from experiences on a budget

The good news is that many gratifications don’t cost much, especially when compared with pleasures like expensive restaurant meals and holidays.

In his more happiness bang for your buck blog, Chairman of the Australian Government Financial Literacy Board, Paul Clitheroe offers a couple of useful tips for discovering new ways to experience happiness without spending big:

The $50 test

Take time to plan three activities costing less than $50 each during the next month. Ideas include going to the movies, buying art supplies, doing a cooking class or planting a small vegetable garden. For each activity rate how happy you think it will make you, how happy it makes you immediately after and how happy it makes you a month later. You’ll soon start to learn which experiences are contributing more to your overall happiness.

Keep a happiness diary

During the next month write down everything you buy and do in a notebook. Include how much it costs and how happy it makes you both immediately after and a month later. Now look at what you’re spending most of your money on. Does it match up with what makes you most happy?

When you take stock of what you’re spending money on and how happy you end up being as a result, you’ll have the insights you need to make changes to your budget and invest more wisely in your happiness.

Source: Money & Life