5 simple things you can do today to improve your finances this financial year.
With a new financial year already upon us, now is the perfect time to get your finances into shape. Here are 5 things I’ve personally done to get my money under control that you can do too!
1. Pay off High-Interest Bad Debt
First and foremost, you need to pay off any high-interest debt that you have lingering. The trick is to avoid paying the monthly minimum. Instead, you should contribute as much money as possible to your debts. By paying off your debts quickly, you’ll pay less interest to your creditors. Who would want to pay back lenders more than they need to? I certainly don’t and you shouldn’t either.
To avoid paying the least amount of interest, start by paying off the highest interest debts first. These might be credit cards or personal loans. Whatever it is, start from the top and work your way down. You can figure out what your highest interest commitments are by getting in touch with your lender(s) directly or by reading your product disclosure statement (PDS).
High-interest credit card debt uses the power of compound interest against you. The sooner you pay it off, the less interest you’ll pay to your creditors. This will free up more capital to eventually begin investing in growth assets.
2. Track Your Expenses
Secondly, we should all be tracking our expenses. Having an understanding of where your money is going will help you regain control of your spending. Simple daily spending habits like double shot almond lattes (that's my order) and expensive lunches can add up over time. When you track expenses, you can clearly see the true cost of your bad habits.
I personally use Fudget to track all of my income and spending. Fudget is a simple, yet effective budgeting app that allows me to cleary layout my monthly incomings and outgoings. Fudget is free to download and is available on the Apple App Store and Google Play Store. That being said, there are loads of budgeting and personal finance tools for you to choose from. Fudget simply works best for me.
The key point here is to start tracking your expenses in a way that works for you today. Once you know what your spending, you know what you can and can’t afford to cut back on. As a result, you can begin to form the foundations of your own personal budget.
3. Consolidate your Superannuation
Consolidating your super into one account will instantly save you money. The fees associated with having multiple superannuation accounts open for products you’re not using is a wealth killer. It’s common for Aussies to have multiple superannuation accounts opened for them by various employers, which are lying dormant and being charged fees. Check out the ATO (Australian Taxation Office) for some great resources on how to track and consolidate your super.
While we’re talking Super, it’s very important to make sure your employer is actually paying you your superannuation entitlements. Employers are obligated to pay you a minimum of 9.5% of your gross (pre-tax) earnings into your nominated superannuation account.
You don’t need to check your account every time you get paid, but it’s certainly worth checking in quarterly as a minimum to ensure your employer is doing the right thing.
4. Make A Commitment to Consistent Investing
For most of us, investing can seem complicated and abstract. However, the truth is that investing isn’t as confusing as it seems, which is awesome because it’s crucial in determining your financial destiny. We know that investing comes with a level of risk. But what you may not know is that not investing almost certainly dooms us to financial failure. So it's worth educating yourself and taking calculated risks. In other words, "risk comes from not knowing what you're doing" - Warren Buffett.
In my experience starting small and incrementally increasing your investment contributions is best to get yourself into the rhythm of consistently investing. Remember that there’s no pressure to rush into an investment. Simply starting to save little extra money here and there and debiting into a separate “Wealth Creation” bank account (that’s what I call it) is a great starting point. Once you’re comfortable with an investment vehicle(s) that suits your personal situation, then you can slowly start putting that money to work!
So where can/should you invest? Check out 5 safe investments for 20 somethings Part 1 & 2 for some ideas to kickstart your investing journey.
With investing today being more accessible than ever, you can also consider comparing online fintech opportunities. Fintech or financial technology utilises technology to your advantage to find new and innovative ways to invest.
5. Start reading about personal finances.
The most powerful thing you can do to improve your finances is to continuously learn. But don’t take it from me. The common denominator between the world’s most successful people is that they’re all fanatic readers. Bill Gates and Warren Buffett read for hours every day. Elon Musk taught himself how to build Rockets by reading. Oprah Winfrey selects one new book to read each month and discusses it in her book club. I think you get the picture. Reading is awesome.
To help you along with your finances, seek the assistance of books written by financial experts. There are loads of books available to assist you with your finances, which cover topics like debt reduction, financial mind-set, and investing.
To reduce costs, I sometimes buy used financial books online or borrow them for free at my local library. All the things you can do to! If you’re short on time, consider audiobooks and podcasts.
Here are a few of my favorite finance-related books to kickstart you on your money journey!
P.S. I’d love to meet you on Twitter: here.
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Disclaimer: This website (the “The Money Pal”) is published and provided for informational and entertainment purposes only. The information in the Blog constitutes the Content Creator’s own opinions and it should not be regarded as financial advice.