Whether you are starting your financial journey out of Uni, getting your first job, climbing the career ladder, jumping into a relationship, buying property or starting a business, you need to take control of your financial future. Here are 8 really important things to know when you are starting out.
One: Live without a credit card
Did you know that Australians owe approximately $32,673,480,146 in credit card debt as of this morning. Here’s an easier number: Thirty-Three Billion Dollars. Personal debt per credit card holder is $4301.00 with an average of $723.45 in interest per annum. Yikes!
For many of us refusing to use a credit card is simply not an option. Without one it’s difficult to pay bills and even make reoccurring payments. So use it for that and not for shopping. What should you use for shopping and spending I hear you murmur sarcastically? Use a debit card. You can’t spend more than you have in the bank that way. You’ll find you will spend less and when you next look at your bank statement you’ll even question what you are buying and maybe start to budget.
Two: You don’t have to keep up with the Joneses
Keeping up with your peers is dangerous. Just because they have the latest model of car or go on the holiday that you’ve always wanted to, doesn’t mean you should too. You don’t know what their situation is: they may have inherited some money, or they may be so far in debt that you don’t want to follow. You are you, they are they, don’t get confused with that. Live within your own financial means not your peers.
Three: Choose your partner very carefully
Business or personal partner, this is relevant to both. Don’t be impressed by a showy display of money or wealth, it may just be a façade and have a bucket load of debt supporting it. Be careful and be aware. When a business starts making money it’s very tempting, particularly if it is a new concept to your partner. There are so many horror stories of partners who get all consumed by newfound wealth and blow it all. Money can bring out greed in a person… very easily. Keep your finger on the pulse.
Four: Start Saving
More than 40% of a recent survey said they were able to meet their normal monthly expenses, but a third admitted they were worried about their ability to do so. The report said that the results clearly showed there are a large number of people who struggle to cope financially, and the problems are not always linked to the size of their pay-cheque. In many instances people are living in the hope that they will achieve their goals rather than planning for a fulfilling and secure future.
57% of those surveyed had no regular savings plan, and peaked among 45 to 54 year olds, who are often nearing the peak of their earnings capacity. Close to 40% of people would be unable to maintain their current lifestyle if they lost their income for three to six months, thanks to not enough savings.
So how do you counter that? Put a simple budget in place, as you never know when your financial situation can and will change. We like to call it Your Spending Plan as that is what we are all working around: Spending.
Five: Develop a budget
Don’t spend more than you earn. It’s hard to keep track of spending if you don’t have a budget. Putting a simple budget in place lets you know what you have to spend, and what you don’t. We like to call a budget a Spending Plan as that is what we are all working around: Spending.
Six: Get yourself health insurance
Without health insurance, you may not be able to afford expensive medical services when you need them but there are many more reasons why you need health insurance: Shorter waiting periods for elective surgery, choice of doctor, extras benefits to name a few.
You could end up paying more for private health insurance over your lifetime if you don’t take out hospital cover before 1 July following your 31st birthday. If you join after this time, you may be required to pay a 2% loading on top of your premium per year for every year you are aged over 30 and do not have private hospital cover, up to a maximum loading of 70%. For example, if you take out private hospital cover at age 45 you may pay 30% more than someone who took it out at age 30.
Do you really want to be significantly out of pocket when you are sick?
Seven: Keep track and set some goals
If you don’t know where you are it’s often hard to know where you are going. Hopefully you establish your budget, then revise and review. Your budget is a living document, it keeps changing so you need to keep assessing and adapting to these changes.
Put some realistic goals in place and try to stick to them. You’ll benefit in the long run.
Eight: Understand Superannuation
If you want enough money for a comfortable retirement, spend some time learning about superannuation. Taking a few steps now to boosting your Super will make a huge difference to your lifestyle in the future.
Superannuation is a way to save for your retirement. The money comes from contributions made into your super fund by your employer and, ideally, topped up by your own money. Sometimes the government will add to it through co-contributions and the low income super contribution.
Your employer must pay 9.5% of your salary into a super fund. This is called the Super Guarantee and it’s the law. The Super Guarantee will gradually increase to 12% in coming years.
Over the course of your working life, these contributions from your employer add up, or ‘accumulate’. Your super money is also invested by your super fund so it grows over time. When you retire, you will have money to live off – a nest egg. Super is a lifetime investment that has many benefits. Super can be a minefield of information so ask an expert for help, It’ll save you money in the long run.
So if you are starting out on the career path, in a budding relationship, a new business or “it’s just time”, get a grip on controlling your overall financial situation. Here’s a great Free e-book from Your Money Sense: 6-steps to Financial Security It’s a good starting point to get you in the right mindset when you are starting out.
Are you a single parent? It’s more common than you think. The first thing to accept is that you are now financially independent, or need to be. At first that can seem overwhelming, particularly as a single mum. Just understand that there is plenty of help out there if needed. There is such a great network of support through women in business networking groups on Facebook and LinkedIn. And they really are very supportive and helpful with lots of personal experience to tap into.
Get out and live your life, personally and in business. Embrace your kids, activities, the city, and financial opportunities. And take control of your finances; understand them and rework them to suit your new lifestyle.
Here are 7 financial steps to get you back on track after divorce:
1: Embrace that you are now financially independent. Yes, you may be eligible for child support, but also remember this, you may not end up getting it. But you can control how much you earn, and you can earn far more than a judge may order you be paid. It’s also very important at this stage to move on emotionally in this phase of your life; don’t rely on someone else.
2: Set some short- and long-term financial goals. In the short-term you may need to pay off a credit card bill, build an emergency savings account, or simply put; make more than you spend. Your longer term goals may include buying a home, saving for your kids’ college, or investing for retirement.
3: Set quality of life goals. There is no point in paying off a credit card bill if it means you work so much that you never see your kids or have time to exercise. Consider free time, quality time with your family, for their health and well-being. Think about how your money and life can work together.
4: Decide to make more money. Take a mentor, someone you know is doing it well, out for coffee to learn about opportunities in your profession. Research about doing further study. Consider starting your own business. Talk to your boss about working from home and other life-balance arrangements.
5: Get rid of bills for stuff you don’t need. Haven’t been to the gym in six months? Get real with yourself and cancel that bill. Look at your mobile phone and cable bills – can you trim down your services?
6: Go on a shopping diet. No more trips to the shopping centre to browse, on or offline. Make a strict list before stepping foot there, and do no stray into the cosmetics department for a “treat” no matter how good a deal it is! By making each purchase a conscious one, you will feel empowered and confident about your money.
7: Give yourself a break. Getting back on your feet after a divorce can be a long process full of setbacks. But this can also be one of the most exciting and empowering times of your life.
For most single parents, their lifestyle will be different from the past because of their changed financial circumstances. Try not to dwell on the past, and how different it may have been, because it will just eat away at you emotionally.
Build a financial plan that outlines your assets, income streams (from investments and working) and obligations (debts, living costs etc). Calculate a cost of living figure and come up with an amount that represents the weekly, monthly and annual commitment. If there is a gap between cost of living and income (wages, investment income and government entitlements) then develop a plan to plug that income deficit.
Here’s a helpful downloadable guide to take back control of your financial situation. 6-steps to Financial Security, a Free e-book from Your Money Sense. It’s a good starting point to get you in the right mindset to manage your money.