No doubt you know someone who made the new years resolution to get fitter. Now that New Year’s resolutions are fading and gyms are emptying out as people get busy getting on with their lives, we thought it was about time to talk about a different kind of fitness – financial fitness.
Financial fitness is one of the most important factors that will affect you and your family’s wellbeing and security. So if it’s that important, what is it?
What is financial fitness?
Being “financially fit” is all about having a level of control around your finances, getting in a regular financial routine and setting/achieving your financial goals.
Especially with the recent changes to credit reporting, it’s more important than ever to be on top of your financial routine.
Regardless of whether your salary is $70,000 or $1,000,000, it’s critical you know the finer details of your finances – what comes in, what goes out, which points of your year are likely to be stress points, how much you’re saving etc. If you don’t know, you will most likely be in poor financial health. Not only will you see less money in your bank – through late fees, missed payments, etc, it could lead to financial stress that can potentially affect many areas of your life including your future, relationships and quality of life.
So how can you find out if you’re financially fit or not?
Take the test!
ANZ have a great financial fitness test online that will determine how healthy you are when it comes to day-to-day living, managing debt, protection, wealth and retirement.
If you find that you are financially unfit, we’ve got some great workouts to help you turn that around.
4 Financial Fitness Workouts
#1: Develop a budget
To get a real handle on your finances, start with creating a budget – there are many free online budget templates. Take some time to sit down and work out your income, your bills and expenses – on a monthly basis. Then track your spending each month against what you’ve forecast, including your morning coffee! Chances are, you’ll be quite surprised at how the end total differs from what you thought it would!
Doing a budget allows you to really see whether you spend less than you earn – the cornerstone of financial fitness. It can seem a little confronting at first, but if you don’t know, you can’t possibly take remedial action before it’s truly required.
#2: Create a savings account
A savings account is a MUST when it comes to your financial fitness – how are you meant to save without a savings account?! Now you might think a savings account is just your usual bank account where your salary is deposited. We’d suggest setting up a long-term savings account that will assist with your investment purchases and can somewhat act as an emergency fund (think enough cash to support you if you earned nothing for six months).
The trick to this workout is selecting an account that pays reasonable interest and allows you to set up automatic transfers (and is a little difficult for you to access).
It’s important that you create a regular routine when it comes to deposits. Use your budget as a guide and set up a transfer each month (even if it’s just $50).
The golden rule; don’t touch the account unless it’s for a real financial emergency or something important like a deposit for your first home, investment property, etc. AND then only if you’ve got an excess over and above emergency reserve fund.
#3: Review your superannuation
Superannuation is one of the most important things you need to consider when determining your financial health. It’s what’s going to keep you financially healthy in the future. So many people neglect theirs. Make sure you set some time aside to assess your super fund – is it the right fund for you, are you on the right investment option for your stage of life, are you putting enough aside.
If you feel like you’re after more control, you might consider a self-managed super fund. That’s something we can help set up for you.
#4: Pay all your bills in full and on time
It’s human nature for many people to dawdle when it comes to paying bills. But it’s unfortunately a reality of life – they must be paid
And recent changes to credit reporting might motivate you further. You’ve now got just 5 days grace past the due date before being reported. The best thing to do when it comes to bills is work out how much you’ll be up for each month so you aren’t surprised when the bill arrives (include this in your budget).
If you can, always pay your bills in full – that way you’ll avoid late fees and extra interest charges. If you’ve got outstanding balances on credit cards that you can’t pay in full – try to pay as much as you can over and above the minimum payment – that way your balance will reduce over time strengthening your financial fitness.
If for any reason you can’t pay a bill on time, make sure that you call your vendor early to discuss payment terms. Almost everyone will agree to longer terms, etc if you make the first move and then honour the terms of your agreement – yes, even the ATO.
We hope that these exercises improve your financial fitness. If you feel like you’d like some extra help with your finances, we’d love to work with you as your financial fitness trainer. Give Greg or Kerry a call today on 6023 1700 or drop us a note.