Personal Finance

Personal Finances: Follow These Tips for a Better Financial Future

In Australia, the average living cost for a family of four is about $5,378 per month; $2,835 for one person and $4,118 for a couple. With the rising cost of living, building wealth today seems like a long shot for most people.

In such economic situations, being resilient is crucial in taking control of your personal finances. It involves prioritizing expenses that matter and budgeting better to fatten your savings. But how can you do it?

Here are essential stips you can start using right now.

1. Create a Savings Plan

The right time to start saving money is NOW. You shouldn’t wait to get a salary increase or a second job to create a savings plan. Savings are crucial for both planned and unplanned expenses.

But, be sure to open a savings account that offers a high-interest rate. There are several rules you can employ, such as the popular 50/30/20 rule. In this case, 20 percent of your income, before any use, goes towards savings. You can come up with your own rule as long as you’re meeting your monthly savings goal.

2. Control Your Expenditures

Making changes in the way you spend money can make a huge difference to your savings account balance. For instance, you can cut down on alcohol, rent DVS and books instead of buying, make lunch at home, and limit your Christmas and birthday expenses.

According to “The Richest Man in Babylon,” a personal finance book by George S. Clason, you should never allow your desires to turn into needs. Just because you earn more doesn’t mean you should spend more. Strive to cut your expenditures, and you’ll never struggle to save money.

3. Respect Your Budget

Budgeting is one of the best practical tools for money management. With a well-defined budget, it’s easy to identify your income sources, overall income amount, and essential and non-essential expenses. Draw up a budget that suits your specific goal and stick to it.

Whatever amount your monthly income is, you need a budget to know where your money is going. Set a limit for your monthly expenses, and be sure to respect it. The truth is, it’s going to be difficult at first, but self-discipline makes things easier along the way.

4. Increase Your Earning Ability

The more you earn, the more you can save. So, if you have a huge savings goal, then you shouldn’t just depend on your monthly income amount to achieve it. If possible, be sure to get paid what you’re worth, particularly when applying for a new job.

Another tip is to become better at what you do. You’re likely to earn more when you’re a subject matter expert in your field. Some people will even opt to take two or more jobs or start a home business to increase their monthly income. Whatever you do, strive to earn more to boost your savings.

5. Have a Retirement Plan

Most retirees in Australia get their income from the Age Pension and super. With the right plan, however, it’s possible to have multiple income sources after retirement.

First, determine the assets you have and their total value, and then find out the amount of super you have and when you can access it. Also, be sure to know whether you’re eligible for the Age Pension and when you’re allowed to apply for it.

You can then diversify your retirement investments. A good example is capital growth investments, such as shares and property, as they tend to grow in value over time. Interest-bearing savings accounts and term deposits can also help you earn money for everyday expenses.

6. Save on Insurance Plans

Some people have insurance policies that actually don’t benefit them. Inasmuch as it’s essential to have enough insurance coverage to protect your income and dependents, make sure you’re getting value for your money.

For example, it doesn’t make sense to buy life insurance when you don’t have dependents. Or, you can purchase whole-life insurance when a term-life plan is your ideal option. Before buying insurance, compare quotes, bundle your policies to get discounts, and have a good credit rating.

7. Invest and Multiply Your Savings

There are two ways you can earn with your savings. You can get an account that offers compound interest, which allows you to grow your savings faster.

Or, you can invest in assets that provide high returns. Since you’re likely to earn returns over long periods with such assets, you need to start as early as possible. The good thing is that you don’t need lots of money to start investing.

Today, you can invest in individual companies through direct stock purchase plans. With this option, there’s no intermediary or brokerage account; you work directly with the company. This means you’ll not pay hefty commissions to brokers.

Or, you can use online brokers, such as CMC Markets, CommSec, Westpac, and IG Group, to build your portfolio. These brokers allow you to invest in stocks, commodities, and currencies.

8. Protect Yourself from Loss

Financial disasters can happen to anyone, but it’s possible to protect yourself from significant loss. For example, while having joint accounts with your spouse is okay, it’s advisable to have your own assets as well. In the event of a separation, you have a safety net.

Before investing in anything, take the time to research every investment opportunity. First, ensure it’s genuine and not a scam; you should check the ASIC’s list of companies to avoid. Also, it should be viable enough to deliver the promised returns.

Don’t take too much debt as you’ll end up losing even more if you default. Always have a repayment plan that keeps you in control of your credit.

BONUS TIP: Save on how you use credit cards – watch this video to see how….

Final Thoughts

Money permeates all areas of your life, and it’s crucial to learn how to manage it wisely. Start by changing your habits to reduce your expenses. It’s all about establishing a lifestyle that allows you to save more and spend less.

Have realistic financial goals and keep your debts as low as possible. Most importantly, always have a plan for your income and never spend the majority of it. With these tips, it won’t be challenging to achieve your personal goals.

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Roland Bleyer

Mate produces well-researched content that is unbiased and balanced. Our research team is led by Roland Bleyer who regularly features in the media as one of Australia's leading experts in consumer finance. This year he has been featured on 7NEWS, News.com.au, Womens Day, The West Australia, SMH, Your Money, Channel 10 and many more. Roland's company is an Australian Credit License holder and he is an authorised credit representative. We rely on official government and bank sources as well as data released by Australia's leading comparison engines.

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