It’s already April and Easter is looming. So how is your New Year’s resolution going? You know, the one about your money? If your answer is ‘not well’, then don’t let yet more months go past without getting serious managing your finances.
Below are my top seven tips for getting your financial house in order.
- Have a plan. The American business tycoon T. Boone Pickens famously said that, “A fool with a plan can beat a genius without a plan.” Write down a basic plan with some specific objectives, goals and strategies. It’s like a road map – if you don’t know where you are going, how are you going to get there?
- Think, ‘Step by step’. Don’t try to do everything at once. Your plan should include a series of steps. For example, start off with reducing credit card debt, followed by saving a set minimum amount every month.
- Have a budget and stick to it. A fortnightly or monthly budget should be a basic part of your plan. It needs to set out your expected income and expenses and the amounts you will set aside for savings or paying off debt. It should be realistic, and it needs to be challenging enough to make a difference. Aiming to make only the minimum payment on your credit card each month will quickly send you backwards, not forward to financial freedom.
- Pay yourself first. While we all have bills and other expenses, don’t pay yourself last by saving only what is left over at the end of each month. Have a strategy such as an automatic fortnightly deduction from your salary that goes into something productive such as a high interest savings account. Some banks have accounts with reasonably good rates, so long as you put a bit more in each month. Check them out, but watch the fine print.
- Read that credit card statement. As painful as it may be to study, this is a really valuable document. Firstly, it can tell you where a whole lot of your money is going. It will also show you the ugly interest rate you are being charged if you don’t pay off the whole balance each month. You are simply throwing away your hard earned dollars if you don’t.
- Learn about money and investment. Education is something that no one can take away from us. The time spent on improving your knowledge and skills will pay off in spades.
My best money light bulb moment was when I realised the difference between an asset and a liability. An asset makes money for you while a liability costs you money.
A car, for instance is not really an asset. It costs you money because it depreciates in value every month. If you have a car loan, it is even more of a liability. Pay it off as quickly as you can because you are leaking money on something whose value is steadily going south.
Take the time to learn the basics of superannuation and the tax benefits it can give you. If you’re able, salary sacrifice some money into your super fund on a regular basis. It is the best legal tax game in town.
Ignorance is not bliss when it comes to money, and fortunately there are some good resources out there to help you learn and develop your skills. For some practical tips and strategies go to MoneySmart the Australian government site with heaps of great tips and tools including budget planners, a credit card debt calculator (this is a real eye-opener) and ideas for finding a financial counselor if you are in trouble.
Another good one is Super Guru with lots tools and clear information about superannuation.
- Take responsibility for your financial health. Finally, I see too many women abdicating responsibility for their money by not taking it seriously enough and by leaving important financial decisions to their husbands and partners.
There is no money fairy godmother out there and prince charming hasn’t been sighted for years.