The way we live has changed significantly over the past few decades. People tend to marry and have families later in life — if at all — and types of careers and the types of careers and number of jobs you’ll have during your working life are also radically different. Even your 30s aren’t what they used to be – retirement age is officially 65 and on the rise.
However, one significant thing remains the same – the importance of financial planning, especially when job and housing markets have drastically altered and life expectancy is higher than ever.
Being financially savvy is important, especially when you begin the journey towards retirement. Finance-related blunders can have harsh long term consequences you don’t always spot at the time.
With that in mind, here are 30 things that you should know.
1. Know your net worth
Your net worth is the total value of your your assets minus your debts. This may not seem important, but it’s one of the things finance companies – think banks for loans and credit card applications – look at in assessing your creditworthiness.
2. Know your debt
This can be intimidating for a lot of people, especially when you add it all up. Ignoring debt or blindly making payments can cost you more in the future. It’s better to know what you’re up against so you make informed decisions.
3. Take advantage of rewards based credit cards
Credit cards are often required when planning for your everyday spending, however it’s important to try and pay off your balance at the end of the cycle to avoid high interest charges. If you have a rewards card, you should consider using it for the majority of your expenses where possible as you may be able to reap some lucrative benefits, such as free or upgraded travel.
4. How to budget
A budget is a great way to set yourself up for success. It’s far too easy to overspend when you don’t place restrictions on yourself or make plans from what you’ve earned. Set aside funds for your living expenses, bills, savings and leisure and stick to them.
5. Track your expenses
Not sure where to start with your budget? Start tracking your expenses. This may be an intimidating prospect, but it will give you an accurate depiction of how and what you spend your money on, and where. There are even apps for that to make life easier. From there, you can look for ways to cut back and save money.
6. Get rid of unnecessary costs
It can be easy for fees and other costs to start building up without much attention being paid to them. Are all of those subscriptions necessary? Are your investment fees higher than the average? Do you have three bank accounts all paying monthly fees? Know what your money costs you and be conscientious about finding ways to save. Every dollar saved really is a dollar earned.
7. Avoid overspending
If you find yourself short each month or consistently blowing out your budget, you need to find out why. Perhaps you impulse buy, eat out too often or have friends who encourage a more lavish lifestyle. Pinpoint the cause and then find tools that are right for you to avoid repeating that behaviour in the future.
8. Set automatic payments
Unless you’re living from paycheck to paycheck, setting up automatic payments is a great way to avoid missing any bills and the fees that inevitably come with late payments. Some companies even offer additional discounts for paying on time. And on the downside even missing one phone bill payment can affect your credit rating.
9. Establish savings goals
What do you want to save towards — holidays, a new car, an investment property? Having clear goals makes saving easier because you have something visible to work towards. Establish a timeline and targets for both short and long term savings goals so you can see the progress you’re making.
10. Have an emergency fund
If you don’t have an emergency fund, start one – it’s the financial equivalent of stockpiling for winter. If you already have one, be sure to maintain it. Keep it replenished and perhaps consider investing part of it so it can grow. Don’t use too much and stick to low risk options — these funds do need to be available for emergencies, after all.
11. Negotiate your salary
Have you been on the same income for a while? Perhaps you’ve been with the same company for years. Now is the time to evaluate your skill set and ensure that you are being rewarded for it. If your skills and experience have increased, generally your salary should too.
12. Earn extra income
Relying on one source of income isn’t a smart financial move, particularly as you move closer to retirement. We’re not saying you should get a second job as an UberX driver, but starting a side business or considering your investments now will give you more options in the future and ensure that you still have a potential income stream once you retire from your day job.
13. Consolidate your superannuation
If you’ve had a few different jobs over the years, you may have a bunch of different superannuation accounts – and you’ll be paying fees on each one. Consider consolidating your super to save on fees. Finding lost super and putting it all in one place has been made easier than ever and the ATO can help you find lost accounts.
14. Explore investments
This philosophy can also be applied to your current finances. You don’t have to be a financial expert to dip your toe into other investments. Consult a financial adviser to discover the ways that you can make your money work for you.
15. Choose the right insurance
There’s plenty of different types of insurance out there. Think carefully about what’s right for you, and the things covered within your policy (pay extra attention to health insurance options). You don’t want to be overpaying for so-called benefits that you don’t need or to not be covered where you need it most.
16. Regularly evaluate your insurance
As mentioned above, you don’t pay for things you don’t need or would ever claim for. So when was the last time to took a serious look at your insurance policies? It’s important to regularly reevaluate your coverage across the board so its still relevant for your current circumstances. Have a chat with a financial adviser to make sure you don’t lose any important benefits.
17. Have a retirement plan
What have you done to prepare for your retirement? Relying on superannuation may not be enough — consider starting a savings account or investment portfolio specifically for retirement. It’s also imperative to periodically re-evaluate it to make sure that it still fits your needs and the fees aren’t too high.
18. Put more into super
Again, don’t just rely on your employer for super contributions you will rely on for retirement. If you can, try and take advantage of the tax benefits that a salary sacrifice into super can offer to boost your balance. If you are already doing this, consider boosting your contribution, particularly if you’re earning more than in the past.
19. Don’t dip in for your kids
It’s important to celebrate special occasions such as children getting married or going to university however you should also consider your retirement fund when planning for these.
If you want to help financially, consider opening a dedicated savings account for their education or the Big Day when you’ll gain an extra son or daughter.
20. Lead by example
How to be financially savvy is one of the best lessons you can teach your kids. Set a positive example for them with your own choices and conversations. Encourage a good work ethic and savings from a young age and financial independence when they’re older.
21. Refinance your house
When mortgage rates drop it can be a good idea to consider refinancing your home for a lower rate. Just be careful though, because you don’t want to end up in another multi-decade term. Be smart about it and consult a mortgage broker or your bank.
22. Be careful with your home equity
Although it can be tempting to cash out on your home loan equity, be careful. This may increase your term and the amount you owe. Only consider doing this for essentials that will be beneficial, such as home improvements that will add value to the property.
23. Have a will
If you don’t already have a Will — now is the time to create one. You want to be sure that your wishes are adhered to and your assets are dealt with in an orderly fashion. Not only will this bring you peace of mind, it will make the logistics easier on your loved ones down the track.
24. Review your beneficiaries
It can be easy to create a will and then forget about it. It’s important to periodically review it in case your financial situation changes and to ensure that your assets will go to your preferred beneficiaries.
25. Think about how you plan to retire
Do you want to keep living in the city, heading to concerts and plays every week, or are you going to move to the country, or perhaps a small Italian village? The way you want to live in retirement and when you want to retire, will shape how and how much you save for the day when your time becomes your own once more.
You don’t have to wait until you retire to consider downsizing. Do you actually need that many cars? Could you comfortably live with less stuff to take up your valuable space? Even if you’re not ready to downsize your home yet, downsizing your lifestyle can be a smart way to prioritise your spending.
27. See a financial adviser
Managing and optimising your finances can seem daunting, but you’re not on your own. Take the time to seek out specialists and find a financial planner who is authorised to give advice under an Australian Financial Services licence.
28. Get tax help
The same goes for your tax. Etax can be a quick and convenient tool, but it may not be appropriate for your financial circumstances. Assets, savings accounts and investments make tax time complicated, so it might be worth getting an accountant to ensure that everything is order.
29. Prioritise your health
Don’t just save for health-related rainy days, actively prevent them from happening. Keeping fit and healthy now could save you from bills and medication in the future.
30. Have fun with your money
You’ve worked hard, and saved along the way, your working life should just be about sacrifice for your retirement. Remember to have fun! You don’t want to look back and regret not living your life — feel free to indulge in some of life’s pleasures that you have worked so hard for. But like anything, moderation is key.
Take the first step today to get your finances sorted. For more tips on advice super and insurance visit commbank.com.au/maketodaycount.
Things you should know: This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. You should consider seeking financial advice before making any decision based on this information. Advice and products may be provided by wholly owned but non-guaranteed subsidiaries of the Commonwealth Bank of Australia ABN 48 123 123 124.