For many people thinking about money feels intimidating, stressful, or even boring! BUT taking a bit of time out to put your financial foundations in place will provide you with enormous peace of mind and a map for your future security. It may also help you weather any unexpected financial hiccups if they arise.
Here are 6 key foundations for solid financial health.
1. Budget
By looking at what is coming in and going out you can start to make some decisions about where you want to direct your money. Instead of wondering where your money went a budget allows you to decide where it’s going.
The trick is to spend less than you earn and borrow less than you can afford.
A budget provides visibility over where your money goes. It should address essentials (bills), nice to haves (eating out, entertainment, holidays), savings and investments.
2. Emergency fund
We don’t get to choose when a crisis occurs, but we do have control over how we prepare for unforeseen events. An emergency fund provides scope for coping in an adverse event such as losing your job, a financial set-back or relationship breakdown.
A good way to build your fund is through an automatic direct deposit into a separate account that you don’t touch. It is also a good savings habit that can set you up for achieving other financial goals such as saving for school fees or a renovation.
3. Insurances
We would all rather not think about the unexpected curve balls that life can throw at us. If something happened to you or your partner, would you be covered? How would your family be affected financially? Could your debts be repaid and where would your family’s new source of income come from?
You are your biggest asset. Life insurance, income protection, business protection, total and permanent disability and trauma insurance can ease the burden should you find yourself in an unfortunate circumstance.
4. Mortgage repayment plan
Paying off your mortgage will provide peace of mind and free up cash flow. Setting up an offset account, finding lower interest rates, making additional repayments or lump sum payments are some of the things you can do to speed up the process.
5. Super and wealth creation
Superannuation is often one of your biggest investments so make sure it is right for you. How much money you need to retire depends on many factors and this will influence your strategy when it comes to investing in super.
Consider making additional contributions. Not only does your super grow faster, but there are tax benefits for you or your spouse and government co-contributions for lower income earners.
ALWAYS nominate beneficiaries within your super – your will does not cover superannuation. Update them if your relationship breaks down, you remarry or have additional children/grandchildren.
In addition to super you should also look at building your wealth through other means if possible. This may include investing in real estate, stocks or funds that have the potential to grow over time.
6. Estate planning
Family dynamics are unique and sometimes complex. Having a plan can prevent problems for your family when you are gone.
Having a current will ensures your assets will be distributed according to your wishes, who will act as guardians to your children if needed and who will be the executors and trustees of your estate.
Estate planning should also include an enduring power of attorney which allows you to nominate how you would like to have your personal, financial and health care matters managed, should you lose capacity to make those decisions is also part of estate planning.
Every day we help our clients to get their financial foundations right. Getting the right advice can make all the difference to achieving your goals. Get in touch.
General Advice Warning: The information provided in this article is general in nature and does not consider your particular investment objectives, financial situation, or insurance needs; we therefore recommend you seek advice tailored to your individual circumstances before making any specific decisions.
Dobbrick Financial Services (Gympie) Pty Ltd ABN 48 931 205 109 & DFS Oakland ABN 64 340 527 395 and their advisers are authorised representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306. DFS (Ipswich) Pty Ltd ABN 86 100 184 521 and their advisers are authorised representatives of Fortnum Private Wealth LTD ABN 54139889535 AFSL 357306.
