Seven ways to kickstart your finances this financial year
July is the first month of a new financial year, but a lot of us spend it looking backwards, gathering information from the last financial year to complete our tax.
Naturally it’s important to review your finances, but there’s nothing you can do to influence them. You need to be taking the time now to set yourself up for this financial year so that come July next year, you can look back and see what you’ve achieved, rather than just gathering receipts.
Building a budget and setting savings goals are integral to kickstarting your finances.
To help you along the way, here are seven steps you can take today to make this a reality.
Set meaningful goals
Goal setting is a powerful, proven way to move you from where you are now to where you want to be. Just taking the time to write down what you want to achieve financially will already bring you closer to that goal.
They key is to be as specific as you can. Rather than “I want to be rich” or “Financial freedom”, think along the lines of “I want to live in (affluent suburb) within 10 years” or “I want to be debt-free by the end of this year”.
The more specific the goal, the more likely you are to achieve it.
Build a budget
Having a budget should be the number one priority for anyone serious about reaching their financial goals. While many might consider just the thought of a budget too constricting, without knowing how much money you have, and where it is going, you have no way of knowing how it can grow.
Sit down and review your income, expenses, bills and leisurely pursuits to get a complete picture of your current financial position. This is the base from which everything will naturally flow.
Cut back on unnecessary spending
If you’ve been thorough in your budget, then you might have gotten a few nasty shocks along the way. Little things like coffee and going out with friends can add up over a week, month or year and quickly chew through your earnings without your even realising it.
It doesn’t mean you need to stop socialising, but rather, make a conscious decision on how much you are willing spend doing it. Factor this into your budget and stick to it. This should go for anything that you don’t deem an essential expense.
Now is the time to put aside that little bit extra and start saving. With the fat trimmed from your budget, you’ll now know how much surplus income you have available. This might only be $20 a fortnight or it might be considerably more, but every little bit helps.
A fantastic way to force yourself to save is to create a savings account without direct cash access like a debit card. If you can get your employer to transfer your chosen savings amount directly into that account, and can’t access it immediately for those impulse buys, then the balance will just keep growing.
Top up your super
Superannuation is a fantastic savings vehicle for retirement, but you are limited to the amount of money you can put into it each year. However, if you rely solely on contributions from your employer then you’ll probably have plenty of room left over. From increasing your salary sacrificed contributions to doing after-tax top-ups, there are plenty of ways to put that surplus income to work for your retirement.
Pay down your mortgage
If you’re already a home owner, then consider putting your surplus income into your mortgage. Even the smallest amount can add up to significant gains over the life a loan. Putting just $50 per month extra into a $500,000, 30-year loan at 5 per cent interest will save you around $22,000 in interest and shave off more than a year from the contract.
Plan for the worst
With all your hard work planning for the future, its also worth considering what can go wrong. Loss of income due to unforeseen health concerns can be crippling for any family, even more so where there is only one main earner. Insurance cover such as life and income protection can be a smart investment that, while you hope you’ll never need it, will protect you if you do.
Now is also a great time to review your will, making sure that those you love will have one less thing to worry about should the worst come to pass.
Make this financial year one that you can look back on with pride, a year that you didn’t just tread water financially. Follow these steps to get it started right.
Of course, there are many more options available to grow your wealth and, if you’re already on top of what we’ve discussed, then why not take the time to get a professional review of your financial position and find out how you can continue towards reaching your goals.
Why not increase the financial savviness of those around you – pay it forward and pass on these tips to your family, friends and kids.
Olivia Maragna is the co-founder of Aspire Retire Financial Services and is an independent and respected financial expert. Olivia’s advice is general in nature and readers should seek their own professional advice before making any financial decisions.
You can follow Olivia on Facebook or Twitter.
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