Rashesh Bhavsar, Financial Adviser, Fortune Wealth Creation Group
Budgeting to investing to building the will power to spend less than you earn, here are some pointers to saving more. And there’s no better time to start than now Although making resolutions to improve your financial situation is a good thing to do at any time of year, many people find it easier at the beginning of a new year. Regardless of when you begin, the basics remain the same. Here are my top ten keys to getting ahead financially.
Make sure you earn in line with market, try to increase it, and spend less than you earn
It sounds simplistic, but many people struggle with this first basic rule. Make sure you know what your job is worth in the marketplace, by conducting an evaluation of your skills, productivity, job tasks, contribution to the company, and the going rate, both inside and outside the company, for what you do. Being underpaid even a thousand dollars a year can have a significant cumulative effect over the course of your working life.No matter how much or how little you’re paid, you’ll never get ahead if you spend more than you earn. Often it’s easier to spend less than it is to earn more, and a little cost-cutting effort in a number of areas can result in big savings. It doesn’t always have to involve making big sacrifices.
Have a budget and stick to it
One of my favourite subjects: budgeting. It’s not a four-letter word. How can you know where your money is going if you don’t budget? How can you set spending and saving goals if you don’t know where your money is going? You need a budget whether you make thousands or hundreds of thousands of dollars a year.
Pay off credit card debt/high interest/non deductible debt first
Credit card debt is the number one obstacle to getting ahead financially. Those little pieces of plastic are so easy to use, and it’s so easy to forget that it’s real money we’re dealing with when we whip them out to pay for a purchase, large or small. Despite our good resolves to pay the balance off quickly, the reality is that we often don’t, and end up paying far more for things than we would have paid if we had used cash. Non deductible debt should be payable first as it does not attract any tax benefits.
Contribute to a Superannuation for your retirement
Yes, super is boring but it can be your dearest friend if you are high income earner and planning have comfortable retirement. Super is not an investment, it is just a tax structure where you park your money to save for your retirement. In super you pay maximum tax up to 15% in compare to your marginal tax rate which can be up to 45%. Once you put money into super, generally you cannot access until you meet your preservation age (normally age 60 for most people) or meeting one of early access eligibility criteria. We highly recommend to get a professional financial advice before you put money into super.
Have a savings plan
You’ve heard it before: Pay yourself first! If you wait until you’ve met all your other financial obligations before seeing what’s left over for saving, chances are you’ll never have a healthy savings account or investments. Resolve to set aside a minimum of 5% to 10% of your salary for savings BEFORE you start paying your bills. Better yet, have money automatically deducted from your pay check and deposited into a separate account.
If you’re contributing to superannuation and a savings account and you can still manage to put some money into other investments. Remember, diversification is a key to minimise your risk from one asset class under performance. If you are investing for more than 7 years, investing into stocks and property historically outperformed cash and term deposits significantly.
Review Your insurance coverage
Too many people are talked into paying too much for life and disability insurance, whether it’s by adding these coverage to car loans, buying whole-life insurance policies when term-life makes more sense, or buying life insurance when you have no dependents. On the other hand, it’s important that you have enough insurance to protect your dependents and your income in the case of death or disability. Normally, to provide full protection to your family by having Life, Trauma, TPD (Total & Permanent Disability) and Income Protection cover cost between 2%-3% of your income and you also get tax deduction for income protection.
Update your will and enduring power of attorney
Almost more than half of Australians don’t have a will. If you have dependents, no matter how little or how much you own, you need a will. Protect your loved ones. Write a will. You also need a enduring Power of Attorney; make sure it is enduring not a general power of attorney. Enduring power of Attorney works beyond the mental incapacity while general power of attorney does not which defeat the purpose of power of attorney. Enduring power of attorney comes in various types — limited financial, medical and guardian. If you have a child or children, you need to have Enduring Power of Attorney (Guardianship).
Keep good records
If you don’t keep good records, you’re probably not claiming all your allowable income tax deductions and credits. Set up a system now and use it all year. It’s much easier than scrambling to find everything at tax time, only to miss items that might have saved you money.
Get professional financial advice and review it regularly (at least yearly)
If you need a doctor, you go to doctor right; if you need an electrician you call him; right you do not do yourself. So why you take a risk on your financial future by managing your financial affairs yourself. It is important to be a financial literate and I always encourage so you can take informed decision but doing everything yourself is surely not a right way to go as financial planning is a complex field and changes do happen every year in tax, superannuation and that make it more complex. According to Galaxy survey, 9 out of 10 Australians are benefited from the experience of using a financial planner but unfortunately only 2 out 10 Australians currently have their personal financial planner. It is also very important to review your financial situation regularly with your planner to update or modify the strategies accordingly.
The writer is a financial advisor, CEO & Co-Founder of the Fortune Wealth Creation Group, and can be reached at firstname.lastname@example.org