Tags: Money & finances Future security Standard of living Financial advice

“Drill down and get a good understanding of your expenses. You might be surprised at how much it costs to live”—Vikki Manuel, Senior Financial Adviser at Australian Unity.

Key points

  • Once you know what you’re spending your money on, you’re likely to find areas you can cut back on or eliminate entirely.
  • Speak to a licenced financial adviser, as getting the right advice can put you on the right path to financial security.
  • Planning for your financial future may involve making sacrifices now and will take commitment but will be well worthwhile.

Actively planning for a secure financial future is one of the best things you can do for your family.

Taking charge of your money and committing to building wealth is critical to securing your family’s finances.

By putting the right building blocks in place, you can create a financial future where you tell your money what you want it to do and not the other way around.

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It all starts with some simple strategies that help you to understand how much you have coming in and going out, and that get you in the habit of budgeting and establishing regular savings.

Here are five strategies to help you start planning out your finances.

1: Take control of your income and expenses

“Drill down and get a good understanding of your annual, monthly and weekly expenses. You might be surprised at how much it costs to live,” says Vikki Manuel, Senior Financial Adviser at Australian Unity.

First, take the time to add up how much money your family earns. This might include wages, any bonuses you may receive, or any extra income, such as dividends from shares or money from second jobs and side hustles.

Next, work out what your expenses are. Split them up into fixed costs and variable costs.

Fixed costs include your rent or mortgage, and responsibilities such as insurance premiums, credit card repayments, and car or other personal loans.

Variable costs include presents and clothes. It’s a good idea to also split up your expenses into discretionary costs (such as entertainment) and non-discretionary costs (such as food).

There are several tools you can use to identify your expenses, such as Pocketbook, your bank statement, or simply pen and paper.

Once you know what you’re spending your money on, you’re likely to find areas you can cut back on or eliminate entirely.

You can then squirrel that money away into other areas, such as savings or investing, which leads us to strategy number two.

2: Put a budget together

Once you know how much you have coming in and how much is going out, you can create a family budget.

Sometimes you’ll find more money is going out than coming in. If that’s the case, and you are living beyond your means, you’ll need to look for ways to reduce your expenses.

Shop around to find better deals on things like electricity, gas and insurance, and look for discounts when you’re shopping for groceries.

It’s also a good idea to cut out any unnecessary expenses. For example, you may be paying monthly fees for streaming services or other subscriptions you’re not using. Cancelling these could save you significant funds over time.

The other approach is to find ways to make a bit more money, such as bidding for jobs on Upwork and Freelancer, or selling unwanted items on Gumtree or Facebook Marketplace.

Whatever you do, don’t cut your budget to the bare bones, says Vikki, as it’s not realistic. “It's like a diet, as soon as you get a little bit stressed you'll eat a whole bar of chocolate, so you need to include some discretionary spending.”

Importantly, identify a budgeting style that works for you, as this will set you up for success.

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3: Domino your debts

Wealth creation is often hindered by debt, so tackling your debts—with the exception of your mortgage—is a sure-fire approach to securing your family’s financial future.

To start, make a list of all your debts and decide on how you will tackle them.

One good approach is to pay off your debts from the highest interest rate to the lowest.

Another simple approach is to pay off your debts smallest to largest, as knocking off the smaller payments gives you more ammunition to fire at the large ones.

And yet another tried-and-true method is to consolidate your debts, which involves combining your credit cards or any personal loans into a loan with a lower interest rate, such as a mortgage.

But take care when using this strategy. It can be all too easy to consolidate your debts, take out another credit card and find yourself in the same position in a year’s time.

“Review what's triggering your spending to put you in a situation where you need to continually consolidate your debts and try to address these behaviours,” says Vikki.

Whatever approach you take, paying off your debts is essential.

Doing so allows you to maintain your credit score, which banks and other institutions use to decide whether to lend you money, as well as giving you more money to put into savings or investments.

4: Set savings goals

Once you have analysed your expenses, set up a budget and attacked your debts, it’s time to set up a savings strategy.

Having savings gives you a financial buffer to pay for unexpected costs, but they can also be invested to build your wealth over time.

Everybody will have different savings goals, depending on what you want to achieve with the money. It might be a holiday. You might want to invest in shares or property, or start saving for your kids’ education. Or you might decide to start an emergency fund.

But only you and your family can decide what you want to use it for.

The main thing is to make a decision about the best use for this money, rather than frittering it away on inconsequential purchases.

Vikki’s advice is to automate your savings, as this means it’s more likely to happen on a regular basis.

“You may wish to set up an automatic transfer for some of your surplus income or put money into a special account," she says.

"High-interest savings accounts are a good option. Look for an account that doesn’t let you access the funds for 24 hours, so you have time to decide whether you actually want to spend this money.”

5: Get financial advice

Speaking to a licenced financial adviser can seem daunting, but getting the right advice can put you on the right path to financial security.

An adviser will look at your financial situation holistically and take into account your dreams and risk profile to devise a strategy that’s achievable for you.

In doing so, they’ll give you the tools and steps that will help to get your family closer to a secure financial future.

Remember, planning for your financial future may involve making sacrifices now and takes commitment.

But it will be well worthwhile and will set up your family so it’s on the path to financial success.

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