10 Tips to improve your financial health

Managing money isn’t always easy and it requires an honest look at your own financial habits, biases, expectations, and cash flow. Where to start? Below are some simple steps to help get you on your way.

Key takeaways:

• Tracking where you’re spending your money can reveal areas where you may be able to cut back
• Creating a budget can assist you in taking control of your money and avoid spending more than you can afford
• High-interest debt can lose a lot of money by making payments that go toward interest, so it’s best to pay-off that debt sooner rather than later.

Forming healthy financial habits takes time and effort. Thinking about improving your financial wellbeing can be daunting. Where to start? What to plan? What to review?

Below we cover 10 good money habits that may help you improve your financial responsibility and to get ahead. Here are some tips you can start with today.

1. Know where you are spending your money

Try tracking everything you spend for a short period of time – for instance, over a one-month period. This can give you insights into how much you are spending right now, and how spending even regular small amounts add up over time.

Tracking where you are spending your money is also a good way to reveal those areas of spending that otherwise go unchecked, such as paying for subscriptions to multiple digital streaming services (which you may not use).

2. Create a budget and stick to it

Yes, the dreaded ‘b’ word. Budgeting isn’t very exciting but creating a budget can allow you to take control over your money. The process can help you pinpoint lifestyle changes you need to make to grow your savings and become more financially stable.

After you create a budget, it’s important that you stick to it. Regularly check-in with your budgeting goals so you don’t spend more than you can afford to repay. The key is to live within your means and calculate how much you could save on a weekly, monthly or yearly basis. Not sure where to start? Moneysmart’s budget planner is a quick and easy budgeting tool that can help you get set in the right direction.

3. Set savings goals

By setting short-term, mid-term and long-term financial goals, you’ll be one step closer to being financially secure. A long-term goal, for example, might be saving for retirement. A mid-term goal could be saving to buy a house. These are all big goals you’ll want to plan for financially.

Getting a sense for when you might want to reach each goal can help you make choices about how to use money you’ve already saved and how to continue saving and growing your money to help meet those goals.

Start by estimating how much money you’ll need to meet each of your goals and align these with your budget. One key to achieving these goals is to assign them specific dollar amounts and the date by which you want to achieve it.

4. Plan for the unexpected

Some call it ‘saving for a rainy day’, but it’s essentially planning for the unexpected by having an emergency fund set aside. Ideally, you want to have enough stashed away to cover all your daily expenses for a few months.

5. Pay off high-interest debt

Debt can hold you back from doing many things with your money. When it comes to high-interest debt, you can lose a lot of money by making payments that go toward interest, so it’s best to pay-off that debt sooner rather than later.

Credit cards are a great way to build your credit when used properly. But they can sometimes lead you to spend more than you earn and get into credit card debt.

Check your credit card statement for the due date and make sure you pay on or before that date. By doing this, you’ll avoid paying extra interest or late fees and also help keep your credit score healthy. And if you can make higher repayments each month, you will pay off the debt faster and save money.

Similarly, many popular Buy Now Pay Later (BNPL) services are often advertised as ‘interest free’ or ‘0% interest’. But they charge fees that can add up quickly. They may charge:

• late fees – if you miss a payment or pay late, around $5 to $15
• monthly account-keeping fees – a fixed monthly fee, up to $10 a month
• payment processing fees – some charge an extra fee of around $3 each time you make a payment
• establishment fees - a fee to set up the account. For some there are no establishment fees, for others these fees can be up to $110.

6. Update your will

A will is important to protect where your wealth goes when you die. If you have dependents, no matter how little or how much you own, make sure your will is up to date. If you are unsure about any legal issues, talk to your lawyer.

7. Review your insurance

It is important to have enough insurance to protect your family and your income in case of death, disability or illness. Your financial adviser can assist with this.

8. Start saving for retirement

What’s your retirement plan? One way to help grow your nest egg is to negotiate with your employer to increase super contributions by salary sacrificing. These contributions are on top of compulsory contributions made by your employer (currently, your employer must contribute 11% of your salary into super).

Salary sacrificing into super is an agreement between you and your employer to pay some of your pre-tax salary as contributions into super. Doing this can also be tax effective. Salary sacrificed amounts to super are concessional contributions. The amount you contribute to super is taxed at up to 15% (and up to 30% if your income is over $250,000 per annum) rather than your marginal tax rate, which might be up to 47%. 

9. Consider investing

When it comes to financial investments, if you contribute to your super and already have a regular savings plan, and you still have some spare money, then you might want to consider putting it into other investments to maximise your long-term returns.
 
When you start looking at investing options, it’s easy to become overwhelmed by all the information. Therefore, it helps to get expert advice. A great source of information and expertise is your professional financial adviser. With the right help you can invest to either grow your assets and create long term capital gains or create more cash flow or both.

10. Check-in with a financial coach

Busy with work and family, many people find it difficult to keep up to date with investment options and to understand the risks involved. Seeking financial advice is a great way to ensure you keep you on track to reach your financial goals.

If this is something you're looking for, we suggest seeking help from a qualified financial adviser. You can look for a financial adviser on the moneysmart.gov.auwebsite or through an industry association such as the Association of Financial Advisers (AFA) or the Financial Planning Association (FPA).

Important information: This document has been prepared by IOOF Investment Management Limited (IIML) ABN 53 006 695 021, AFS Licence No. 230524 as Trustee of the IOOF Portfolio Service Superannuation Fund ABN 70 815 369 818 (Fund). IOOF Employer Super is a Division of the Fund. IIML is part of the Insignia Financial of companies, consisting of Insignia Financial Ltd ABN 49 100 103 722 and its related bodies corporate. This is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this document, you should assess your own circumstances or seek advice from a financial adviser and seek tax advice from a registered tax agent. Please obtain and consider the PDS and the Target Market Determination (TMD) both of which are available for consumers to better understand products before making any decision about whether to acquire a financial product. Information is current at the date of issue and may change.