Tips to help make 2021 your best year yet
If every year you set big financial goals but then never actually achieve them, then read on.
We are going to share 6 tips that are so simple, yet they actually work!
Let us help you improve your finances. These tips apply to both your personal and business finances.
Manage your finances easily
The key to being financially secure is to be organised, and to be smart.
Therefore, we have focused on the best ways to maximise your finances while also making it just part of your normal life.
- Define your financial goals
To get financially organised and improve your wealth, you need to first understand what your goals are, and why these goals mean so much to you.
Start by identifying and understanding your motivation. Get as specific as you possibly can.
So rather than simply stating “I’d like to pay off my car loan and credit cards." Perhaps go further and identify what that would mean to you? More money for holidays? Less stress at the end of the month when all the bills are due?
Similarly, instead of saying “I want $100,00 in savings” go further and state why and then work backwards to work out how much per month that means you need to save or earn from extra interest or investments.
Your financial goals can be broken down into weekly, monthly, or annual goals - or even into longer-term time frames.
2. Create a budget
Maybe you think budgets are boring. Maybe you’ve tried to keep a budget before, but then given up quickly?
Don't worry, we won't judge! It's quite common to overlook how effective the humble budget can be.
In fact, having a budget that you regularly check, tweak, or update is one the simplest and easiest ways to get better at managing your finances.
Start by listing all your income streams (wages, investments, bonuses etc)
Then list all your expenses (rent, mortgage, loans etc)
The most common way to do this is either in a simple Excel spreadsheet, or in an accounting App/software. And monthly is the most common way to list items but you can do it weekly or fortnightly, especially if that’s how you get paid.
Some people like to stick to their budget by separating their money into different accounts, each account having a set amount of money to spend on everyday items or bills, for example.
3. Pay off high interest debt first
High-interest debts can have you chasing your proverbial tail. Therefore, it's a smart idea to prioritise high-interest debts and pay them off as quickly as possible.
This has the double effect of reducing the interest amounts AND getting rid of high debt quickly.
Then once the debt is paid off or under control, you can re-direct the money into better investments.
4. Get curious about investing
When looking for ways to invest, think outside the box.
Investing your hard-earned salary money – or money that comes as a bonus or inheritance – is a great way to increase wealth and put your finances in a great position.
You can invest in anything – but it’s a good idea to speak to a trusted financial advisor.
Following that, the best advice is to invest in the things you understand first. If you already have come knowledge of a particular stock, or in property investment, then you are more likely to make educated decisions. If you want to know more about an investment possibility, then go and read about it, research it, and look at the odds.
Often you might actually loose before you win but that’s not a bad thing. It’s why it’s also a good idea to master the art of diversification. This simply means looking to invest in a range of stocks, bongs, investments etc, if you can. Rather than a case of “all your eggs in one basket” it a case of a “diversified portfolio”. This will help protect you against any volatility in one or more investments.
5. Plan for retirement – yes even in your 20’s!
When planning for your retirement it is easy to get caught up in numbers and head-spinning calculations.
It doesn’t need to be hard; you can break it down into simple steps. First, consider what you want your retirement years to look like. And consider your likely circumstances (will you have paid off a mortgage? Or still be renting? Do you want to travel? Do you have ongoing health complications that might affect how much money you need in retirement?)
Once you have really thought through to the future, you can then work out how much you might need to save now in order to achieve the goals. You can also look at other retirement funding ideas such as investments or other income streams.
Everything you save now will give you back something wonderful called compounding interest. So even if you can only afford to save a modest amount each month, it will still be worth a lot once you actually retire.
6. Regularly review your finances
Set up regular times when you will review your budget, your investments and your retirement plans. Don’t leave it a whole year or even decades!
At least 2-3 times a year you should be checking if your budgets still work for you, and assessing your investments. You might be able to change things around a bit to be more in line with your goals. Or you might realise that there are other opprotunites for you to consider.
It's also likely that your personal circumstances will change over the years, in terms of work or family life. So these factors all need to be worked into your budget and plans at least once a year.
Help for your financial goals
At Profacc Accountants & Financial Planning, we can help you identify and achieve your financial goals. Contact our friendly Perth-based team today.