Too many Australians are still struggling with their finances.
A survey of more than 2,000 people conducted last year by comparison site Canstar found that one third of respondents weren’t comfortable with their financial position.
That’s a lot of people!
The good news is there are plenty of things you can do right now to improve your financial situation.
Without working extra hours or investing in any elaborate schemes, you can bring more money in simply by being smart with what you have, who you work with, and by understanding how money operates.
Most people, you see, focus on getting more money from an outside source.
That is – attracting more money to them by getting paid more, scoring a bonus, or maybe even winning Lotto.
There is nothing inherently wrong with this.
In fact, the accumulation of wealth is something I have devoted a lot of time to studying.
In order to become financially free you have to make sure you’re bringing in money so there is nothing wrong with this.
But a lot of people get distracted by their big picture goals.
They’re so intent on making millions that they don’t get a few fundamentals right to start off with.
They neglect the little things, which is wrong because a person’s financial house is only as strong as the foundations that underpin it.
So make sure you get across these basics first.
In fact, you might be surprised by how many of your friends don’t do the following.
1. Embrace good debt
This is absolutely fundamental to good financial management.
I am amazed at the amount of people who trade in their cars for new ones every few years but baulk at buying an investment property.
What is the difference?
A car depreciates the moment you drive it out of the dealership, whereas an investment grade property earns you money.
You may have to take on debt to buy it, but in the long run it rewards you many times over.
Look at what you’re spending money on.
The big debts should all be appreciating assets.
2. Roll over your super funds
Sounds basic, I know, but a lot of people still have multiple super funds, which, of course, means multiple fees.
You should also keep track of how your super fund is performing.
Do you know its rate of fees and returns and how this compares to other funds?
If you’re in a self-managed super fund, are you taking an active interest in your investments?
Don’t just leave this up to your adviser, which brings me to…
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3. Work with the best
The more successful you become, the more important it is to have a good team working alongside you.
Make sure your financial adviser is independent and not aligned to bank products.
I have no problem paying good people a decent amount of money for what they do.
But I also take an active interest in how they’re paid because it affects the quality of the advice they’re giving me.
I want people with my best interests at heart.
Some of the experts you work with may not be the cheapest in the business and that is OK.
They save you money in the long run by being the best at what they do and steering you in the right direction.
4. Cash flow is king
If you’re starting your own business, cash flow suddenly becomes extremely important.
It’s no good locking in a significant amount of business if you don’t see the receipts for months on end.
Prioritise cash flow in your business dealings by making when you get paid as important a topic of discussion as how much money you actually receive.
Sometimes it’s even better to take a little less money if it means the payment is received promptly.
5. Track your savings
People lose money all of the time and I’m not just talking about coins down the back of the couch.
Ever since the tap-and-go debit cards came into being, it’s been easy for people to lose track of their spending.
This is where the basics of money management are important.
Draw up a budget and stick to it.
Conduct a monthly audit of your spending and see where most of your money is going (those daily coffees quickly add up!)
Once you know what you spend — truly know — you’ll be less likely to throw it away without thinking.
6. Pay off the credit card
If I’ve said it once, I’ve said it a million times.
If you have credit card debt then pay it off – and keep paying if off every month in full.
The interest rates on credit cards are as high as 18 per cent.
And funnily enough, the banks haven’t lowered them in line with the RBA rate cuts!
Credit card interest rates are a great way to lose hundreds of dollars a month so don’t fall for this trap.
None of these tips are rocket science, but they all trip people up on a daily basis.
Even those running their own companies can struggle with the basics, but it’s worth spending some time ironing out your financial blind spots.
Remember: it’s always the little things that add up to something big – and that is not always a good thing.