Three simple steps for financial wellness

If money’s too tight to mention, here’s some small steps that can make a big difference in achieving your financial goals.

How would you rate your level of financial wellness?

Do you think you’re in a good position to meet your immediate and near-term financial obligations? What about your long-term goals?

They’re tough questions, asked in a particularly tough financial environment.

The sharp rise in general living expenses over recent times has spurred central banks to raise interest rates in a bid to quell consumer demand.

Three simple steps for financial wellness

Many households are already under increased financial pressure, and further rate rises are on the cards. Investment returns, including superannuation returns, have also fallen.

Yet, in assessing your level of financial wellness, it’s important to look beyond short-term events.

Sure, they definitely feed into the overall equation. Household budgets are likely to be stretched until economic conditions normalise.

But also consider whether your financial wellness is on track in terms of your future, longer-term financial goals. This includes your regular investing strategy, both inside and outside of superannuation.

This three-step framework for financial wellness may help you to identify strategies to improve your financial wellness in order to meet your shorter-term financial obligations, and to keep you on track in terms of your longer-term goals.

Step 1: Take control of your finances

Taking control of your finances largely comes down to understanding everything about your finances – the amount of money you receive in regular and ad hoc income, the amount you need to spend on general living expenses, the money being put towards specific goals (such as a house or car), and what’s left over (your savings).

Consider implementing a budgeting strategy, if you don’t already have one, to track all your expenses and identify where potential savings could be made so you can build momentum towards achieving your short-term and long-term objectives.

Reductions in certain expenses could be used towards paying off high-interest debts, such as outstanding credit card balances, and ensuring you can pay the minimum payments on all debts.

Step 2: Prepare for the unexpected

Having better control over your money will invariably put you in a stronger position to build wealth over time.

Protecting your wealth as it grows is important, and that means preparing for the unexpected.

Households can benefit from setting aside emergency savings to cover modest, unexpected expenses for when an inevitable or unlikely event occurs.

Think of events such as unexpectedly losing your job or a sudden drop in the income you generate from your business activities, and unforeseen spending shocks that can eat into your accumulated savings.

Emergency savings can ensure you have some cushions in place to help reduce the potential impacts of such events on your household budget, financial plans, and goals.

Insurance cover is also an important component of financial wellness and protecting against unexpected or unwanted financial losses. Common types of policies include health, life, disability, trauma, and income protection cover.

Given insurance premiums can be high, striking a balance between risks, costs, and coverages is prudent.

Step 3. Make progress toward your goals

To achieve your long-term financial goals, it makes sense to remove any impediments that will stand in the way of attaining them.

Step 3 of the financial wellness framework focuses on strategies such as paying off longer-term debts, such as your home mortgage. Paying higher-interest debt first will save on interest.

Depending on your life stage and investment trade-offs, you can choose to either pay down lower-interest debt, using money previously allocated to investing, or to rely on your budget and one-time windfalls to accelerate the paydown strategy.

However, having cash on hand may also be important for your peace of mind. Directing more money toward paying debt forgoes liquidity in the short term, so evaluate whether you need cash in the short term.

Also, consider using accounts paying higher interest to save for shorter-term goals, such as buying or paying off a house, vehicles, funding a holiday, or in order to retire early (before you’re able to start accessing your superannuation).

Conclusion

Attaining a high level of financial wellness comes down to a range of strategies, but first and foremost it’s about taking control of your personal finances.

Just doing simple things, like having a household budgeting system, can make an enormous difference in helping you to understand how your money is being allocated, and where you can potentially save on costs.

Having a financial buffer, or war chest, is also important to cater for unexpected events such as a major unforeseen expense, or if you suddenly lose regular income.

Think about having investments that are liquid enough to access if you need extra cash, which can include money you have invested in exchange traded funds or managed funds.

Lastly, always stay focused on your long-term goals and use a range of strategies to achieve them, such as reducing your debts over time.

Taking direct action with your finances will greatly improve your chances of achieving investment success over the long term.

Contact us today to find out more. Call us on 03 9553 0271.

Source: Vanguard February 2023

Reproduced with permission of Vanguard Investments Australia Ltd

Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients’ circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.

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CFP® Dip FP
Authorised Representative 298494
Interprac Financial Planning Pty Ltd 

Darryl Jopling

Senior Adviser

I have worked in the financial services industry since 1982 and as a Financial Adviser since 1999.

I have worked for large Financial Planning businesses, Membership based organisations and looked after the financial planning needs of clients within an Accounting Practice before starting my own business.

I am married, have 4 older children and a grandson and I am keen golfer with mixed results like many .

I have been through many of the strategies I talk with clients about myself and with my family.

I have been through the journey of seeing my parents move into Aged care and negotiated the difficulties and pitfalls of understanding the system for them and this gives me an excellent insight into what is required to assist families at this difficult time.

In a previous roll I used to run retirement seminars looking at Centrelink and Retirement Incomes and how to make these work for you. I have helped many of my clients with Aged Care advice when their parents needed to move into Nursing Homes. For many clients I assist them with superannuation, building wealth and protecting their loved ones with insurance.

I am supported by his, Licensee, Interprac Financial Planning’s in-house resources and ongoing technical, systems and training.

I am committed to understanding your needs and identifying strategies and products to help you achieve your goals.

My guiding principle as an Adviser is to design plans which help to provide my clients with clarity of purpose and the opportunity to build a solid financial foundation.
I will take the time to listen, explain things clearly and keep you informed throughout the advice process.

My experience is complemented by professional qualifications including:

  • Certified Financial PlannerTM Professional
  • Diploma of Financial Planning

At Choice Financial Advice we work with you along the way on life’s journey.

Whether you are getting married, starting a family, embarking on the trip of a lifetime, planning to enjoy your years after work or assisting elderly parents with Aged Care and Nursing Home placements, we can help.