Advice Financial Planners Use Themselves

Most of us are looking for ways to save money and better our financial situation. As we rack our brains in search of ways to achieve our goals, we are often left thinking “what do financial planners do?” These guys know how to secure their financial situation – after all, it’s their job.

  1. Create a budget (and try to stick to it) – It may seem simple, but creating a budget is the single most effective way to keep track of your financial situation. Your budget should include your net income, as well as both fixed and flexible monthly expenses.
  2. Don’t cut out life’s little pleasures in the quest to save a few dollars – Whether you like the odd takeaway coffee, or want to brighten your day with a new lipstick, there’s no need to feel bad about making yourself feel good. The key is moderation, which can be achieved via:
    • Using gift cards for ‘treat yourself’ expenses – this way, you have a set amount for either the week or month
    • Create a list of feel-good buys under $30 – when you need a pick-me-up, choose from this list
    • Open a separate ‘fun account’ – this is an easy, guilt-free way to keep track of your ‘fun’ expenses
  3. Only purchase insurance you need – life and disability insurance are generally money well spent, as your greatest asset is your ability to work and earn an income. Skip the trivial insurance plans, such as those for your phone or extended warranties for electronics – they add up over time, and in most cases they aren’t necessary.
  4. In a relationship, ease into sharing your money – While you may share some financial decisions, there’s no need to jump in and merge finances straight away. Open an additional joint account that you both contribute to regularly. This can be used for activities you enjoy together initially, and over time you can begin to contribute more to cover other joint expenses such as bills.
  5. Consider both pre-nups and post-nups – While we don’t enter a long term relationship planning for divorce, it’s necessary. When the relationship is positive, it’s easier to decide on an equitable way to divide assets in the event of divorce – once the relationship has soured, it’s often difficult to come to an agreement. Post/pre-nups are very important for stay-at-home parents who have left the workforce to raise children.
  6. Plan for children financially – If you’re planning on having a baby, consider whether you are able to live on one income. Try living on one partner’s income for 6 months, and see if you are able to cover expenses. Once your child is born, open a savings account in their name to save monetary gifts from friends and relatives.
  7. Save for retirement – It is important for both partners to save for retirement. If you’re a stay-at-home parent, you should maximise a Spousal IRA or Spousal Roth IRA, so that funds are accumulated in your name as well. When it comes to your retirement savings (and life insurance) it is also important to make sure you’ve signed a beneficiary form.
  8. Understand your employer’s benefits – Make sure you are making the most of your entitlements.
  9. Simplify investments – If you’re not confident in managing your investments alone, talk to a financial planner or consider opening an all-in-one asset allocation fund, as this ensures your eggs aren’t all in one basket.
  10. Donate – Set aside a certain amount of money each year for donations. Whether you choose to support one charity or spread it around, you’ll feel great knowing you are helping those who are less fortunate. Rather than wait ‘until your older’ to donate, start now with a smaller amount – you can increase this as your income grows.