When clients come into our office to talk about their financial future, part of our time is spent doing what we call “housekeeping”. Money housekeeping represents the basic, non structural changes that we suggest that clients make to their finances in order to improve them. They are simple, low or no risk way of making more money by making your money work better for you. Here are our top 5 tips of simple things that you can do to make your money work harder for you.
- Consolidate your superannuation. Many people have more than one superannuation fund, and most know that it’s probably not a good idea to have too many. Not only could you end up paying more in fees, you also lose the ability to focus your efforts and direct your money more appropriately. Imagine if you had your savings spread over 10 different bank accounts – it would be harder to keep track of everything and ensure that your money is moving in the right direction.
- Get your debt in order – literally. Many people have more than just one debt. They may have a car loan, credit card, housing loan, investment property loan – the list could go on for some time. Logically, it would make sense to make sure you’re paying off the most expensive debt first while leaving the least expensive last. A credit card at 18% is costing you $180 for every $1,000 of debt whereas a home loan at 6% is only costing you $60 for every $1,000 of debt. If you found yourself with an extra $1,000, you would be better off saving $180 rather than $60, which is three times the savings. Also, if you have cash in the bank because you like having that cash buffer but also have a credit card debt, pay it off immediately – it makes no logical or mathematical sense to leave the debt there. While you’ll have less cash, you’ll still have immediate access to the money that you’ve paid off your debt in case of an emergency.
- Do a simple budget. Many people have a fear or loathing of budgeting, and for good reason. It takes time to create one and even more to manage it and lets face it, cleaning the house can be more fun. However,if you ever wonder why you’re not getting ahead as much as you want to be, it’s quite likely that you don’t actually understand where your money is going. If you can identify just 5 actual things that you think your’e spending too much money on it’s more likely that when it comes time to spending money on those items you’re going to find yourself holding back a little – just because you know. Visibility and awareness of your current financial situation is one of the basic keys to being able to move forward.
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- Talk about your financial goals and ambitions
- Discuss life goals such as family, travel, purchases or retirement
- Review your current financial position to assess what is working and what needs fixing
- develop a conceptual idea of the steps you need to start making some of your financial goals and dreams a reality
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- Lock your money away. It gets easier and easier to spend money these days, so once you’ve done some sort of a budget and found that you’re spending too much, one of the simple approaches to spending less is to lock your money away. If you can’t get to it, you can’t spend it, and if you’re not spending it you’re going to be saving it. Practical places to stash your cash would be high interest online savings account, your mortgage and offset account or in small bundles of unmarked notes in a safety deposit box.
- Keep on top of things. It’s often the little things that count as life is busier than ever. Time needs to be taken to stay on top of everything, including the little things. If you can find a 0.25% saving on your home loan, a 0.2% saving on your superannuation fees, an extra 0.5% on your savings account, less bank fees and shave off other costs, over time it’s going to add up. Given the sheer volume of numbers that most of us live with, six or seven figure mortgages, six or seven figure superannuation funds, investments and savings accounts, the numbers will become substantial after a while if you add them up. You wouldn’t walk around all day with a rock in your shoe, you’d do something about it. Do something about your money, make sure you’ve getting the best possible value for money out of it by making it a higher priority in your life – you’ll retire sooner for it.