With 2020 still fresh in our memories, what did we learn?
For many, it’s the realisation that we can go from financial stability to financial stress in a hurry.
As early as June 2020, the Australian Bureau of Statistics (ABS) had reported that more households had experience financial stress than in the previous three quarters combined.
Even then the full impact of the pandemic, restrictions and lockdowns were yet to hit our economy.
The good news is we can learn from the past to prepare for our future.
One way we can do that is with a financial health check.
In layman’s terms a financial health check means we look under the bonnet to discover what’s working well, what needs a tune up, and what needs replacing in our personal economy.
Where to start
First thing’s first, you need to make sure you can afford your current financial obligations.
Are you struggling to get through to your next pay day?
Take a closer look at your income and expenses to see where you can make better use of your money.
Here are some easy steps to help you take control of your finances and prepare for future unexpected events.
These are the big-ticket items; your home loan, your car loan, your holiday and other expenses that soak up thousands of dollars each year.
It’s within these big expenses you could find some big savings by shopping around for a better price.
If you have bank loans, speak with your local branch to make sure you’re on the best deal possible.
If you’re paying off your home, ask them if you are able to consolidate other debts (like a car loan) into your home loan. It simplifies your banking and can save you hundreds or more in interest.
Planning your annual holiday? Look online for deals to your preferred destinations and be open to travelling closer to home. Perhaps you’d enjoy a week in Port Douglas as much as Paris. The coffee’s cheaper and the beach is better (yes, we’re aware Paris doesn’t have a beach).
The little things add up
Here’s a little activity you might like to try when you’ve exhausted the Netflix library.
Scan your account statements for small, regular purchases. Think coffees, entertainment subscriptions, take away food, anything that seems like no big deal, but when made daily becomes significant.
Find ways to cut back, but don’t go cold turkey. When trying to create any healthy habit, small steps performed regularly work best.
Money in the middle
Somewhere between the big expenses and the small spending is where the bulk of your bills live.
Insurances, internet, phone, electricity, credit cards, buy now pay later, the list goes on…and on…and on.
Plenty of people set and forget these services and do themselves a disservice in the process.
The companies offering these services operate in highly-competitive industries, which is good news for you.
Shop around for a better deal. If you find one, ask your current provider to match or better it. It feels good to take back some control of your money, so make the most of your buying power.
Tip: Take this measure to the next level by setting up regular payment to your savings account for the equivalent amount. It won’t take long before those seemingly small amounts add up.
An important part of your financial health check should include protecting what you have.
Your home, contents and car are obvious starting points. But protecting your income is just as important. Check with your superannuation fund to see if you’re covered for loss of income if illness or injury strikes.
Have a plan
It’s fine to make changes which improve your current financial situation, but what about your long-term financial health?
Financial advice isn’t just for wealthy people. It’s simply a way to help you make the most of what you have.
Next time you visit your local branch, ask about the financial advice services available.
So, now it’s 2021.
While many challenges from last year remain, there are steps you can take right now to lessen the impact.
A financial health check is a good place to start.
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