If money feels tight, don’t worry—small actions can lead to significant strides in achieving your financial goals. But first, ask yourself:

How would you rate your financial wellness?
Are you well-positioned to meet your short-term obligations?
Are your long-term goals within reach?

These are challenging questions, especially in today’s economic climate.

The rising cost of living has prompted central banks to increase interest rates, placing added financial strain on many households. While short-term challenges are unavoidable, achieving financial wellness means looking beyond immediate circumstances and focusing on both the present and the future.

It’s essential to consider whether your financial plan aligns with your long-term objectives, such as consistent investing—inside or outside superannuation. Simple practices like household budgeting can make a world of difference.

This three-step framework for financial wellness can help you manage immediate obligations while staying on track toward your long-term goals…

Step 1: Take Control of Your Finances

Taking charge starts with a thorough understanding of your financial situation:

Know your income (both regular and irregular).
Identify essential living expenses.
Allocate funds toward specific goals (e.g., a home, car, or holiday).
Assess what’s left over for savings.

Implementing a budgeting system, if you don’t already have one, can help you track spending, uncover savings opportunities, and build momentum toward your goals.

Redirecting savings to pay down high-interest debts, like credit cards, is a smart move. Make sure you can meet at least the minimum payments on all debts to avoid penalties and maintain financial flexibility.

Step 2: Prepare for the Unexpected

Controlling your finances sets the stage for long-term stability, but protecting your wealth is equally important.

Build an Emergency Fund: Create a cushion for life’s surprises, such as job loss, business downturns, or sudden expenses. Having three to six months’ worth of living expenses saved can reduce financial stress during challenging times.
Evaluate Insurance Coverage: Policies like health, life, disability, or income protection can safeguard you against major financial setbacks. Balance the cost of premiums with the level of coverage that best fits your needs.

A proactive approach ensures you’re ready for whatever life throws your way.

Step 3: Make Progress Toward Your Goals

Reaching long-term financial goals requires addressing obstacles that could slow you down.

Focus on paying off high-interest debts first. Reducing these liabilities saves you money on interest and frees up cash for other priorities.
Consider trade-offs when managing lower-interest debts. Depending on your situation, you might prioritize paying these down or allocate those funds toward investments.
Maintain liquidity to cover short-term needs while working toward larger goals. Accounts offering competitive interest rates can help grow your savings for objectives like buying a home, funding a holiday, or retiring early.

The Bottom Line

Financial wellness hinges on a mix of strategies, but it starts with taking control of your money.

A household budget is a powerful tool for understanding your spending, identifying savings, and achieving your objectives.
An emergency fund offers peace of mind when unexpected expenses arise.
Staying focused on long-term goals, reducing debt, and maintaining liquidity provide a solid foundation for success.

By taking deliberate, consistent action, you can enhance your financial stability and position yourself for long-term investment success.

Rick Maggi CFP, Financial Advisor/Planner Perth, Westmount Financial