How to give your finances a health check...

July 30, 2021 Rick Maggi

How healthy are your finances? Isn’t it time you put your own financial wellbeing front and centre? You can take control of your financial future quickly and easily, with a simple financial health check.

Just like your physical health, it’s worth giving your finances a check-up once in a while. Over time, unhealthy spending habits can creep in, threatening to derail your progress. Here’s how to give your finances a health check and find out where you can make some healthy gains.

Step 1: Take your financial pulse

Understanding where you stand with your finances is the first and most important step. It’s also the one many people struggle with! Taking a close look at your financial situation can be uncomfortable, but it’s a lot easier than you might think, and, essential, if you want to achieve your goals.

Here’s how to analyse your spending and put a budget in place:

Use a spreadsheet or online budgeting tool to record all of your essential and non-essential expenses.
Fill out each category using figures collected from your invoices and bills. Using real figures will give you a more accurate idea of your spending.
Check how your expenses add up against your income. Are you overspending? Look for areas where you can cut back. Underspending? Great, you’ll have some wiggle room to put towards your financial goals.

Step 2: Get the basics working for you

Once you’ve got your spending into shape, take a look at these financial fundamentals. Do you need to work off any debt or gain some healthy savings?

Debt – Like carrying a few extra kilos, debt can creep up and become a burden before you know it. Put a repayment plan in place and stick to it. Be specific about the amounts and timeframes. Check out these smart strategies for paying down debt.

Emergency fund – Like health insurance for your finances, an emergency fund gives you a buffer against the unexpected. Aim to build up enough funds in a separate account to cover six months’ worth of living expenses.

Superannuation – If you want to stay financially fit and healthy into old age, you need to lay the groundwork now. You can use the Moneysmart retirement planner to work out how much super you’ll have when you retire. If you need to top up your super, you can do so by salary sacrificing or making after-tax payments to your super. Find out how to do a superannuation health check.
Insurance – It’s important to protect your earning ability and assets in case of the unexpected. Make sure you have enough total and permanent disability, income protection and life insurance cover to protect you and your family.

Step 3: Set yourself some healthy goals

Once your finances are on the path to good health, you can set yourself some bigger goals. This is the fun part, where you get to dream about all the things you’d like to do, have or experience.

Your financial goals could range from the more practical, like buying a house, setting up an investment portfolio or paying off debt, to the enjoyable, like taking a holiday or moving to the beach. Whatever it is you want to do, this is your opportunity to envision it.

Try brainstorming as many goals as you can. Write down each one of your ideas on a post-it note. Give yourself a set amount of time to generate a stack of ideas, then prioritise them using the post-it notes. Select the top two or three to work towards and use them to motivate you.

Step 4: Put your financial fitness plan in place

The best goals are ones that are supported by a plan. Now that you’ve detoxed your finances and identified your goals, you need to work out how to get there. Depending on your goals and your timeframe, saving alone may not be enough. You might need to consider other ways, like investing, to grow your income. This is where a financial planning professional can help. A financial expert can advise you on strategies to achieve your financial goals.

If you’d like help to take control of your finances, speaking with a Certified Financial Planner® (CFP®professional) can help. They can work together with you to put a plan in place that will help you reach your financial goals. You can find a CFP® near you using our Match My Planner tool.

Money & Life, FPA