September 22, 2017

Getting your Finances in Shape

Set some goals

It’s pretty hard to just get ‘fit’ as there is no real definition of what ‘fit’ is. You’re much better setting a measurable goal like; fit enough to run 10km in 1 hour by my next birthday. Your savings are exactly the same. Don’t just put money away without any real plan or target. Set some achievable goals that are time bound and stick to them.

Set some achievable goals that are time bound and stick to them.

Write a program

Following on from that, create a plan and stick to it. Establish a regular savings amount and put it away before you spend the rest of your money. Don’t worry though, just like exercise you don’t have to start off with a Spartan Race. Start off slow and systematically work your way towards your targets. If you are starting from $0 savings try saving 1% of your income, increasing it by 1% or 2% a month. Over a year you end up at a savings rate of 13% – 25% of your income.

Exercise a little self-control

Over Indulgence is a bad thing across the board, your spending is no exception. Tracking your spending can be a frightening but useful way of identifying where your money goes. There are plenty of smart phone apps that will help with this. Once you have a general break down of your spending you can start to think how to eliminate, substitute or reduce those costs.

Cut the fat, I mean fees

Do a thorough assessment of your financial accounts and consider the full cost of operating them. Your aim should be to have minimal, or zero fees if you only have transaction style accounts. You will always have to pay something if you have a home loan, use an online broker, or make international transfers but make sure you are paying as little as you can. There are lots of online options which have substantially lower fees than the traditional banks, money lenders, brokers and currency exchanges.

Don’t cancel out all your hard work

There is no point spending all morning in the gym and all afternoon at the donut shop. Likewise, you will be seriously hindered if you have ‘bad’ debt (think non appreciating assets like car, holiday, wedding and TV loans). Credit card and short term loan interest rates are terribly high, much higher than you will be able to sustainably make through saving and investing. Before you do anything else pay off your debts.

Lastly, just like physical fitness, your finances need a bit of time and effort to get into shape so don’t be shy of a little hard work. There results however should be much longer lasting than your weekly gym sessions.

Just like physical fitness, your finances need a bit of time and effort to get into shape so don’t be shy of a little hard work.

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