Try these ten ways to become more money savvy and achieve financial freedom
PHOEBE BLAMEY– NOVEMBER 4, 2021 5 MIN READ
Money is considered a socially taboo topic so it’s often tricky to know if you are on the right track to achieve financial fitness, writes Pheobe Blamey author of The Happy Money Journey.
All too often we leave money matters to our accounting gurus, and why not? They are the professionals after all. But it would be good for all of us to be a bit more money savvy to know that we are on the right track.
Canstar recently reported that a staggering 95% of Australians are feeling financially stressed. Financial stress comes in all different forms and, sadly, COVID has increased this with fear of job loss, increase in the cost of living and other uncontrollable factors.
Financial stress can impact a person’s health, both mentally and physically so it’s important to look at ways to improve your financial wellbeing and get savvy with money before you become a statistic.
Getting better with money is something that many people fear, however it’s much easier than you think. It’s simply a matter of knowing where to start, understanding yourself and being curious.
1. Become Curious about money stuff
Kick off your financial savvy journey by making friends with money. Like any new friendship, take time to learn about what money does and can do for you and vice versa.
There are so many valuable resources out there to give you information about money starting from the very basics to the more advanced. Take time out and read, watch and listen to money news. This doesn’t mean you need to read Australia Financial Review cover to cover each day, be sure to mix it up. Find something that you like and suits your level.
Your curiosity will soon get the better of you and before you know it you will be on your way to becoming more money savvy.
2. Know yourself
It’s time to let go of the opinions of others.
You need to know exactly who you are as far as money is concerned.
Get your current financial position sorted so that you know what your starting line is.
You need to know exactly what you own, how much you owe, what you owe, what you earn and what you spend.
This may sound confronting but once you know this you’ll start to feel better for it.
3. Deep dive into spending
Do you know exactly where your money goes each day? We all have invisible spending habits, like eating out for lunch, take away for dinner. Do you know yours?
If we ask people to look at their spending, we can start adding up all the ‘small’ food items but soon enough these turn into large amounts.
Digging deep into your spending habits instead of guessing gives you a massive insight into your money habits.
Your habits create your life. You might just need a couple of small moves to regain control of your money. So, start now and no cheating!
4. Set goals and write a map
It’s pointless starting a journey without a destination. You know where you are right now so the next step is to work out what you want and what it will take to get it and write it down.
If you are anything like me, if it’s written down it has to happen.
You are entitled to live the life you want to live every day, on your terms and with a greater feeling of certainty about your future than you may have now.
Whether it is buying a house, retirement goals, private school fees or a big holiday, the things that make your life are the people but having money can give you some amazing opportunities.
It’s time to go for your own version of life so decide what you want and work out the steps you need to take to get there.
5. Understand how much risk you want to take
Financial advisors talk about risk profiles. Knowing how much risk you are willing to take with your money is great but really understanding the risk of an investment is key to making investment decisions.
Knowing this will help you choose the best investments solutions to meet your current needs and future aspirations.
For instance, I have been doing an experiment with Cryptocurrency. This is hugely volatile and has big returns, but I could also lose every cent of my initial investment at the drop of a hat. Is the return worth it? But also do I need money now, in the future or never? All these questions are important to get a better understanding of how much risk you are prepared to take.
6. Know your current investments
You need to understand what your current investments are.
Do you have super? How is it invested? These are usually conservative investment which will mainly be cash and bonds combined with to high growth which will be weighted with higher risk investments like Australian and international shares.
Do your own your home? This is also classed as an investment in long-term wealth.
Naturally more volatile investments carry a higher risk of loss. Regardless of your level of investments you need to understand the value of each.
7. Understand savings versus investment
Everyone talks about saving money but this appears to be an outdated concept.
At the moment, saving will barely pay any interest. Investment returns are outweighing savings, so you should look at what you might want to invest in. If you are unsure, it’s best to start small with micro investments and build up some capital. Baby steps is better than none.
Make sure that you keep an eye on the fees as small amounts have small fees. You can then pick a point to move money into shares or Exchange Trading Funds (ETF).
8. Know about debt
Let’s get something straight, debt is not evil.
Debt is considered a real part of life and not something that you should be ashamed of.
Most people could not by a house without going into massive debt over years. That asset may grow in value which then far outweighs the interest paid.
Similarly, smaller debts like credit cards and Afterpay spread payments over time giving you more cash flow every day.
If you want to go into debt know the real costs compared to the value of what you are buying with it.
9. Tax is an important consideration
It’s not worth investing in anything unless you know the tax implications.
For instance, there are tax benefits for adding more money to super but you can access money outside super easily as long as you know-how.
There are government schemes that allow you to salary sacrifice into your super to save for your first home, and this is tax payable when you withdraw. When you buy and sell investments you may also have a capital gain that is taxable.
It’s not advisable to base your investments decisions purely on the tax implications however do your homework so that you stay friends with the Australian Tax Office.
10. Enjoy your money
Money, is the key to living your best life and doing what you want.
Make today the day that you start your money journey to change your behaviour, habits and mindset around money. It’s time to gain the skills to make money the conduit to a happier life.
One thing inevitably leads to the next and soon you will go from hoping, to learning to trying it yourself. Enjoy starting your love affair with money.