How to improve your financial future
By Maureen Jordan from Tilly Money
"Over two thousand years ago a Chinese philosopher is purported to have said “A journey of a thousand miles must begin with a single step.”
Lao Tsu was born in 601 BC and these wise words ring true today. Every journey we take in life begins with that one movement. If we don’t do that, nothing happens and we stay in the same place, whether that be the same job, the same town or suburb, the same level of wealth – you understand what I mean.
When a couple have a child, they begin a most important journey, not only for themselves but for the human being they bring into this world. They usually don’t know it when they have their first child because this experience of life is totally new to most people. Friends once described it as belonging to a club you never leave. This journey will take them more than a 1,000 miles, as life throws wonders and challenges at parents who travel the highways and byways with their beautiful creation.
And while the love that a child brings into your life is priceless, the reality is that raising a child is hard work and expensive – over a lifetime, extraordinarily so. But you can take a step in the right direction and decide on an action plan to improve your financial position, so the cost of raising a child becomes a little less of a ‘burden’.
Here are general money tips for beginners but everyone could benefit from these because sometimes we forget the simple start-out messages. Build up your wealth and keep learning. Learning is a life-long process. Down the track, enjoy the comforts and peace of mind that go with a financially secure life.
- Don’t procrastinate when income circumstances change for the worst
Treat it like an “intensive care ward” and set things right quickly. This could mean changing your spending patterns, renegotiating loans and talking to lenders.
- Start early
Use discipline and build up a reserve of money. If you’re looking for money to save, make sure you do a budget. Cutting lifestyle costs saves you much more than you think. It’s good to have a definite plan but any commitment to any saving is better than nothing. Review your plan at least once a year. Have it in front of you always. Work out your lifestyle to create savings. For example, buy Pay TV services to avoid going to the movies and hiring videos could save you more. This shows the value of a plan.
- Use credit cards to YOUR advantage
Avoid department store credit cards. There are expensive and cheaper credit cards. Do your homework, read the fine print and swap. Go to www.ratecity.com.au/credit-cards. If you have too many credit card debts, talk to your lender about debt consolidation, which should deliver you a lower interest rate.
- Check out the fees you pay
Check out the fees you pay on your mobile phones, any loans you have, superannuation fees and charges, insurance, banking, etc. Try to cut them down.
- Don’t over-insure or under-insure
Check out your insurance coverage, its cost and compare alternatives.
- Smart investing information
Smart investing information can be found at ASIC’s website called MoneySmart at www.moneysmart.gov.au/investing/ invest-smarter.
- There are two reasons why people don’t get rich
There are two reasons why people don’t get rich — they work hard instead of working smart and they don’t curtail their spending enough to acquire the savings to invest.
- Buy the worst house in the best street
If you can’t afford to buy a house you can live in, then you could become a landlord owning a house in an area where you want to live in the future. There are tax advantages of doing this and when your wage rises, you could move into that property. If you buy a home to live in, paying off the mortgage quickly is seen by many money experts as a very tax effective way to go.
- Take care you don’t over-capitalise
Take care you don’t over-capitalise your real estate assets when you renovate.
- Never invest in something you don’t understand.
- Make sure you’re not missing out on claiming commonly overlooked tax deductions
There is a list of commonly overlooked tax deductions — make sure you’re not missing out on claiming them. They include fees for preparing your tax, home office expenses, interest paid to the ATO, depreciation on buildings used
for investment, borrowing costs for finance, meal and accommodation when travelling, depreciation for home computers, and more. Do your homework and check out the Tax Office website: www.ato.gov.au/Individuals/Income- and-deductions/Deductions-you-can-claim/
- Don’t be afraid to use professionals to make better investment decisions
Don’t be afraid to use professionals to make better investment decisions. Build a support team, which might include a financial adviser, accountant, stockbroker, lawyer and Tilly Money! Find out what tax-saving opportunities exist for someone like you. Let an accountant look at your circumstances to see if tax can be legally reduced. The cost is tax deductible!
- Always know and be prepared for the worst-case scenario
Always know and be prepared for the worst-case scenario and make sure you can always service your debts.
- Be committed to life-long learning
Invest in yourself, as education can create income.
- When you have the means, give back to others.
These tips are aimed at you learning how to make money, not waste it. It’s up to you to do the work that will involve continuous lifelong learning. Keep walking down the path of financial freedom. Once on that path, you will never want to go anywhere but forward.