Tired of money worries? Here are 5 tips to improve your financial wellbeing12 April 2023
If you are keeping up with your daily living expenses but still feel like your finances are controlling you (instead of the other way around), you’re not alone. Research is showing that many Australians are struggling with money management even if they’re getting by day-to-day .* †
Allan Ward, Head of Advice at Super SA, shares some simple actions you can take to gain control and improve your financial wellbeing.
What is financial wellbeing?
Essentially, it’s your ability to meet expenses and also have money left over. It means being in control of your finances and feeling financially secure, now and in the future.†
Financial wellbeing is a strong predictor of overall wellbeing‡ so it makes sense to invest some time in pinpointing the causes of your money worries. A few changes could be all it takes to gain control and get in better financial shape, so you can enjoy your money today and in the future.
Allan’s five tips to guide you in reducing your money worries.
1. Set goals for the future
Ask any motivational or life coach and they’ll agree that setting goals are essential in reaching your potential and living the life you dream of.
Whether it’s an annual trip to the Sunshine Coast; buying a brand new car; investing in further education or living mortgage-free, setting targets for achieving your goals could be the difference between dreaming them and realising them.
If your goals are important to you, then you see the value in achieving them which means you’re more likely to reach them.
So where do you start?
Creating SMART goals could help. These goals should be Specific, Measurable, Achievable, Relevant, and Time-bound. They can be really helpful when setting short-term goals (eg. paying off your credit card), medium-term goals (eg. saving for a house deposit), and long-term goals (eg. paying off your mortgage).
A financial planner can also help you with setting financial goals while taking into account your current financial position, needs, and objectives.
2. Create a budget (that you can stick to!)
Are you spending more than your income allows? The truth is, it’s easy to do if you’re not keeping an eye on what’s coming in and what’s going out. Moreover, it’s impossible to gain control of your finances unless you know where your money is going.
That’s where a budget can help, but creating one isn’t always an easy feat – especially if your income fluctuates and you haven’t been tracking your spending.
Start with the basics: spend a couple of months collecting information. Gather up bank statements, receipts, pay slips, and loan statements, or write down what you are spending, as you spend it. This may help you to see if there’s a pattern and determine if you’re living within your means. If you’re not, where can you cut back? If you are, have you set savings goals?
It’s not about being tight with your money or missing out on the fun, but rather spending consciously so that you can have the things you really want in life.
The saving-on-takeaway-coffee example
A commonly used example that paints a really good picture of how tiny savings here or there can really add up:
Assuming you pay $4.50 for your daily coffee, limiting your purchases to three cups a week can save $936 a year. That could go towards paying off debt, or you could invest it.
Let’s use the example of a 35-year-old earning $60,000 annually. If they salary sacrificed $1,463 a year into Triple S their take home income would reduce by $936 annually – the same amount as their annual coffee savings. This could give them an extra $50,000 in super when they retire*.
Maybe you’re not a coffee drinker. You can apply the same principle to eating out (or ordering in); the number of streaming services you have, car parking fees, and even subscription fees (think gym, online fitness, and weight-loss programs).
*Assumptions of this calculation
The extra super amount in this example has been calculated using the following assumptions and rules of the Triple S Scheme:
Super balance of $50,000
Retirement age of 67
Default employer super contributions of 11% up to 12% by 1 July 2025
Salary of $60,000 is excluding employer super contributions
Investment rate of return of 5% per annum after investment fees and Operational Risk Reserve (ORR) fees
Price inflation rate of 2% per annum and a salary inflation rate of 3.2% per annum
Insurance premiums of $300 per annum
Administration fees have been calculated at $70.20 per year plus 0.05% of the account balance (capped at $325 per year).
This calculation estimates an amount payable at a future time and has been adjusted to include price inflation to assume changes in the cost of living.
3. Save for those rainy days
If you’re spending beyond your means, you have nothing left over to save which could be devastating if things around you start to crumble (like the plaster wall in the study room caused by the undetected leak in the roof!). Whatever the crisis, being unprepared can lead to financial shock and a lot of stress.
A common rule of thumb is to save enough for three months of expenses. If that’s not do-able right now, start with any amount – just $25 a week will add up to $1,300 in one year. This can help pay for car repairs, the replacement of white goods, and unexpected out-of-pocket medical costs.
Moneysmart has a savings goal calculator you can try for free.
4. Stay on top of your debt
Not paying your loans on time and frequently exceeding your credit limits can add to your stress load and potentially damage your credit score. It could help to have a plan in place to pay off any (‘bad’) debt that’s not adding to your wealth or wellbeing.
Bad debt is the debt you take on to fund your lifestyle. Think personal loans, car loans, and credit card debt. This type of debt can have a positive effect on your lifestyle and wellbeing if handled correctly, but it can have the opposite effect if you struggle to make repayments.
Be disciplined with your repayments. This means knowing when repayments are due and how much you need to pay. If you find yourself struggling with making repayments on time, see if you can cut back on other expenses to make up for the short-fall.
If you’re concerned about your ability to pay your debt, get help quickly. Learn more about free financial counselling service on the MoneySmart website.
5. Make sense of money
By the time we reach adulthood, most of us know (or at least think we know) enough about money. We’re earning, we’re spending and we may be applying for loans and credit. But to live the life you really want, it helps to take a deep dive into your relationship with money.
What money choices are you making? Are you proactive or reactive when it comes to managing your money? Do you feel guilty or nervous about making big purchases? Are you comfortable with investing and if not, what’s holding you back?
A better understanding can give you a greater sense of control. And it doesn’t have to be an all-consuming task. There are plenty of resources out there to help you, including the MoneySmart website. Some of my favourite books on this topic are Dollars and Sense by Dan Ariely and Jeff Keisler, and The Richest Man in Babylon by George S Clason.
Check with your financial institution also. Many banks and credit unions have online tools and resources you can access for free.
At Super SA we offer free online and in-person seminars and a range of tools and calculators to help you learn more about super and plan for the future.
About the Author
Allan Ward, Head of Advice at Super SA
Allan is passionate about helping everyday Australians improve their financial wellbeing. With over 20 years in the financial planning industry, he’s seen first-hand the benefits of good financial advice and believes that anyone is able to create good financial habits. His biggest financial regret was not buying a 1960’s Fender Stratocaster guitar in the early 90’s (before they became ridiculously expensive).
* Source: Improving the Financial Wellbeing of Australians. Sited 14 November 2022; available from: https://www.commbank.com.au/
† Source: Exploring Financial Wellbeing in the Australian Context. Sited 14 November 2022; available from: https://assets.csi.edu.au/
‡ Source: The emerging concept of financial wellbeing and its relevance to the debt-taking behaviour of Australian households: issues and empirical. Sited 15 November 2022; available at: https://researchrepository.rmit.edu.au/