Jacqueline Barton

In recent times in society, there has never been a greater emphasis on our health and wellbeing.

However, there is a crucial element that is often overlooked – financial wellbeing. When considering overall health, it is essential that we also look at the responsibilities and stressors that come with managing finances.

According to the Organisation for Economic Co-operation and Development (OECD), the average Australian household finds themselves in debt around 203% of their net disposable income, ranking us fifth worldwide behind countries such as Denmark and Norway. In this debt race, the further away from first place we come, the better!

With little education around budgeting and responsible spending, it can be easy to fall into an unhealthy financial position. However, it is comforting to know there are a range of basic strategies you can implement into your daily lifestyle to keep on top of your finances, all while positively contributing to your own health and wellbeing.

1. For the average Australian, it is essential to know where your hard-earned cash is truly going—spending $30 per week on coffee? It is sometimes easy to blur the lines between our needs and wants, so creating a structured budget to implement weekly is a great place to start. The 50/30/20 budgeting method assigns half of your earnings to needs, such as rent, food and bills, another 30% goes towards wants and leisure (an occasional latte from your favourite café), leaving the remaining 20% to be distributed between debt repayments and savings. Implementing an organised, non-negotiable budgeting system will create a solid foundation for managing your money.
2. Another creative way to manage your debt is to map out a financial liabilities’ hierarchy or debt pyramid. Jot down your current debts and place those with the highest interest rate at the top, much like your credit card. Then, make your way down, assigning debts such as mortgages, student loans, car loans etc., into their rightful positions based on interest rates or fees.
3. Beware of apps and programs allowing you to ‘buy now, pay later’, such as Afterpay or ZipPay. While easy to use and usually requiring no more than a few taps, these payment methods can quickly plunge you into financial despair. The bottom line here: Don’t spend money you don’t have.
4. Much like that assignment you said you would do yesterday, or that pile of laundry that has been staring at you for days, it is easy to leave bills and repayments to the very last minute, or even worse, until they’re overdue. Allocate an hour every other week to sit down, open those bills, review any owing repayments, and act accordingly.
5. Lastly, consider speaking to a professional! Investing time into your financial situation and wellbeing is essential to a well-balanced lifestyle. A financial adviser can give you realistic, well informed, and knowledgeable advice specific to your individual needs, and help set you up with skills that will last a lifetime.

Proactively managing your finances is the very best way to boost your financial wellbeing, lower stress, and keep you feeling your best during these uncertain social and economic times.

Source

https://www.nerdwallet.com/article/finance/how-to-budget ‘Budgeting 101: How to Budget Money’ Bev O’Shea, Lauren Schwahn (13/01/2021) (Accessed on 04 March 2022)

Forget about location, location, location being the key to a good investment outcome. For now, let’s think of the most important ingredient as being regular, regular, regular!

A regular savings plan can turn small amounts of money into a sum that can take you closer to your dreams much faster. All that’s needed is time and discipline.

For example, let’s see what happens to an investment starting with just $100 and adding $100 each week from your regular income. Table 1 shows what the investment value would reach after five years and up to thirty years. In this example, we have assumed that the investment pays a return of 5% per annum (paid quarterly).

Table 1: Regular savings plan of $100 per week compounding monthly.

The results show that a regular savings habit can turn small sacrifices into real outcomes.

It might sound picky, but in return for self-restraint you can see what can be achieved:

• the $29,000 in 5 years might go towards a deposit on your first home or an overseas holiday;
• the $67,000 in 10 years might contribute to your young children’s secondary or tertiary education; or
• the extra $258,000 in 25 years might help you to retire more comfortably or earlier than you thought you could.

Any of these goals would seem to make your small sacrifices extremely worthwhile in the long run. And remember to write down your financial goals as early as you can because it’s much easier to make those sacrifices if you know what they are helping you to achieve.

Reducing expenses is not the only way to find a spare $100 each week. Another good time to start a savings plan is when you receive an increase in your disposable income from a new job or a pay rise. Before you spend the extra money, put it away.

The trick is to start soon

Everyone’s ability to save is different. If you can’t save $100 every week, the above figures are still worthy of your attention. For example, if you can save $50 per week simply halve the results in Table. Conversely, if your savings capacity is higher, multiply the figures.

The results also demonstrate the effect of time and compounding returns on the value of your investment. The sooner you start, the less you need to save in order to achieve the same outcomes.

And finally…
The examples we have used here are aimed at highlighting the benefits of time and discipline when it comes to investing in a regular savings plan. To keep things simple, we have not taken into account other factors that will impact on the outcomes you can achieve, such as taxation, fees and differing investment returns. These factors are important; and are considered by us at Stream Financial.

We can help to unravel what type of investment/s that are best suited for you, by putting a lens over your own specific circumstances, including your goals, timeframes, and attitude to risk (volatility). The information collected can then be utilised to put in place an investment plan suited to the induvial to ensure your wealth creation needs are met.

You can start a compounding savings plan on your own or talk to us – we can show you more options to help you achieve your dreams sooner.

Sources:

Compounding calculation – www.moneysmart.gov.au Compound interest calculator