Top five actions to do right now to achieve financial wellbeing
(It was going to be ten, but hey five is already a massive start.)
It was never going to be easy taking a long hard look at your finances, so to ease the discomfort we have put together a handy list of what you can do immediately to get your finances in order and start thinking about your money in a healthy way.
Financial wellbeing starts with feeling in control of our money. And there are a few easy and concrete actions you can take to get started now:
1) Cash Flows
First things first is to take a look at your bank statements: Is more going out than is coming in at the end of the month? You'll have a good idea of this anyway, but it makes sense to quantify it. How much is left at the end of the month as that is the money you have to "play with".
2) Rationalise your spending
If you've never done this there should be some "low hanging fruit" expenditure that you can look at. Again you'll find them all on your bank statements. Look at your recurring payments that come back every month and split those out into necessities (mortgage, rent, utilities etc.) and others. Start with subscriptions you never use. But don't go overboard! It's important to splash out from time to time, so include things to make you feel good in your spending plans (over and above the essentials).
3) Good debt and bad debt
Debt can be such a worry, a good way to be able to start taking action on debt is to categorise it as good and bad debt. “Good” debt is defined as money owed for things that can help build wealth or increase income over time, such as student loans, mortgages or a business loan. “Bad” debt refers to things like credit cards or other consumer debt that do little to improve your financial outcome. Therefore if you have a choice you can pay off the bad debt first before making overpayments on your mortgage, for example.
Don't forget -- to also pay attention to interest rates, as it makes sense to pay off your debts with the highest interest rates first.
4) Mindset makeover
This one has two parts :
- First take a few minutes to remember how your family approached money when you were growing up. You might be surprised at how you see it impacting your attitude towards money now.
- Secondly to help your money mindset if at any point you start to feel discouraged, rest assured we all have financial health and ensuring you know that can help with motivation. Couple of quick tips to help your money mindset here are: i) set some short term goals (eg. saving for a holiday) as well as long term goals ii) buy experiences instead of things, according to research it makes us happier.
5) Start getting educated
If interest rates are rising, should I buy stocks or bonds? Should I put my money in the stock market and if so where? Can I lose all my money on stocks?
If you do have spare cash and are looking to make the most of it, there's nothing like educating yourself. And the big finance secret is..it's not rocket science. Once you start learning you may find you're a top-performing investor! Here are our top picks for getting up to speed quickly:
1) Finimise website for understanding the stock markets
2) Websites of any providers you are with. eg. Hargreaves Lansdowne, Nutmeg etc. there is often a lot of information there.
4) Books such as Simple Path to Wealth