5 reasons why you should review your finances
There may be ways you could adjust your budget to help pay the bills
As living costs continue to rise, many Australians are finding it tough to make ends meet. Here are five red flags that mean you may need to review your personal finances.
1. You find it hard to pay for emergencies
The car breaks down. The hot water system starts leaking. A few roof tiles come down in a storm. Without an emergency fund you could find yourself high and dry if an unexpected problem arises.
If you have any slack in your home loan you could redraw to pay for emergency repairs. But then you’d be using borrowed money, not to mention putting yourself behind on your repayments.
Ideally, as a rough rule of thumb the minimum emergency fund should be around three months of your salary. Don’t forget, if you need to draw on your emergency fund, you’ll need to top it back up again. It’s even easier if you’ve already set up automatic payments. And if you set up your emergency fund in an offset bank account, it will help to reduce the interest you pay on your home loan.
2. You pay interest on an unpaid credit card bill every month
If you can pay off your credit card bill in time, fine. But credit card limits represent temptation that can be hard to resist. One option is simply to get rid of your credit cards and use a debit card instead. But if that’s too extreme, set yourself strict spending limits and make sure you pay off the card before interest starts to accrue.
3. You spend a high proportion of your income on paying your rent or servicing your home loan
If this sounds like you, you’re not alone. An estimated one in five Australians are experiencing mortgage stress1. If you have a home loan, it might be worth talking to your provider about whether you can refinance. And if you’re paying rent, it might be worth looking at solutions like renegotiating your terms or looking at moving to a more affordable area. Either way, professional financial advice can help you look at ways to juggle the family finances.
4. You run out of money before your next pay cheque
It may sound obvious, but the rising cost of living means many Australians are finding it difficult to make their money last the month. If you’re finding yourself in this position, see if there are any savings you can make. If possible, try setting a strict budget and stick to it—taking it one day at a time.
5. You find it difficult to meet everyday expenses
Putting food on the table. Getting to and from work. Heating and cooling your home. If you’re finding it hard to meet the basic necessities of life it can be easy to feel overwhelmed.
Take a deep breath and start by asking yourself a few questions.
Could you save money by shopping around for a better deal from utility and other service providers?
Are there any savings you can make elsewhere in your family budget?
Are you taking full advantage of any government or employer benefits you’re entitled to?
Can you divide your expenditure into essentials and discretionary and set strict limits to help you get back on your feet?
Getting your spending under control…
Unfortunately, illness, redundancy and bereavement can happen at any time, leaving you in financial hardship through no fault of your own.
If you’re an AMP customer we offer support through periods of financial difficulty.
But if you recognise that excessive spending is putting you in a tricky position despite a regular income, there are ways to get your expenditure under control.
Instead of continuing with your normal routine, why not try a no-spend challenge — you might be surprised to discover what you learn about how to save money.
Instead of going out to the cinema or the new restaurant down the road, why not have a movie night in and invite friends and family?
Instead of buying a daily takeaway coffee, why not take a plunger to work and make your own?
Instead of using credit, why not think about using a debit card so you’re not spending money you don’t have?
Instead of driving to work or taking the train, why not consider cycling or walking part of the way to save money and get fit?
Instead of giving in to impulse buys, why not divide your expenses into essential and discretionary—you might be surprised at how much you can save by setting a strict limit on non-essentials.
…and getting the most out of your income
Once you’ve got your spending more under control, you might want to consider looking at ways to maximise your income, such as:
claiming all the government benefits you’re entitled to
including all your work expenses in your tax return
making money on the side of your usual job.
There’s no time like the present to start getting your finances in order and turning those red flags green.
Please contact us on |PHONE| if you seek further discussion.
Source: www.amp.com.au 27 November 2018
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