5 Things you Should Know about your Financials

5 Things you Should Know about your Financials

Do you understand your personal finances or is it a subject you avoid due to confusing finance language and overwhelming information?


If so, then let’s break it down into five easy essential facts you will do best to know.


#1 Start Saving ASAP


Time is a critical factor in every aspect of life, and even more so in respect of financial planning. Personal finances are by definition based on the choice of the user, but actively saving as early as possible greatly increases your chances of financial freedom. The idea behind becoming saving-savvy sooner rather than later is all to do with the notion of compounding interest.


Saving money

What is compound interest?

Einstein once called it the “8th wonder of the world”. The idea behind it is that if you start saving sooner, your money will have more time to grow. Absolutely anyone can take advantage of compounding interest ¾ it all comes down to time.


Compound interest is money you make on the savings/investments you have. The best thing about compounding interest, the earlier you save, the greater the reward.


Not convinced? Consider there are two young individuals at the start of their saving journey. Bill, age 25 and Lucy, age 20, both have $10,000 saved. If they were to leave this money in an interest bearing account which produces 5% per annum; then by age 50, Bill would have $32,221, while Lucy would have a $41,461. That’s a whopping $9000 dollar difference, just by starting to save 5 years earlier.


Now you can see how compound interest is a gift that keeps on giving.


#2 Tax Planning


Taxes are a part of life whether we like it or not. Being smart with your tax planning can save you more money and allow you to reach your finance goals faster. You should always pay your taxes honestly, however there are ways to reduce your taxable income in a smart and legal manner.


Firstly, you should maximise your contributions to your superannuation account. Your money is taxed at 15% in your super account, which is a radically reduced rate compared to other tax brackets.


Income Tax

Secondly, claim all tax deductions that apply to you and your income. You can claim against all work expenses, travel costs and tax credits provided by the Australian government.


The less taxes you pay, the more money you have for investments and future goals.


#3 Creating a budget that’s right for you


Most of us consider budgeting a tedious and boring task. The truth is however that budgeting can increase your financial freedom dramatically. Your own personal budget is unique to you. The goal is to make your budget fun and have it work for you, not against you.


Here is a checklist to follow for your personal budget planning

  1. Live within your means: Make sure that the inflow do not surpass the outflows
  2. Plan for the future: A good budget is a long-term budget. Do it for your future self!
  3. Have a splurge account: Have a portion of your hard earned money that is completely for you and all your exciting wants
  4. Create an emergency safety net: Ensure you have at least $3,000 in savings for an emergency fund and 3 months worth of living expenses in your savings account.
  5. Enjoy life: Make sure your budget is right for you, but don’t deprive yourself of enjoying life.


#4 Buy what you can afford


Buying within your means is a simple yet important financial tip. A study conducted by ASIC says that1 out of every 6 Australians are struggling to repay credit card debt. This is definitely not a picture of financial savviness. If this is you, don’t worry, there is a solution: simply try to buy only that which you can afford.


A simple way to do this is to use more cash.


Cash is tangible, it’s in your hands and psychologically, you have more of an understanding of how much money you are using.


Also, when the cash dries up, so does your spending. This is a simple change we can all make in order to buy what we can all afford in our everyday spending, and stop this tsunami of debt that is consuming more of us every year.


#5 File and read your statements


Receiving your bank statement doesn’t excite anyone, and if you are like me, you take one look and throw it away… but did you know, reading through you bank statement has a number of benefits? For example,


See what you spend your money on


Reading your financial statements allows you to see where your hard-earned money is going. Most people spending money on food, entertainment and fuel. By reading through your transactions, you will be able to highlight areas of unnecessarily spending or areas where you think you can splurge a bit more. Knowledge of your spending habits is crucial.


Fighting Fraud


Reading through your bank statement can allow you to check what you have spent your money on in the last few months. It can also allow you to detect any suspicious transactions. Doing this at a quarterly interval minimises the damage of potential fraud.


Reviewing automatic payments


In the world we live in today, many of the services we pay for are automatically deducted from our accounts. Most of us never actually check that the money has left out account because it is all done automatically. This is where checking your financial statements is crucial, to ensure the authorised payments have been conducted and to the correct amount. Hidden fees and unwanted automatic payments usually go under our radar if our financial statements are not reviewed.


With these 5 key areas top of mind, taking better care of your financials should be a made a whole lot easier in the months ahead and allow you to get a lot more mileage from your money.


About the Author


Daniel SmithDaniel Smith is a small business advisor and a freelance writer for Perth based accounting firm Brentnalls WA. He also has an online resource centre for empowering SMEs dealing with the challenges of running a small business.


1 Star2 Stars3 Stars4 Stars5 Stars (No Ratings Yet)
Loading...

Leave a Reply

Your email address will not be published. Required fields are marked *

Top Rated Articles

How your company can adapt to the Digital Revolution

Over the last couple of years, technological innovation has brought about a rapid change in the customer service landsca

LEARN MORE

Will Marketing Automation Help Your Business Grow?

Marketing automation software can benefit your business in a number of ways. It is a great way to increase traffic, enco

LEARN MORE

How CRM Can Maximize Customer Lifetime Value (CLV)

"Keep your customers always on the frontline," this is a key philosophy to running a successful business. Customers are

LEARN MORE

Recently Viewed

How I changed my Facebook Business Page Name

I started a Facebook page for my business many years ago. I had spent thousands of dollars running ad campaigns and gain

LEARN MORE

The Top 10 Business Parks in Sydney

Sydney is Australia’s corporate capital and holding any kind of business event, either national or international, li

LEARN MORE

How to Use Social Data to Launch a Successful Marketing Campaign

Social media is a goldmine for marketing specialists. There’s no other tool like social media that can help business o

LEARN MORE
  • Over the past 6 months the incredible team at MMP have supported us to shift our attitude towards our business & month on month our revenue is increasing to the point we will be able to employ additional staff to support our business goals long into the future. Do not regret our decision one single bit!

    • Emma Reece

  • Working with my coach has enabled me to see the areas where my business is failing. This was pretty confronting to me to be honest. MMP has the tools to improve these areas and the guidance on how to implement them.

    • Sharon Robinson

  • I have been working with Max My Profit for approx 3 years now, and over that time I have learnt a lot of things about not only what it takes to run a business, but I have also learnt things about myself. I don't believe i'd be the person or have the business I have today if it wasn't for Max My Profit and our Business Excelerator. Great team to work with if you want to take your business serious!

    • Ben Choy

  • As a new client for Max My Profit (MMP) it has taken no time at all to realise the benefits of business coaching. Despite many years of senior management experience starting a new business requires best practice systems and processes built on a solid platform of detailed planning. I look forward to the benefits of adopting the formula being shared by MMP.

    • Campbell MacLeod

  • Max My Profit Are truly awesome at what they do. They have helped me over the past 12 months to get off the tools in my business and start working on my business. I am looking forward to 2019 with enthusiasm not concern. Thanks so much.

    • Aaron Kemp

  • If you are committed to Growth the Max My Profit Team has the tools and expertise to excelerate all areas of your life. They Care, They Listen, They Understand You as an Individual first then they focus on Your business. Thank you Max My Profit my rating is a 6/5 - Kindest Regards The Mr Handyfix Team

    • Catherine Kavadas

  • The team at Max My Profit are an absolute pleasure to deal with. I love working with a team who is on top of what they are doing and have a clear view of what they are working on with you and helping ensure you get to the end goal.

    • Lauren Watts

  • I have been working with MaxMyProfit over the years and what they do for SME's in growing their business is fantastic. Also due to there knowledge and their supporting material for companies across the 5 lifestyle stages and assisting them through this process day in day out is extremely comforting as a small business owner and have referred them many businesses over the years.

    • Steve Laingy

  • Working with a business coach from MaxMyProfit has been one of the best things I have done for my business. I had several other coaches before MaxMyProfit but these guys are a step above the others. I have seen a significant increase in sales, now have a business that can run itself and the coaching program has paid for itself many times over.

    • Matthew Kitchin

  • Much more than just business coaches. There is an absolute treasure chest of business knowledge in their members site.

    • Iain Campbell

  • Max My Profit are unique as they really partner with you to develop and implement a plan that will drive success for the business. I was hesitant to proceed as previous business coaches tell you what to do and rely on you to implement.

    • Michael de Haan

  • I attended one of Max My Profits introductory events in Melbourne. Having been an accountant for almost 30 years, I was somewhat sceptical. Boy was I wrong. I not only enjoyed the presentation, but I gleaned so much from just that session.

    • Daniel Odd

  • These guys are an absolute wealth of knowledge for Small Business. The programme and support networks they have set up ensure learn more every day and can take your business from good to great. Thanks so much.

    • John Butler