Financial planning

Take control of your finances

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By AMP financial adviser Dianne Charman*

Most of us reach a point in our lives where it dawns on us that the pay packets coming in are finite and we have limited time left to achieve our financial goals. When that moment arrives we can feel overwhelmed. Where do I begin, how do I start?

How many times will you be paid this year? Most of us are paid weekly, so the answer is 52. How many years of full-time work do you have left before you hope to retire? Maybe 20? 15?

You have about 1,040 pay packets left, at best. Maybe 780 pay packets if you have 15 years left. So are you doing everything you can to maximise the value of those pay packets for your retirement?

This is a lightbulb moment. Our pay packets won’t go on forever.

AMP financial adviser Dianne Charman says we can focus our energy and turn this into a positive.

“Understanding the true picture about your current financial situation and your retirement is the first step. Once you’ve got that picture clearly in your mind, you’re in the best position to take effective action,” she says.

Step 1: Get an accurate picture of your finances

What’s your financial worth? How much debt do you have against the assets you own?

If you haven’t really paid much attention for a few years, you may have a few accounts scattered around the place. Consolidate any transactional or savings accounts. There’s no benefit to having multiple accounts and it’s likely you’ll be paying multiple account-keeping fees on them. Whittle it down to one, and possibly have an online savings account that will help you with achieving your goals (more on this later).

Look at the insurance policies you have. An easy way to do this is to check your bank accounts and see what direct debits, or automatic payments you have. This will help you identify the providers and then you can call them and find out what policies you have.  Do you know what inclusions you are getting and are you making the most of them?

What credit card debt are you carrying and what interest rate do you pay? If you currently pay 18 per cent, make the switch to a low-interest card. If you transfer your balance to a 0 per cent card, check the honeymoon period – which is when the 0 per cent rate ends and the normal rate kicks in – and mark that on your calendar. Also, make sure you know what the rate is after the honeymoon period ends. If it goes up to 18 per cent after 18 months, be very certain that you can pay off the balance in 18 months.

Step 2: Superannuation

You need to find out how much you have now, how much you’ll have by retirement age, and how much you’ll need in order to maintain your lifestyle.

As a general rule, it is usually forecast that you’ll need around 70 per cent of your current income to maintain your lifestyle in retirement. This gives you a starting point.

There are many calculators around that will help you answer this in more detail. The AMP website includes a simulator that will make projections based on the information you give. You’ll be able to calculate the lump sum you will need in order to generate the income you would like in retirement.

Step 3: Organise the information

Once you’ve got all the information, put it into a table or a spreadsheet and organise it. You should be able to see, at a glance, the money coming in and the money going out every month. This will help you see how much is left over.

That surplus amount is your launch pad to financial success.

Step 4: Set goals, create a budget

You will now have a clear idea about your current financial worth. It’s time to set some goals and create a budget. Want to have your house paid off in five years? You can now calculate with certainty the spare cash you have and decide how much you want to divert to that goal. Want to beef up your super balance? Make those additional payments and watch your retirement lifestyle get more comfortable with each payment.

Save! Use an online savings account (where it’s harder to get at the money) to set up a regular direct debit. Set it, forget it. If the money is whisked out of your everyday account on pay day, you won’t have a chance to use it, or miss it. Save 20 per cent of your net pay and soon you’ll have a tidy nest egg of thousands of dollars that you can use to achieve one of your financial goals.

The key to success is action.

“Don’t procrastinate – do it now, while you’re reading this article!” Ms Charman says. “Commit to the idea of improving your financial situation and it will happen.”

*Dianne Charman is an Authorised Representative of AMP Financial Planning Pty Ltd, ABN 89 051 208 327, AFS Licence No. 232706.

Any advice given is general only and has not taken into account your objectives, financial situation or needs.  Because of this, before acting on any advice, you should consult a financial planner to consider how appropriate the advice is to your objectives, financial situation and needs.

Dianne Charman

Dianne Charman is mother, accomplished business woman and Authorised Representative of AMP Financial Planning Pty Ltd, ABN 89 051 208 327, AFS Licence No. 232706.

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