Ten Ways To Kickstart Those Idling Finances
Sydney Morning Herald
Saturday August 8, 1998
FEELING that your finances match the weather? Well, while a complete financial turnaround can't be achieved overnight, there are some steps you can take now that will generate instant results and turn you in the right direction. 1 Set yourself some financial goals, says BT executive vice-president Terry Power. You've got to have a reason to get started. Your goal doesn't have to be a virtuous one such as saving for retirement. It could be a new car, holiday, or funds to pay the kids' school fees. The important thing is to have something to strive for. 2 If you can't stomach the budget word, says David Hartgill, manager of Mercantile Mutual's Financial Passages program, look at where you are spending your money. What are the areas where money is floating away? That is the money you should be trying to capture and get working for you.
If you can handle the B word, make up a budget. List your income on one side and your expenses on the other. Work out where you are overspending and resolve to stop.
"How often do you say `I don't know where my money is going'?" asks Power. "But if you work that out you may find you have extra money available for the things you really want." 3 Look at your credit cards. If you have more than you should, cut one up. If you spend more than you should, ditto.
"What about burying your credit cards for a month and seeing what happens?" suggests Narelle Brown, president of the Financial Counsellors' Association of NSW. "You might find you can live without them."
At the very least, try leaving them at home on days you know you won't need them. That way, if you're tempted, you'll have to pay cash or come back tomorrow after you've had time to think it over. Either way, you'll buy time to be sure you really want to make the purchase. 4 If possible, sit down and pay all your outstanding bills. That wipes the slate clean and gives you "review" time to think about your expenses - what you're spending where and whether there is any unnecessary spending that can be cut. If you can't pay all your bills just now, draw up a plan of action - a timetable for repaying them - and work out where the money will come from. Then stick to it. At the very least, says Brown, make sure you are paying more than the minimum required payment on your plastic. "You've got to make a decision to reduce your debt." 5 Can you reduce the costs of any outstanding debt? If you have a high interest rate loan, you should pay this off first. Hartgill says people often have money sitting idle in their cheque account which could be used to wipe out expensive credit card debt.
If you have too many loans, Brown says there may be merit in refinancing and consolidating all your loans into a cheaper personal loan. This can reduce repayments, overall costs and headaches, but you need to ensure you are really saving money. There's little point, for example, in consolidating a high-interest loan with only six months to run into a personal loan that you will be paying off for the next three years.
Check your home loan, says Terry Power. If the deal isn't competitive and right for you now, consider refinancing. 6 Do you have lazy money, asks Hartgill. This is money lying around in low interest accounts which is working for the bank, not you. Try moving this money to a higher-earning account or a cash management trust. If you can lock it away for a while a managed investment may be an option. 7 Commit yourself to regular savings. Open up a special bank account or, if you have enough money, enrol in a savings plan with a balanced fund. Some funds require as little as $500 plus $100 a week to get started. Even if you're only saving a small amount, it's getting started that's important.
Have money taken out of your pay, says Power. "It's amazing how you cut costs when the money is not available." 8 Spring clean. Brown says most of us have possessions we no longer use or value. A growing trend is to "recycle" items like clothing. If the item is in reasonable condition, and a good label, for example, you may be able to sell it through a recycled clothing store. Childrens' clothes, furniture, even unwanted collections of things might be turned into cash. 9 If you've got a good income and no job uncertainty, says Power, consider gearing to boost your potential investment returns. Make sure you obey all the classic rules of buying quality assets, diversifying, and investing for the long term. And don't forget to insure your income in case of illness. 10 Review all your insurance. Are you sufficiently well-covered? Are the premiums and policies still competitive?
© 1998 Sydney Morning Herald
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