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Building a Personal Financial Plan – Essential Tips from Our Advisors

When it comes to understanding the fundamentals of money and managing your finances, it can be intimidating to begin if you don’t know where to start. Most of the time, however, money management can be relatively simple. 

At the end of the day, you don’t have to be a financial genius to handle your finances, nor do you have to spend all your time and energy on knowing what to do. There are simple steps you can take to build your own financial plan, or you can rely on an experienced financial planner to save you even more money and time. 

Simply put, you can achieve anything if you understand the fundamentals of money. You can set goals to save up for an emergency fund, plan for a business venture, pay off debt, or buy a property.

Read on to discover what our advisers have to say with these seven essential tips to help you construct your own personal finance strategy:

7 essential tips for financial planning:

Tip #1: Budget for your lifestyle

No, we’re not telling you to avoid spending money on objects you may want or restrict yourself to budget products. Nobody wants to feel limited from living their lives the way they desire. What we mean is that there are responsible ways to remain comfortable whilst being financially practical. 

The trick is to keep track of all your costs and purchases so you can understand where your money is going. If you spend less than you make, you will gradually accumulate savings. This will offer you tremendous peace of mind knowing that you’ve saved money for life’s unforeseen situations.

Tip #2: Avoid interest payments where possible

Avoiding interest payments doesn’t mean you can run off to the hills and ignore your credit card debts. What we’re trying to convey here is that you should be paying off your credit cards consistently every month. Missing even one payment can put you in a dangerous situation. If you continue to carry the debt, you may end up spending more in interest than necessary.

Even if you are unable to pay off your credit cards in full each month, make an attempt to pay more than the minimum amount. Any payment is better than no payment. Paying down your debts and bills quickly when you can afford to will make a difference in the long run.

Tip #3: Build a Safety Net

A safety net may be as simple as putting money aside in an emergency fund that is distinct from your savings account. This is best used for unexpected costs like vehicle expenses or medical costs you didn’t anticipate, or in the event you lose your job.

No one knows what the future holds, so it can’t hurt to be well prepared. Without a safety net, such as an emergency fund, you may go through a time where you struggle to pay your normal living expenses, which can be extremely stressful and hard to financially recover from. 

You may like to consider creating a high-interest savings account, where you can schedule automatic monthly payments and benefit from the interest gained. One you’ve reached your financial goal, try to continue regularly depositing some of your money into a savings account for the future. 

Tip #4: Stick to Your Budget

The foundation of your personal finances is your budget. You should have already created a budget that is appropriate and realistic for your lifestyle, so now all that is left to do is rigorously stick to it.

The important thing to remember is that budgets can always change – especially if you are going through a big lifestyle change. For example, when you are paying off a mortgage, or have a savings goal you are aiming for, or maybe you are budgeting to start a family?

Aim to regularly examine your income, spending, and other financial obligations. Take note of how you spend your money each month and check in with your budget regularly to see if you need to make any changes.

With time, you’ll become accustomed to your budget, which will provide you with a clearer route to your financial objectives. Sticking to your budget may just help you reach your long-term financial goals sooner like saving for retirement, creating an emergency fund, and reaching your holiday fund target.

Tip #5: Deal With Your Debt

Taking care of your debt is undoubtedly one of the most responsible financial decisions you should make. By making proactive choices, you won’t allow your debts to drag you down and prevent you from achieving your financial objectives.

Learning how to pay down your debt successfully is one of the fundamentals of finance. An excellent example is paying off more than the minimum amount on your credit card, to avoid expensive interest charges. This also applies to your mortgage and any other debts you may have. Strive to remain debt-free at all times!

Tip #6: Look Forward to Your Retirement

Again, no one can predict the future. The same may be said about your retirement. However, it’s never too early to start thinking about those golden years, in some ways.

Most people in Australia receive superannuation from their employer, which currently is 10% of your salary. However, if you’re serious about having a comfortable retirement, you may want to consider making extra contributions to your super. Maybe you want to save 11% of your income. It is important to best protect your retirement funds so that by the time you are ready to retire, you have peace of mind that you won’t run out of money. 

Examine your superannuation fund and calculate what you will likely have at retirement age. This way, you will have a clearer sense of what you’re up against so you can start making changes for your future self.

Tip #7: Invest in Insurance

Many people might not believe it but being insured is a significant part of a financial plan.

Tragic events like a job loss or a house fire can devastate your life if you do not have adequate insurance in place. Consider taking out not only the basic insurance policies like house, car and health insurance but also personal insurance to protect your assets and your working ability.

A comprehensive insurance plan can help secure your finances for your future. 

Financial planning can be easy, clear, and rewarding—all depending on your perspective. To succeed with your finances, consistency is key.

As you develop better budgeting practices, you’ll notice that there’s more to money management than meets the eye. 

Controlling your money includes planning your savings, establishing a reliable emergency fund, adhering to your budget, making payments on time, and being debt-free. Although it is completely natural to stray from your plan from time to time, adhering to your plan, in the long run, will make a world of difference when it comes to preparing for whatever the future holds.

Looking for sound financial advice in Newcastle?

Are you looking for a professional financial planner in Newcastle? 123 Financial Group has been providing expert financial advice for over 30 years. 

We’re a team of trusted financial advisers who will support and guide you through achieving your financial goals, for the short- and long-term.

Book an initial consultation with our financial planning team today and take your first step towards financial freedom!

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