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Money management is the key to financial wellbeing

Money management is about being on top of your finances to ensure you don’t incur bad debt or financial hassles down the track.

To start, you need to workout how much you are spending and saving. One of the best ways to do this is to do a budget. You can find a budget planner online, including at the Australian Securities and Investment Commission’s or the Government’s Understanding Money website – The budget planner will outline how much you are spending weekly, monthly or annually. When completing a budget, be strict and honest with yourself too. You might be shocked at how much you are spending (or saving!).

The budget puts your money life on paper and allows you to start setting some goals. If you want to purchase a house, for example, work out how much you will need for a deposit, fees and so on, and then start saving. Then work out how much you will need to make in repayments on the mortgage each month. Also remember that the cash rate of interest set by the Reserve Bank of Australia can go up, down or stay the same in any month. Work out whether you would still be able to make repayments should the cash rate go up by two or three per cent.

Setting goals will also keep you focused on what you really want to achieve. 

Eliminate costs you don’t need

Money management is also about working out what costs you have that you can eliminate. Say you go to the cinema every week. This may be an unneeded expense. Hire out a DVD or read a book instead or go to the movies monthly or every couple of months. Another example is fees for using an ATM from a bank different to the one with which you have an account. Sure, the couple of dollars they charge might seem like a small amount, but when you multiply it by the number of times you pay this fee per year, it can add up. 

Consider a financial planner

Some people may consider visiting an independent financial planner who can help set money goals and help achieve them too. Before you engage with a financial planner, you should do your research first. Ask financial planners about costs and how they will be remunerated – do they charge a fee for service such as an hourly rate; is it a percentage fee for service where they charge a percentage on the amount you invest; or will they earn a commission? Also check with ASIC to ensure the financial planner holds a valid Australian Financial Services license. Visit a few financial planners before settling on one

However you go about it, it’s important you are organised when it comes to money management.

For advice you can trust book a complimentary first appointment with Switzer Financial Services today.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Published on: Thursday, July 08, 2010

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