Financial security is a goal that resonates with everyone. Whether you’re a US resident focused on raising a family or a backpacker enjoying a relaxed working holiday in Australia, you likely want to enjoy a secure financial future. While the backpacker may be more focused on finding the cheapest hostels and the best tax calculator for Australians, that doesn’t mean all their financial moves will be different. There are plenty of money moves anyone can make to improve their financial position.
Whether you’re a stay-at-home parent, an intrepid traveler, or an ambitious office worker, the following five tips should help you navigate your way toward a brighter financial future.
1. Make a budget (but actually do it)
Right now, you’re probably thinking, “Yeah, yeah, make a budget – tell me something I don’t know.” The question is, have you actually made a budget? And are you updating it regularly?
A well-maintained budget is the foundation of a strong set of personal finance habits. So find a way to track your income and expenses meticulously. If you love a good app, there are plenty that can take all the work out of budgeting for you.
2. Check in with your emergency fund
With the cost of living soaring, it’s important to check in with your emergency fund to ensure you still have enough set aside. Take a look at your budget, examine your expenses, and calculate how many months’ worth you have in your emergency fund. Many financial advisors recommend stowing away six months’ worth of expenses. However, you can go with more or less, depending on your lifestyle and household needs.
3. Avoid (or knock out) high-interest debt
Here, we’re mostly talking about credit card debt and personal loans, both of which can be a significant drain on your financial resources. Of course, you don’t need to cut up your credit cards, but you should avoid carrying over a balance at the end of the month and accruing unnecessary interest.
If you’re already stuck in that debt cycle, make it a priority to pay off your debt as quickly as possible. This could mean cutting back on luxuries for a few months or arranging an interest-free loan from a loved one. Just be careful with the latter option as financial disputes can destroy relationships.
4. Invest strategically
With the first three tips, you’ve created a strong foundation for your financial future. Now, it’s time to start building up your wealth. Set aside some time to explore various investment options, including stocks, bonds, mutual funds, REITs, and retirement accounts. Ideally, you should do this with a qualified financial advisor who doesn’t have any vested interest in where you invest your money. Together, you can develop a diversified investment portfolio that will help you grow your wealth while mitigating the potential risks.
5. Add retirement planning to your investment strategy
Retirement planning is critical if you want to enjoy a safe and secure financial future. So make sure you’re taking advantage of any employer-sponsored retirement plans available to you. In the US, the main options are 401(k)s and IRAs. In Australia, it’s superannuation funds and self-managed retirement accounts (the latter of which you’ll need an SMSF accountant to help with).
While retirement funds vary from country to country, they generally come with tax advantages and compound growth that even the best investment vehicles can’t compete with. So, the sooner you take advantage of them, the better.
Put these simple steps into action, and you’ll soon be rocketing toward a far more stable financial future.