Clean Up Your Finances
Take our 7 day challenge to get your finances all spruced up
With Clean Up Australia Day taking place this weekend (5 March), we’re in the mood to clean, organise, tidy, wash and scrub. While the day is all about taking care of our beautiful country, it did get us thinking, why not extend our efforts to our finances?
Much like the environment, every so often our wallets could do with a good old fashion spring clean (even if it is autumn).
This may sound like a laborious chore, but not if you take our 7-day financial cleanse challenge. It’s a plan that features a daily task for the next 7 days, to help you get your finances in tip-top shape.
Not only does it provide direction and structure to a task that can otherwise be confusing and challenging, but let’s be honest, it also adds an element of fun! And as Mary Poppins taught us, “In every job that must be done, there is an element of fun. You find the fun and snap! The job's a game.”
So on your marks, get set, go!
Day 1: Determine your money mantra
Before you jump into budgets, superannuation and insurance, take a step back and ask yourself: why am I doing this and what do I want to achieve with my money? The purpose is to give you focus and remind you what the end goal is all about.
Here are some examples:
- I want to consolidate my debt and become debt free faster
- I want to increase my financial know-how so I can make better informed decisions about my money
- I want to create an emergency savings fund
- I want to save a deposit for a house
- Be sure to keep it somewhere visible while you work your way through the challenge
Day 2: Work out your current situation
You can’t know where you’re going if you don’t know where you’re starting from. This exercise is all about figuring out how you currently spend your money.
To begin, work out your monthly income – that’s everything from your salary to interest earned from investments to income from rental properties and so on.
Next tally up your monthly expenses – this includes any ongoing regular payments such as rent/mortgage, utilities, insurances, etc. as well as an estimate on your ad hoc spending such as going out, groceries, travel, shopping, etc. To work out your expenses, we suggest looking back over that past 3 - 6 six months to see the average you spend in each of these categories. It will give you a more realistic view rather than just guessing.
Once you have both these numbers, subtract your expenses from your income. A positive number means you’re living within your means. A negative number means you need to minimise your spending!
Day 3: Know your debt level
It’s funny how one number can cause so much angst. In fact, many of us will choose to remain ignorant rather than face the truth. But knowing your debt level is essential to good money management. Most of us will have good debt and bad debt. As a reminder, good debt is the type that helps you build your net worth e.g. your mortgage would be considered good debt. Bad debt is the debt we incur to purchase depreciating assets e.g. taking out a loan for a holiday or your credit card.
The aim is to pay down both good and bad debt, but ridding yourself completely of bad debt as soon as possible should take priority. To help you do this, you need to figure out what your current level of debt is.
Once you’ve done this you might want to consider consolidating your bad debt so it’s more manageable. Then it’s time to set about working out a regular payment plan (see day 4).
Day 4: Create a budget
Now that you’ve got an idea of your spending habits and your debt level, it’s time to set a budget. For all the categories you’ve identified set individual spending limits. Not only will this make you more mindful of how you use your money but it will also help you work out areas where you can save a little here and there.
Going forward, keep track of your progress – remember to update your budget as you spend and keep a running tally against your spending limits. With the wide array of apps available, keeping track of your budget has never been easier. Of course, a simple spreadsheet will also do the trick if an app isn’t your cup of tea.
Day 5: Make sure you’re covered
Many of us have some form of insurance but when was the last time you actually looked at your policies or reviewed your insurance against your current situation? On day five, it’s time to dig into your insurance policies and make sure you have adequate cover and the right types of insurance are in place.
Different types of insurance you may need to consider include:
- General insurance: motor vehicle, travel, renter’s, home and contents, mortgage loan repayment insurance, landlord’s insurance
- Life insurance: term life, income protection, TPD, trauma, funeral
- Private health insurance: hospital, general treatment (extras)
Day 6: Supercharge your superannuation
After the family home, superannuation is often the biggest asset for Australians. And yet, our engagement with our superannuation is very low. Day six is all about demystifying your superannuation by getting involved.
Here are some things you may like to sort out when it comes to your superannuation:
- Check your account balance and the performance of your chosen fund. See how it compares to other funds.
- Ensure your investment strategy is right for your current life stage e.g. you may want to avoid growth strategies that are more risky if you’re close to retirement.
- Be aware of the management fees for your fund. If you’re not happy with them contact your fund.
- Reclaim any lost super.
- If you have more than one super fund, consider consolidating them into one account.
- If you have insurance through your super make sure it is adequate.
- Update your account details such as your address, phone number, nominated beneficiary, etc.
Day 7: Establish a regular calendar
Sorting out your finances shouldn’t be a once a year activity. If you make it a regular occurrence it will become easier and quicker each time.
If you use an online calendar it’s as simple as setting up recurring calendar invites. If you’re a fan of the pen and paper, then manually mark it in. This will help make it an automatic process so you don’t need to keep a mental note, which can easily be forgotten.
Here are our suggestions for financial check-ins:
- Budget: you should be updating your budget with income and expenses daily. But tracking against your spending goals to make sure you’re living within your means can be done fortnightly or monthly.
- Savings and debt levels: once a month.
- Superannuation: every six-months.
- Insurance: once a year.
If you take our 7-day financial cleanse, we’d love to hear how you went!