Turn your spending into saving, and set yourself up for a stress-free future by planning your finances today.
Financial planning involves organising a series of steps in order to reach one, or several goals. Whether you want to eliminate debt or save up for a house, you will need to make sure your savings are on the right track.
For some, you may want to seek professional advice. But finder.com.au have a few tips for you to follow in order to get yourself started on the right foot. Planning your finances at an early age will prepare you for your future. You can formulate plans to protect your income, make beneficial investments, organise your retirement funds, or simply to just start saving. Having a feeling of control of your funds can reduce the stress of unforeseen financial expenses, putting your mind at ease regarding your future.
The importance of financial planning
It turns out that old saying your parents and teachers used to tell you is completely true – ‘If you fail to plan, you plan to fail.’ It is never too early to start organising your finances. Even if it is your first job, you should still be looking to make a savings plan. From buying your first car to your first house, financial planning will get you to wherever you want to be, even if it might seem too farfetched at the time. There are many benefits to making a financial plan when you’re young:
- Making a habit. By organising your cash flow early on, by the time you have mortgages and bills to pay you will already be used to saving. As soon as you enter the workforce, set up a savings plan and deposit a specific percentage of your wage into a savings account. Whenever possible, you can make larger deposits. Doing this on a regular basis will get you used to saving, and sticking to a plan. Try and give yourself 3 or 6 month goals, and give yourself a reward for achieving them.
- Get to know your taxes. When you are constantly aware of your income, you will also be aware of tax. Research what you can claim during tax time, depending on your occupation. Keep receipts and file them away safely until tax time rolls around. Using the services of an accountant can also help you maximise tax benefits.
- Peace of mind. For some of us, our money seems to disappear from payday to payday, and we don’t know where most of it goes. By creating a financial plan, you will know exactly where your money is going, and where you can cut down on expenses. Having a sense of security and peace of mind that your savings is steadily growing is a great feeling we should all have.
- Financial security. The purpose of a financial plan is not only to reach goals, but to also know that you will never be short of cash if the unexpected does arise. Unfortunately, things like mechanical issues with your car and dental work may come at unexpected times. However, if you have a financial plan, you can plan to put aside money to cover any surprises comfortably.
Ways to achieve personal financial success while still young
- Pay off your debts. Before you can start saving, you will need to clear all of your debts. If you have things like a car loan or credit card debt, they will just keep collecting interest over time, making it more costly and harder for you to pay off later on. Get rid of them as soon as you can, so you can start fresh with your new savings plan.
- Make savings goals. It is important to set goals, so you know what you are striving towards. Divide them into monthly, annually, or multiple year goals so you are always close to reaching one of them.
- Make a savings plan with regular deposits. Make yourself a savings schedule and aim to reach a certain amount of savings every month. Most banks allow you to set up automatic direct deposits from your everyday transaction account into your savings account. You can sync this up with your payday so you never forget to make a deposit. The point of a savings plan is to stick to it! So make sure you don’t make a habit of skipping regular deposits.
- Save or make money wherever you can. There are many ways to find extra funds when saving. Before you go grocery shopping, make a shopping list so you don’t overspend on impulse purchases. You could have a garage sale and make some money off your old clothes and books that you haven’t touched in years.
- Be realistic. Don’t set yourself unattainable goals. It’s impossible for most of us to save 90% of our income unless we don’t ever leave our bedrooms! If you set yourself up to fail, you may become discouraged to keep saving in the future.
- Talk to parents or older relatives. If you’re really struggling to get your savings up and running, talk to a parent or older relative. They’ve all been in the exact same position as you, and may be able to help you out with some good advice and experience.
The value of learning to save while young
Getting into the habit of saving while you’re young, will make things much easier for you when you have to deal with expenses like mortgages, personal loans, credit cards, other household bills. There are many ways to save while you’re young, including:
- Spend more nights cooking at home. Are you the type of person that loves to constantly be out and about? It may not be helping your savings situation. Invite your friends over and ask everyone to bring a dish. Having fun and staying social doesn’t have to be expensive.
- Open a high interest savings account. Instead of leaving your savings in an everyday transaction account, you should consider opening a high interest savings account. You will most likely have to make a minimum monthly deposit to get the high bonus interest, but if you’re making regular deposits this shouldn’t be an issue.
- Set goals. Many of us are extremely goal oriented, and need to be motivated in order to save. Set yourself monthly goals, and reward yourself when you achieve them (maybe with a new pair of shoes or a trip to the cinemas!)
- Buy online. There are many savings to be made by making your purchases online. With so many competing online retailers, you can find a cheaper price on almost anything online when compared to in store.
- Give yourself a weekly limit. Spending is just like sweets and chocolate – it’s not completely bad
for you if it’s in moderation. You don’t have to lock yourself in your room to save, but you do need to know your limits. Give yourself a weekly spending limit and watch your savings grow.
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- Introductory period: 4 months
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The older we get, the more financial responsibility we will need to take on. It’s important to get into the habit of saving as early as possible, so you’ll feel comfortable and secure with your financial situation all the way into retirement. By setting goals, and sticking to a budget, you may never have to worry about your finances. The best thing about saving is that you can start today! So set up your high interest savings account, or start making your budget now so you can get closer to your savings goals.