Financially fit? Sometimes it’s hard to know what to invest your bucks in big-time, or what to scrimp on. We asked Gerry Incollingo, who’s the MD of LCI Partners, a firm that specialises in accounting advisory, lending, wealth, property, insurance and legal, for his top five habits that may help accumulate wealth.
Spend or Save? It’s never Too Soon To Secure Your Financial Future Now
According to the AMP financial wellness report, 1.8 million Australian workers suffer from prolonged financial stress. This could be because many of us didn’t learn to save when we were younger, or we didn’t want to. It could also be because many people do not understand investing. Before investing, I also highly recommend you speak to a financial advisor for tips that are tailored to your specific needs.
Track Your Spending Habits
This is the mistake many folk make with their money. They simply don’t keep track of what they are spending it on. Don’t look closely at your bank statement each month? You should. You may be find you’re spending money unnecessarily, such as subscription payments that you forgot about, meal delivery services, shopping and shipping, several gym memberships and the like. Just doing this one thing alone could propel you forward when it comes to being financially fit!
I can’t stress this enough – Go through your bank statements monthly and track what you are spending your money on. Cancel anything you no longer use or need. If you have multiple subscriptions to similar services, such as Netflix, Stan and Binge, consider choosing one and cancelling the others. Check on health insurance providers every year, they do tend to inflate their prices and if you can change to more affordable services, such as a more affordable gym option, do so. Unless you really enjoy the one you are at as you should also be happy.
Plan your spending
Once you know what you’re spending on, you can carve out a financial plan. Start by listing all the the necessary items you need to spend on, such as your rent, mortgage, transport, groceries and phone bill. Then see how much you expect to have left over at the end of your pay cheque.
From there, you can list your “want-to-haves” and see how – or if – they fit into the budget. Also, keep in mind that in an ideal world you would save 20 percent of each pay cheque towards your emergency fund and investing.
Create An Financially Fit Emergency Fund
If ever there was a solid argument about the need for an Emergency Fund, it was 2020.
Where to begin? Aim to have three to six months worth of excess money in the bank in case of emergencies.
Invest the money, but be wary of any agreement that won’t allow you access to your money should you need it. If you have a business, I would also advise that you have around three months worth of savings to keep you operating if the world shuts down for a few months.
Consider Creating An Investment Plan
There are so many ways to invest. The one we would be all familiar with is superannuation, however you can’t access that until you are 65 so it makes sense to diversify. By diversifying, I mean, having your money in a few places with the intention of growing it. There are many things you can invest in, including:
- Stocks and the sharemarket. Speak to an expert before you invest however, as you can lose on the stock market. I would recommend looking into blue chip stocks if you are new to the idea.
- You can invest in property bonds. This is another easy investment that usually allows you to pull your money back out when you need it.
- You can invest in a business, your own or someone else’s.
- Long term interest accounts, are good, although these accounts will usually hold onto your money for a period of time and not release your money until the period is up. The benefit though is you get a larger return on it than a normal interest account.
- You can invest in property.
- Or if you are older you may want to invest more money in super as it also acts to reduce your tax.
Pay off your credit card debt
Credit card debt is not good debt. It doesn’t reduce your tax. It is essentially just costing you more money and you don’t get anything permanent out of it, such as a house. Make a plan to pay this off as quickly as you can. This should be a priority.
Financially Fit Habits To Make
- Minimise the use of your credit card. Only spend what you have at that moment.
- Make a budget and start saving as much as you can from your pay check, ideally 20 percent.
- Have a seperate account for your savings. As they say, out of sight, out of mind!
- Try to keep your money in a savings account that offers interest so you can make some money off off the money in the account
- Look into government incentives, especially if you are buying a house or starting a business. For example, if you are purchasing your first home, you may be eligible for a stamp duty free purchase
- Make the most of the Australian tax system. For example, if you have an investment property you may be able to get a tax break from it
About Gerry Incollingo
Gerry was appointed the managing director of LCI Partners in 1998. He specialises in advisory, corporate advisory, restructuring, retirement, succession and estate planning, lending, wealth, property, insurance, and legal.
With over 30 years’ experience, Gerry has managed the financial affairs of a diverse client base and his key focus in the day to day contact with management of the business to help grow the profitability and strength of his clients going forward.