(If you ever want financial freedom).
As advisers one of our main tasks is to improve people's attitudes towards money and enforce better habits, not always easy but a worthwhile task nonetheless. Once people adopt better financial habits the difference it can make is huge, it can help reduce stress and worry about impending bills, eradicate the dread of living from payslip to payslip, possibly free up some cash for leisure activities and instil a sense of accomplishment that people are now far more financial literate. Below are my 10 financial planning tips that can improve your overall financial situation and make you more productive going forward.
- Create a budget > this is vital for anyone, whether you are single or married, have kids or not, self employed or an employee. You need to have an idea of your major outgoings on a monthly basis and see if you can highlight any areas of "leakage" or unnecessary expenditure.
- Pay yourself first > this is one of Warren Buffett's (the world's most famous investor and self made billionaire) golden rules. Once your wages are lodged to your account you should immediately divert a portion towards savings, with some ideally going towards a unit linked investment plan.
- Streamline your Direct Debits > If possible try and have as many direct debit's taken on the same day (or as close as possible) - if you get paid on the first of the month but have DD's on say 10 different days in the month it's hard to keep a structure on your finances. If you have most of your DD's gone early in the month you know you have a lot of the big outgoings paid for.
- Use cash as much as possible > "Will i tap"? Surely one of the most uttered questions in shops and cafes nationwide , "oh tap away" is usually the answer, It's very hard to track your spending when you constantly use your card. Take out €200-€300 at the start of the week and see if you have money left at the end of the week.
- Have a rainy day fund > Another must.....you need some reserves built up for the unforeseen events in life. Unforeseen events are usually costly so having the peace of mind that there is money for some such occurrence reduces anxiety.
- Have a fun fund > It can't be all stick and no carrot so save some money for some of your favourite leisure activities - those new golf clubs will feel and look a lot better when they haven't been bought on the credit card.
- Be wary of the Credit Card > Banks charge outrageous interest on credit card balances so be careful, it's great to have a line of credit but if you're paying back 17 or 18% interest on the outstanding balance you owe that's gonna hurt.
- Do a tax return > Claim back anything you possibly can. GP, Physio, Dental visits, pharmacy prescriptions. Reallocate tax bands and credits if married and it's prudent to do so. Don't leave any money on the table.
- Reduce impulse buys > We are all guilty of buying stuff we really didn't need, that watch for €400 - bargain (even though you have 4 other watches) , that dress for €250 that you wear once ...... remember what you have to earn gross (ie before tax) to pay for these impulse buys.
- Engage with an impartial financial adviser > Brokers, impartial financial advisers/planners - whatever they refer to themselves as, we hold the key to your improved financial future. We can use Cashflow Forecasting to give you a roadmap for your future, We can arrange protection policies in case you go out sick (income protection) or contract a serious illness or leave a lump sum for your family in the case of premature death. We can advise on the best and most applicable pension structure given your circumstances.
I hope this helps and some of these habits can be adapted and improve your financial future.