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Financial wellbeing can be described as when a person is able to not only meet their regular expenses, but when they also have money left over after everything has been paid for. This results in them feeling financially secure now as well as in the future.
According to the most current Australian Securities and Investments Commission (ASIC) Australian Financial Attitudes and Behaviour Tracker that monitors financial behavior in adults, most Australians practice excellent financial wellbeing. However, there are still a few ways in which improvements can be made – which will be discussed below.
Examples of Healthy Financial Habits
Approximately 90% of the ASIC survey respondents noted that they kept careful records of their finances in some way or other, while around 80% reported that they had an actual budget. 23% of respondents mentioned that they stuck to their budget.
Keeping an accurate record of your income and expenditure is the most crucial aspect pertaining to financial literacy. The easiest ways to do this include:
- Setting a budget for your weekly or monthly expenses (depending on how you are paid)
- Regularly checking the line items on your savings account, debit account and credit card to ensure no incorrect charges have been included
- Saving something from each pay you receive – even if it is $10 or $20
Learn as Much as Possible
Learning a few key concepts and keeping up with the latest financial news and information could help you to better understand more about the aspects that you may need to discuss with a financial advisor. There is generally a very low understanding regarding key investment concepts when it comes to selecting financial products. Less than 30% of the ASIC survey respondents said that they understood the risk-return tradeoff and only around 40% mentioned that they understood the principle of diversification when it comes to investing.
Perform your Own Research
Although it’s easy to become overwhelmed at the amount of financial information that is available these days, it is essential that you commit some time to research. If you aren’t able to do this, it is strongly recommended that you contact your financial advisor every three to six months, as this will enable you to find out what is happening with your money and if there are any alternative options available to help it grow quicker.
Think about the Future
Having a long-term financial plan in place will help you determine what is happening with your money overall. However, only around 25% of the survey respondents mentioned that they had a long-term financial plan in place, with just over 60% of them overseeing their progress during the past 6 months. Putting a long-term financial plan in place will enable you to take realistic steps to achieve it over the long term – even if your current plan is to pay off all of your consumer debt, the sheer satisfaction of achieving this will make it well worth the time and effort.
Speak to your Advisor
Talking with your advisor could help you to achieve a far higher level of financial literacy, which will ultimately provide you with a solid financial plan that will enable you to plan for your future. If you don’t have a financial advisor yet, now is the time to find one.