7 steps to financial success

by Steve Nicholas, Financial Adviser

As you move through different phases of your life, it’s important to revisit your financial strategies including your insurances, super strategies, savings and cash flow, debt management and estate planning needs. Doing so could make an enormous difference to your long-term financial situation.

Our 7 steps to financial success  can help you stay on track and achieve your financial and lifestyle goals so you can focus on enjoying life.

#1 Cash flow – better manage your budget with our cash flow management service

Many of our clients tell us they find it difficult to pinpoint their expenses and challenging to manage their personal budget, with the result that they often have no savings at the end of the month.

Our cash flow management service enables you to more easily measure and understand where you spend your money so that you can achieve your desired savings and goals over time. We have systems and technology to make this process easier for you.

#2 Pay down ‘bad’ debt – reduce interest payable as quickly as you can

It is important to know the difference between ‘good debt’ and ‘bad debt’ so you are able to more effectively manage your debt:

‘Good debt’ describes loans where interest payable may be tax deductible, and/or where the assets purchased may appreciate in value and generate an income for you. Examples include loans you take out for buying shares, managed funds or an investment property.

‘Bad debt’ includes credit cards, personal loans, car loans and family home mortgages. Any interest on ‘bad debt’ is usually not tax deductible and the assets purchased tend not to earn an income.

While you may benefit from some forms of ‘good debt’, it is generally a good idea to have a strategy that includes reducing ‘bad debt’. If you have ‘bad debt’, such as a car loan, personal loan or credit card debts, we can help you with strategies to reduce the total interest payable and get you closer to clearing the debt completely, which will help improve your overall financial situation. 

#3 Mortgage – make additional home loan repayments of $100 per month

Planning your income to make additional mortgage payments – from as little as $100 per month – could result in you paying off your loan faster and reducing the total amount of interest otherwise paid. Additional strategies such as using a 100% offset account could also save you thousands.

An offset account is designed to hold all your funds together, which allows you to ‘offset’ the amount you owe on your mortgage against the savings you have in your bank account. Having a large savings balance in an offset account effectively reduces the interest payable on your home loan.

#4 Boost your superannuation – build your retirement nest egg

Every additional contribution to your superannuation fund adds to your retirement nest egg, and there may also be tax advantages. Making direct personal contributions to your super fund account or talking to your employer about personal and salary sacrifice contributions may be worthwhile strategies. It can make a significant difference over the long term when you consistently salary sacrifice small amounts, and this may be particularly relevant if you intend to take a break from work.

You will need to take into account your super contributions caps . We recommend that you seek financial advice to determine the most appropriate course of action for your circumstances.

#5 Protect your future – check that your insurances match your needs

You may already have personal insurances in place to protect you and your loved ones from unexpected events. It is important to remember that personal circumstances change for everyone and this can render an insurance policy inappropriate for the new or changed situation. For example, the level of cover and beneficiaries may need to be reconsidered if there are changes to your family group circumstances (birth, death, marriage, divorce).

Additionally, insurance companies are extremely competitive and this results in new insurance products being offered that may include enhanced benefits and/or lower premiums while offering equivalent and sometimes greater value for money. There are many complexities associated with taking out personal insurance and I recommend you seek the advice of a financial professional. 

#6 Savings or investments – if you don’t have a loan or offset account, make the most of a high interest savings account

Allocating surplus income to a high interest savings account has two potential advantages. Firstly, you may gain the flexibility required to access funds on an ad hoc basis and secondly, your savings may grow further by compound interest earned. This strategy is easy to implement and helpful for individuals and families planning for large expenditures such as school fees, overseas holidays or buying a new car.

Alternatively, if you are comfortable investing funds for the long term, consider allocating surplus income to an investment portfolio such as shares or managed funds. These investments may offer a higher return than cash over a long period of time, but do come with short-term fluctuations in value.

#7 Plan for your future – make sure your Will accurately reflects your current wishes and circumstances

If your Will was drawn up a long time ago, it may be time to check that its contents reflect your current circumstances. Marriage, divorce, de facto relationships, welcoming step-children, adopting children or reuniting with an estranged sibling are just some of the changing family structures that could impact upon whom you wish to include and preclude from receiving entitlements from your estate.

Check that you have considered beneficiary nominations for your life insurance and super funds as part of your overall estate plan. Life insurance and superannuation fund proceeds can be directed to your Will or managed outside your Will. A review of your Will should also include consideration of the control of assets held in companies and Trusts. There are potential tax liabilities for certain beneficiaries, so it is important to seek advice.

To find out more about how any of these steps may help you stay on track towards your financial and lifestyle goals, please contact Brett, Ross, Steve or James on 3007 2007 or bcribb@stratusfinancialgroup.com.aurmunro@stratusfinancialgroup.com.ausnicholas@stratusfinancialgroup.com.au or jmarshall@stratusfinancialgroup.com.au

At Stratus Financial Group, we help families, professionals, executives, business owners and retirees manage their complex financial affairs and coordinate their professional advisers. 

Stratus Financial Group and its advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306. This is general advice only and does not take into account your objectives, financial situation or needs, so you should consider whether the advice is relevant to your personal circumstances. You should also read the relevant Product Disclosure Statements (PDS) before making any financial decisions.