Most of us probably have a good sense of what it takes to improve our physical health and of course, there is a whole manner of approaches. We may be driven by competing in a big sporting event, invest in a gym membership, commit to weekly exercise with friends, become better informed about our food choices or talk to experts in the fitness industry and be guided from there. It’s no different when it comes to our financial health and it’s important to have goals to strive for and to seek expert advice too.
How is your financial fitness? Are you standing tall and proud or conversely, gasping for air with a big hill to climb? Research repeatedly indicates that financial health and physical well-being go hand-in-hand. And with that being the case, we thought we’d delve a little deeper.
Research repeatedly indicates that financial health and physical well-being go hand-in-hand.
To achieve financial well-being, we must first understand it. And while it is a very personal state, many of us are driven by the same objectives. Great financial health is less about the bottom line than about having financial security and having the financial freedom to make choices, now and in the future.
Some of the key measures of financial well-being are as follows; from a day-to-day (or month-to-month) perspective, we want to feel in control of our finances. We also want the freedom to meet long-term financial goals such as paying off the mortgage or retiring comfortably. Another important factor that contributes to financial ‘fitness’ is being ready for any curve balls that may come about such as job loss, ill health affecting income for a time or challenges periods in business.
Regina Taarnby, one of our financial planners in Gladstone, often sees first-hand the physical impact that financial peace of mind can bring.
“In my role as a planner, I have worked with clients for years on their budgets and how it ties in with their financial planning. I am passionate about getting the budget right. They may roll their eyes at me but I always tell my clients that budgeting is the foundation of any good financial plan.
Time and time again, I see clients come in feeling uncomfortable and completely out of control with their income and spending. After all, the second most basic human need (according to Maslow’s Hierarchy of Needs (1943)) is safety, which financial security falls under. Stress, sleepless nights, fighting with your partner – all these things stem from insecurities. On the flipside, I’ve also witnessed the physical relief that clients feel once they’re clear on their budget/finances, can define their short, medium and long-term goals and have a solid plan in place to kick butt! It’s the relaxing of the shoulders, a huge sigh of relief, the instant mood change.
In big-picture terms, it means ticking items off the bucket list, buying the dream house, travelling to see the Northern Lights or giving your kids the best possible start in life. I’m in a position to help my clients financially but the emotional and mental security that also comes about as a result of financial stability is absolutely priceless.”
I’m in a position to help my clients financially but the emotional and mental security that also comes about as a result of financial stability, is absolutely priceless.
There’s no denying the correlation between financial health and physical well-being. A 2015 survey conducted by one of the largest banks in the US, revealed that 81% of respondents found other goals much easier to achieve when their finances were in order, whilst 70% stated that good financial health had a positive impact on their physical health.
Alternatively, poor financial health can have a devastating ripple effect. Money worries are commonly related to stress and anxiety which may manifest in physical symptoms such as lack of sleep, increased blood pressure and heart problems. Mental health issues such as depression can also arise when financial fears are present. This will not only impact one person in a household but all of their loved ones too and can possibly flow over into the workplace as well.
Beyond the impact on physical health, our financial health touches on every aspect of our lives such as attitudes, behaviours and emotional stability. Our sense of worth is often linked to feeling safe and secure financially.
So as you embrace taking charge of your future and making your dreams a reality – it’s time to consider the importance of a striving for the podium finish when it comes to financial health. With so many great and well-informed experts in the field, a helping hand is never far away for those who struggle with their finances and never quite feel on top of their money matters.
Here, Regina offers her pearls of wisdom; eight important steps to help you get on track…
It’s not about how much you earn but rather, about how much you save and how much you spend. Make it easier for yourself and keep clear records. Be honest. Write down your expenses for the past three months – including the sneaky treats! Most people have no idea of their spending, especially when they don’t account for it and yet, they know, down to the dollar, how much comes in on payday.
The first step is to acknowledge your spending habits.
Using PayPass, credit cards, PayPal etc all point to auto-pilot spending. If you’re on auto-pilot mode you’re much more likely to overspend. For example, don’t do your food shopping when you’re hungry and avoid online browsing when you’re tired or not concentrating (i.e. it’s well past bedtime) – this will result in impulsive and sometimes costly decision-making.
Pay yourself first in the form of putting some money away for another day. Saving means having a buffer in case of an emergency (not a new pair of shoe kind of emergency) but it also means you’re less likely to take out small loans or apply for credit cards. Saving will bring about personal satisfaction – you’ll know you’ll have worked hard for that holiday outfit/monster TV… And as with most things, turning something into a habit will take time but YOU CAN DO IT!
Credit cards, personal loans and lines of credit are all dollar deprivers. Most forms of consumer debt are easily obtained but have fees (application, administration, hidden fees) and interest rates as high as 30%! Having some simple savings measures in place will ensure that it’s not costing you far more than you bargained for.
Debt can weigh heavily on people’s mind especially when they can’t get on top of repayments. It can be easy to overextend yourself on ‘bad debt’ to fund holidays, credit cards etc. and feel like you have become forever stuck on that ‘paying interest’ merry-go-round. Knowing what you want to focus your hard earned income towards can help prioritise your financial decisions.
Try to pay your ‘bad’ debt down sooner than the arranged timeframe. Look at whether you can allocate more money on a weekly basis – even if it’s only a small amount. With long-term debts, a little extra money each week can work significantly in your favour when it comes to the interest you’re paying.
Having long-term investments (and therefore, money aside) is great for your peace of mind. Investments can also put you on the path to financial abundance. Investing can mean greater growth and a better income than that available through your bank/term deposits. Contributing to investments regularly over time helps even out market risk.
It’s important to define what you’re working toward and set out a timeline. Medium and long-term investment goals may provide better ‘bang for your buck’ than the ole 1% bank account. Investing can be as simple or as complicated as you desire but I do recommend working with a professional to help you develop a diverse portfolio. Keeping your eggs in different baskets and ensuring your choices align with your goals and preference to risk is key.
I’m often amazed at how many people have their homes and cars insured but not themselves! YOU are your biggest asset in the form of being able to earn an income. What happens if sickness or accident strikes and you’re unable to work long-term? How much sick leave and annual leave do you have? Who will pay the bills and put food on the table if you’re unable to work? Filling the ‘risk gap’ with reliance on either sellable assets or personal insurance policies is super important. This means that when the proverbial hits the fan, you may be struggling physically or mentally but at least your financial side is still keeping you and your family afloat.
In the same way that some people choose to engage a personal trainer to help them develop a health and fitness plan, a Financial Planner can help you; define your budget and financial parameters, get you on track and keep you accountable.
I’ve witnessed some of my clients go from absolute ‘spendaroos’ to working within a structured budget without depriving themselves and ultimately, starting to kick their important goals.
What you need to know
This information is provided by Invest Blue Pty Ltd (ABN 91 100 874 744). The information contained in this article is of general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice with regards to those matters and seek personal financial, tax and/or legal advice prior to acting on this information. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relations to products and services provided to you.