Good management the key to money confidence

It's often not how much money you earn that matters but rather what you do with it.

On the face of it things are pretty good in Australia right now. Three key economic indicators – interest rates, inflation and unemployment are all very low. So it’s a concern that working Australians feel less confident about their personal finances than they did two years ago.

According to new research by AMP as part of its Financial Wellness Report, less than one in two (48%) of us are confident about our financial wellbeing – down from 54% in 2014. One in four working people say they are financially stressed and have trouble making ends meet.

The same study identified common triggers of financial stress, notably missed bills, debt repayments and the ongoing need to save for retirement while providing for a family.

Life is expensive, and it’s a fair bet you think if you earned an extra few thousand dollars, you’d be okay. But you know what? You probably wouldn’t.

After more than 30 years in the money business I have no doubt it’s not how much you earn that matters, but rather, what you do with your money. So let’s take a look at a few commonsense steps that really work when it comes to maintaining control of your cash.

It all starts by knowing where your money goes. The free TrackMySpend app, available through the MoneySmart website, is very handy here, providing a clear idea of daily spending patterns. This alone can be quite an eye opener.

Once you know you’re regular spending habits, it’s easy to get cracking with a budget. Just seeing how much money is flying out the door can help to identify money leaks and areas where you can plug the gaps by cutting back.

Don’t think you can’t have fun along the way. A good budget allows you to enjoy your money yet still enables you to save. And saving is essential because having a pool of spare cash to your name can be a big boost to financial confidence.

Set yourself a few goals to aim for too. AMP found 80% of workers have some financial goals in mind, but less than one in five of us have a plan of action to achieve them.

If you’re aiming to grow retirement savings for instance, consider talking to your employer about making salary sacrificed contributions to super from your before-tax wage or salary.

If you’re stressed about bills, work out how much you can realistically save each pay day and set up an online transfer of cash into a dedicated savings account. You may be surprised at how quickly your slush fund grows, providing back-up money for household bills and unexpected costs, and bringing more control – and less stress - to your financial future.

 

Paul Clitheroe is a founding director of financial planning firm ipac, Chairman of the Australian Government Financial Literacy Board and chief commentator for Money Magazine.

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Any advice in this page is general in nature and is provided by AMP Life Limited ABN 84 079 300 379 (AMP Life). The advice does not take into account your personal objectives, financial situation or needs. Therefore, before acting on this advice, you should consider the appropriateness of this advice having regard to those matters. AMP Bett3r Account is issued by AMP Bank Limited ABN 15 081 596 009, AFSL 234517. Consider the terms and conditions available on request by calling 13 30 30 or at amp.com.au/bett3r and whether this product is appropriate for you. Fees and charges apply.

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