A simple financial health check is the first step to a successful year money-wise
Financial advisor David Simon explains how you can live within your means and take the first step on the way to achieving better financial health.
Every individual’s financial health varies, but each circumstance is equally important and it is essential that you fully understand and control your own situation. Generally speaking, people will experience varying lifestyles, some modest, others comfortable and for the lucky few, even luxurious. Even though there are stark differences between different levels of lifestyle, the capacity to generate such means is equally relative. Indeed, although the statement ‘living within your means’ has an array of different interpretations, your ability to live within your own particular means, is what determines your financial health. The best way to determine whether you are financially healthy or not starts with an assessment of your own lifestyle. You can do this by identifying a set of objectives and creating a realistic budget.
Establishing financial objectives in an effective manner can provide much needed clarity about your financial need(s). The SMART goal approach (including Specific, Measurable, Achievable, Realistic and Timely goals) is very effective. Setting a specific savings goal, firm budget and defining exactly what is required to achieve your goals, and by when, will provide a much greater sense of accomplishment.
The establishment of a budget is the single most critical step in being able to determine our financial health. The first step is to gauge your current spending patterns and then calibrate this amount to confirm a realistic budget. The key to success is to keep it both simple and realistic.
This understanding of your financial goals and the creation of a realistic budget will provide the foundation – and tools required - to enable a fundamental assessment of the health of one's finances. Essentially, if you are unable to meet your specified objectives and lifestyle needs (budget) then the health of your financial situation remains questionable or (and more likely) confirms that you are living "beyond and not within" your means. These two fundamental levers are often the most effective in enabling financial success. They are also the ones which are most easily controlled. Nevertheless, there is a range of alternative strategies which can also help increase your probability of financial success and health. Some of these strategies include:
- financial planning
- superannuation and
- debt management.
Click NEXT for more details