8 tips to self-diagnosing your finances

Starting a New Year is the perfect opportunity to clean up your habits, get your life on track, and make sure you’re living the way you want to. Whether you’re worrying about health and fitness, love, travel, work, or just about anything else, it all relates back to your money. So why not conduct a financial health check on your own finances to check if you’re on the right track for 2019? Just like your annual health check-up – but simpler! Because here are our 8 tips of self-diagnosing your finances.

  1. Are you on track to achieve your goals? Are you reaching the heights you’re striving for? Are you happy? You must list Your goals and dreams down on paper – these could be things you want to achieve, or what you value in life. This list ought to be reviewed weekly, and will change as you do.

  2. Do you know where your money goes? Tracking and understanding where and how your money is spent gives you awareness and control. It doesn’t mean sitting down and writing out every transaction – use technology for the time-consuming bits!

  3. Do you regularly save some of your income? After each paycheck (or monthly) you should be saving some money, anywhere from 20%-50% of your income depending upon your living arrangements. Having a separate bank account for your savings lets you track how much you’re saving each month, and builds your confidence knowing you have money there to achieve your goals or, in a pinch, for emergencies.

  4. Is your net wealth growing? Your net wealth is what you own – what you owe. I’m pretty sure you don’t have a goal to work hard every day until age 80, so what are you doing about your future now? Tracking your net wealth is pretty simple – what you own includes property, super, investments, bank accounts, cars etc, and what you owe includes your mortgage, credit card debt, personal loans and so forth. You want your assets to increase and of course your debt to decrease over the years, especially if you’ve set a debt-free date. The easiest way we track this with clients is through our fintech solutions & software.

  5. Do you have long-term investments, such as shares, managed funds, or an investment property? A common way to help grow your net wealth is to have long-term investments that increase in value. Whilst having cash in the bank is safe and important for your short-term goals, you also want to consider your long-term goals, or ’wealth building’. These types of investments can offer a higher return over the years, and as a result increase your net wealth – great for goals such as retiring earlier, taking a trip around the world, or paying for your children’s education.

  6. Are your investments diversified? The ’don’t put all your eggs in one basket rule’ – having your investments a mix of cash, shares and property promotes healthy risk, meaning that if one investment goes down, then you may have others that go up or stay the same. Having money in cash for example is important for short-term goals as you don’t want its value to decrease.

  7. If you were unable to work for six months, would you still be able to pay your bills? We all work so hard to build our savings, enjoy family time, repay debt and grow wealth, but what would happen if sickness or injury stopped your income for 6 months? These crucial things we pay for would have to stop, or even start slipping backwards as no cash comes into your bank account. Consider what life, total & permanent disability, trauma and income protection insurance you have, and if it’s appropriate for your current situation. One of your most important assets in life is your ability to generate an income, so it needs to be well protected in case something goes wrong.

    Overall would you say your finances are getting better or worse? A good wrap up is an overall view of how things are looking with your finances, and if they’re getting better or worse. The earlier you recognise that things aren’t going well financially, the sooner you can start righting the ship. Of course, we all want our situation to be improving, but life throws you challenges along the way – learn from your mistakes and focus on the future.

If you feel that your finances are not where you want them to be or are wondering if you’re doing the best thing for your situation feel free chat to us or book a session.

7Wealth Pty Ltd ABN 44 609 210 246, is an Authorised Representative of AMP Financial Planning Pty Limited ABN 89 051 208 327 Australian Financial Services Licence 232706 and Australian Credit Licence 232706
This blog contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. If you decide to purchase or vary a financial product, your financial adviser, and other companies within the AMP Group may receive fees and other benefits. The fees will be a dollar amount and/ or a percentage of either the premium you pay or the value of your investment. Please contact us if you want more information.

January 30, 2019