Our top five financial planning rules

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Simple steps to financial security

If you feel like you’re stuck in a cycle of endless saving and not getting anywhere, or maybe you feel worried about money and financial pressures, or perhaps you’ve got a big goal ahead and you need money to reach it – you could benefit from financial planning. It’s a fairly simple process, but one that most people don’t practise in their everyday lives. Yet, good financial planning is one of the most important factors in achieving a financially secure and prosperous life. At Reventon, there are some key rules that we live by, and we’re here to share them with you.


1. Set clear financial goals – and prioritise them

If you don’t know your destination, you won’t know how to get there, so the first thing you need to do is define your financial planning goal. You may have a larger overarching goal that you’d like to achieve – for example, you’d like a comfortable retirement, you’d like financial security for your family, you’d like a better lifestyle with holidays and a few more luxuries. Then, you may have secondary goals that could help you get there – for example you’d like to clear your credit card debts, or you’d like to purchase an investment property. You may also have short term goals – saving up for a holiday, school fees, or renovations.

As you consider your goals, you’ll also need to ask yourself a few questions – when would you like to achieve this goal? How much money will you need to achieve it? It’s also key to prioritise. Ask yourself, which goal is the primary goal, and more importantly, how will pursuing another goal impact my ability to reach the one I care most about? It’s about taking a moment to think about your personal drivers for financial change, and organising your priorities.


2. Know your finances inside-out

It’s extremely common that individuals or families don’t have a deep knowledge of their finances. Yet, this is a key aspect of financial planning. You’ll need to bring out your bank statements from the last six months and get out a few highlighters for this task.

First, you should examine your income – many people in full-time employment will find their only income is their wage. Others will have multiple streams of income for example, from self-employment work or interest from investments or savings. In these cases, you should be looking to create a conservative average of your income based on the last six months.

Then, you’ll need to know how much your spending. This can be separated into a couple of categories; the spending that is fixed each month, for example your rent or mortgage payments, loan repayments or credit card debt, utility bills, car payments, and so on. The other category is your variables, for example groceries, eating out, gym memberships, and entertainment.

You can also determine the value of your assets at this point. If you have a property, look at how much you have in equity and how much you still need to pay on your loan, which may be useful if you’re considering an equity home loan later on in the financial planning process.


3. Formulate your budget

Now your know the landscape of your finances. You have worked out your target and you can see it on the horizon, you have also discovered where you are currently. It’s now time to navigate that landscape, and scope out the path from where you are, to where you want to be. This usually involves a fairly unglamorous exercise – budgeting.

Creating a budget involves costing your financial goal (whatever that may be), and using the information from your financial analysis to create a plan to reach it. Look at your ingoing and outgoing money – are you on track to reach your goal in two, five, ten years? Or not at all? By the end of this exercise, you are looking to gain a target figure that you’ll aim for every fortnight, month, or year in order to reach your goal. This figure will depend on the answers to all the information you’ve gathered so far, to gain a crystal clear vision of your situation, and tailoring your budget to suit.

For this step, you may want to use an online budgeting calculator to track your incoming and outgoing expenses against your financial goals.


4. Find new earning opportunities (and spend less)

It’s at this point you’re looking at the techniques you’ll be using to reach your budget each month. There are essentially two options – increase your income, or decrease your outgoings. Usually we recommend a mixture of both.

When it comes to maximising your income, you could be looking at increasing your hours at work, temporarily getting an extra part-time role, or finally asking for that long-awaited pay rise. If you have investments or savings, you might consider switching to different products in order to maximise these assets and make the most of your money.

Decreasing your outgoings means going back to your budget with a fine-toothed comb. Sift through your variable outgoings and ask yourself if you really need that $4 coffee each day, weekends away, or new clothes and determine where you can cut back. Your fixed outgoings aren’t exempt from this exercise – you can look at consolidating your credit card payments or switching your home loan products to reduce the amount you’re spending each and every month. You could be surprised how much this will save you.


5. Work with a professional

Whether you feel daunted by the prospect of financial planning or you’re a budget-savvy saver, consider seeking the help of a professional. They will be able to help you throughout the process, and will have a whole toolbox of financial planning strategies to help you get there. Much of the financial planning journey will depend on the level of sacrifice you are willing to make to achieve your goal. Some people will be determined to get a deposit for a property in two years, so they’ll get an extra job and cut back dramatically on savings to get there fast. Others won’t feel as motivated – and that’s okay. The most important thing is to be realistic concerning how much you’ll be prepared to cut back, but also to be realistic that you’ll need to make enough sacrifices to get to where you want to be.

A financial planning professional can help you with these questions, be a trusted partner in your wealth-building journey, and will provide you with the tools to realise your financial goals. At Reventon, you can benefit from a free financial planning consultation to begin the process – you’ll receive advice and a free personalised plan tailored to your goals and circumstances.

Book your consultation today



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