Is your family in good financial shape?

When it comes to money talk, sometimes it's just easier to bury our heads in the sand and hope for the best. Take charge now by asking yourself the following questions.
Women in white blouse sitting on desk with facial expression

Do you have…

A budget that you stick to?

It is essential for all families to have a household budget and stick to it. If you spend more than you earn, it can quickly land you on the rollercoaster of debt. Look for ways to reduce spending such as using discount petrol dockets, buying generic brand groceries, taking your own lunch to work and cutting back on take-away dinners. Use one of the many online budget trackers provided by financial institutions.

A strategy for paying off debts?

One of the biggest threats to family budgets is credit card debt. Credit cards are fine if they are paid off in full each month before interest is incurred. But if there is a large amount of debt sitting on a card, it could be costing you big time as interest rates on credit cards can be as high as 20 per cent or more. It’s important to pay off this kind of debt as fast as possible. To do this, you will need to make more than the minimum repayments each month. If you have several cards maxed-out, consider rolling all the debt in to one low interest-bearing card to save on interest costs. Once you’ve paid off the credit cards, tackle personal loans and the mortgage next. If you can, make extra repayments on your home loan and reduce interest.

Adequate protection if something happened to you?

It is something we don’t like to think about, but you need to ask yourself how your family would cope financially if you or your partner prematurely died, were injured in an accident or became too sick to work. These days, insurance doesn’t have to be a big drain on the budget. If cash flow is tight, you can get affordable life insurance and income protection through your superannuation. If finances allow, it’s also wise to look into Trauma and Total and Permanent Disability (TPD) insurance.

An up-to-date will?

Having an up-to-date will is a must and it’s also advisable to have an enduring power of attorney and advanced health directive in place so someone can make financial or health decisions on your behalf if you are unable to.

An emergency fund?

As a contingency for life’s unexpected expenses, it is essential to have an emergency fund or access to cash through a mortgage redraw facility or offset account. A good rule of thumb is to have at least three months salary in the kitty. This may seem a tall order for most, but it’s worth starting to build this up because you never know when you might need it.

A savings plan for the future?

While it’s important to create financial security for your family today, it’s also vital to have a long-term plan for the future. A financial planner can help you work out how much you will need to live the lifestyle you want in retirement. They can also assist with strategies to boost your super, such as consolidating multiple accounts to reduce fees and salary sacrificing.

Dianne Charman is an AMP financial planner and mother of two.

Dianne Charman is an Authorised Representative of AMP Financial Planning Pty Ltd, ABN 89 051 208 327, AFS Licence No. 232706. Any advice given is general only and has not taken into account your objectives, financial situation or needs. Because of this, before acting on any advice, you should consult a financial planner to consider how appropriate the advice is to your objectives, financial situation and needs.

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