5 step guide for building a financial safety net
A financial safety net is kind of like a seatbelt in the sense that we don’t really notice it when we’re going about our everyday life, but if something happens we’re really glad it’s there. We’ve taken a look at the main things you have to do when planning for your future with a financial safety net. Follow this simple advice and before too long your finances will be sitting in a good position.
1. Get started
Getting started is one of the hardest parts of creating a financial safety net and while these measures will achieve real effects, sometimes it will take a little while before you notice any headway. For this reason it’s important to start as soon as possible, and don’t be disillusioned by how long your financial goals may be taking to achieve – this is a marathon, not a sprint.
2. Scrutinise your everyday expenses
Run your ledger over everything you’re buying on a day to day basis and we’re sure you’ll find some wiggle room for savings at some part of your shopping docket. This doesn’t mean you have to live like a pauper, but you should be mindful of the amount of money you’re spending on luxury expenses. Be wary of any fees, rates and debts you may have to pay off as well.
3. Separate funds
Make sure your safety net is housed in a place that is hard to get to (no, not the gap between your lounge and the living room floor). Separate the funds you have allocated to making savings by creating your own savings account that’s utilised to just look after the money you’re putting away for a rainy day. Direct any excess cash you’ve attained from scaling back on your daily expenses.
4. Insurance
It might be an idea to consider some income protection as well. Often superannuation funds include life insurance covered in their super and this is definitely the most effective way of achieving this, but make sure you explore your options and see what’s out there. Advance planning can make a big difference and can help ensure there’s a lot more money left in the kitty when all is said and done.
5. Set short term and long term goals
Goal setting is a very important motivational tool and is key when you’re determining whether or not you’ve been successful in your saving plan. Make sure you set two types of goals, short term and long term goals. Short term goals keep you motivated on a daily basis, while long term goals are effective ways to keep broader spending habits in check. A short term goal could be paying off debt or saving for bills that you have coming up, while a long term goal could refer to bigger, broader expenses such as a car, renovations or even something like a major international holiday.