Pulse checking your finances

Your financial health is key to the health of your wellbeing, relationships, work and home life.

It’s important to have a regular checkup of your financial position to ensure you’re on track and to confirm your money is where you think it is, your investments are performing as they should, and debts are regularly serviced and not growing.

A financial plan will generally work around three basic savings accounts:

• A buffer account which would ideally allow for three to six months of expenses.
• A short term savings account for large expenses such as a holiday, renovation, home deposit and school fees.
• A long term account where you save for big ticket items like property.

And then there’s your superannuation account.

Each time you do a pulse check, check each of these accounts to ensure they are still working towards your goals. At the same time, it’s important to review your outgoings to make sure you’re moving forward and not falling behind.

When to check

Now is a particularly important time for pulse checking. Currently, around 5 per cent of mortgage holders in Australia are spending more than they earn on repayments and other living expenses, according to the Reserve Bank.

People have been meeting their shortfall through savings made during the pandemic, but overall their reserves are now falling below the six-month buffer.

You should conduct a pulse check at least once a year. This is where you review your budget – what you’re spending and earning.

Consider if you have underestimated or overestimated your spending – and adjust it accordingly.

It’s an awareness piece. Really look at the information and investments like super – is it what you were expecting, has anything changed in the way you want it invested?

Ask yourself: how are you meeting your financial goals? Is your plan on track? How are your long term savings growing?

This is also a good time to review if anything has changed in your life – new relationship, new job, children, moving house, death in the family or divorce. If any of these have changed then you need to review your full plan and account for those life changes, including updating any beneficiaries.

The pulse check should also include making sure your super contributions from your employer have been paid into your super fund account. Companies often pay quarterly so it’s important to make sure nothing is missed. If there are any issues here, it’s best to know as soon as possible. We’ve all heard horror stories of companies going broke and not paying staff entitlements like super. It’s your money, you’ve worked hard for it and earned it – don’t lose it.

Retirees tend to have a good idea of what’s going on with their finances but people in the accumulation stage need to consciously keep a plan and budget.

The more organised you are and the better your habits, the better your chance of financial success.

People need to have a pulse check at least annually, but probably every six months just to check how the plan is going.

For example, someone might have an emergency fund of $40,000 which is sufficient if it remains there. But when it starts going down for purchases that might not be emergencies, there needs to be a conversation – is this a genuine emergency or is the spending no longer following the plan?

There also needs to be a check in that you and your partner are on the same page.

Overspending can happen to anyone

Over time, it can be high earners that are not good with savings, so if you fall into this category, make sure it doesn’t get out of hand.

A pulse check is important for everyone at every stage of life and making sure you have it scheduled regularly is important because it’s when you leave things unchecked that a previously strong financial position can retreat.

For help with your next steps, reach out to our team here.

Source: Money and Life