The Financial Checklist to Managing Your Personal Finances

Anthony Bell

Finance Expert

Just like going to the doctor for a checkup, it is very wise to take stock of your financial health, to manage your personal finances.  This includes being sure that you protect the assets you have already accumulated as well as assessing your current financial well-being and future goals.

Piggy Banks with savings chart

Your financial health will be affected by a number of specific factors such as your age, income, family circumstances, personal health and possible inheritances amongst others.  It is vital that you obtain advice that takes your specific circumstances into account.

Some areas that might be relevant to you are:

Personal Balance Sheet and Income Statement

The first step in any financial health check is to understand exactly where your finances sit.  This starts with what I call a Personal Balance Sheet, a snapshot if you will which in simple terms details:

  • What you own (that is your assets such as property, shares, cars, home contents).
  • What you owe (that is your liabilities such as home / investment loans, lines of credit, personal loans and credit/charge card debts).

This should be done for you, your partner and for jointly held assets/liabilities if you are financially co-dependent.

You will also need to understand your Income Statement which will detail:

  • What you earn (that is your income such as salaries, interest income & investment income).
  • What you pay (that is your expenses such as personal expenses, investment related expenses and associated taxes on your income).

This should also take into account your actual cash flow.  That is the timing of when your income is received and when you have to make payments so you can be sure you can meet your financial obligations when you need to; future income is not likely to help you directly with paying today’s debts.

Lastly, you should obtain your latest superannuation account balances and investment details.

What’s next?

Having prepared your Personal Balance Sheet and Income Statement, you really should seek professional guidance from a licensed financial planner who can take your specific current circumstances into account as well as your goals and aspirations to develop a 5 to 7 year plan with you as to how they will be achieved.

You can really only properly assess you financial health if you have a plan to track your progress against over time.  Seems simple and obvious but it is so important.

This plan should of course be reviewed from time to time to be sure that the goals remain both relevant and realistic taking into account any major changes in your life or future goals.

Part of the plan should entail examining your assets and investments so you can be sure they are appropriate to your circumstances, delivering a suitable return and are tax effective.  Similarly, when it comes to loans such as home loans, it is far easier these days to switch between lenders, so a review of all your loans should occur at least annually so you can be sure the rate of interest you are paying and the terms and conditions of any loan remain market competitive and appropriate to you.

And don’t forget the dreaded credit cards.  The same review process should occur and consideration be given to debt consolidation if you are struggling to repay your credit card debts.

How do I protect what I have now?

It is generally much easier to protect what you have rather than to build wealth.  Sometimes this can be achieved by the way your affairs are structured (a good Accountant/advisor can help you here) or more often than not by insurance.

Insurance is a topic in itself, some of which I covered off in an earlier RESCU article.  There are two broad categories of insurance:

  • General insurance such as home building and contents, landlords insurance for investment properties and motor vehicle insurance.
  • Personal insurance such as private health insurance, life insurance  so that your nominated beneficiaries will receive a lump sum payment in the event of your death, TPD that covers you for total and permanent disability where you’re unable to return to work, Trauma; should you suffer a traumatic condition such as heart attack, stroke or cancer you will receive a lump sum payment and finally Income Protection insurance to cover you for periods of extended sickness.

It is not always true that you need all these insurances, so again seek professional advice.  Be careful that you are only insured but that the level of cover is adequate.  Under insurance is a major issue in Australia.

What if I die, how do I make sure my assets go to those I want them to?

Setting up a will is generally a relatively simple thing that can make sure your wishes are complied with on your death.  Remember that it should be reviewed should any major life event take place such as the death of a potential beneficiary, marriage or divorce and the birth of children.

Your solicitor will no doubt consider the merits of a testamentary trust where you have children where their needs can be met (such as school expenses) from your assets until they are older and able to receive and manage effectively a lump sum payment to them.

Contact Bell Partners for specific advice:

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