Paul's Insights: Make 2019 the year you make money
If you received a gift of cash this Christmas, chances are, your festive wishes came true. Research by Roy Morgan found the main gift Australians hoped to find under their Christmas tree was a financial windfall – either cold hard cash or a lottery win.
The idea of a financial bonanza is always appealing. It explains why “How to win Powerball” was one of the most popular Google searches among Aussies in 2018.
As humans we tend to look for quick and easy ways to make money. Sometimes it backfires though – Australians collectively lost $101 million to scams in the last 12 months alone.
But 2019 could be the year to start making your money work harder with five easy steps.
First, budget to take control of your cash. Life will be a lot easier if you do. It’s not what you earn that matters, it’s what you spend, and there is a whole range of apps to help you rein in spending. The TrackMySPEND app is worth a look to get started.
Next, aim to save little, save often. You don’t need to save a fortune every week to build a decent nest egg. It’s your commitment to regular saving that can make the difference.
Step three: don’t plan to save cash. By that I mean, don’t expect to save whatever cash is left over after regular spending. Chances are, it won’t happen. We have a tendency to spend close to what we earn – and increase spending as our income rises.
Instead, automatically lock savings away before you can spend the money. It’s easy if you set up an automatic funds transfer from your everyday account to a separate savings account. Time it to coincide with pay days to avoid overdrawing your account.
Step four: don’t pin your hopes on a punt. Dreams of becoming financially secure by winning Powerball may be harmless. However, with odds of 1 in 134 million of winning the jackpot it’s not something I would count on. Using your savings to grow investments is much more of a sure thing.
Step five: spread your savings across a range of investments. Returns on cash are low – and fully taxable, so it makes good sense to consider a mix of assets including Australian and international shares. Both have the potential to deliver decent long term returns, and both can be affordable, hassle-free investments when you invest through a managed fund with low ongoing fees.
Yes, sharemarkets can be volatile, and sometimes the market will work against you. But history tells us that long term investors come out on top, with the potential to earn tax-friendly dividends along the way that provide much-needed extra cash.
Paul Clitheroe is Chairman of InvestSMART, Chairman of the Australian Government Financial Literacy Board and chief commentator for Money Magazine.
Frequently Asked Questions about this Article…
To make your money work harder in 2019, start by budgeting to take control of your cash. Use apps like TrackMySPEND to help manage your spending. Save regularly, and set up automatic transfers to a savings account to ensure you save before spending.
For everyday investors looking to budget effectively, apps like TrackMySPEND can be very helpful. These tools assist in tracking your spending and help you manage your finances better.
Saving regularly is crucial because it builds a habit and ensures consistent growth of your nest egg. Even small, frequent savings can accumulate significantly over time, unlike occasional, larger savings.
A smart way to save money is to set up automatic transfers from your everyday account to a savings account. This ensures that savings are prioritized and not just what's left over after spending.
Relying on winning the lottery for financial security isn't advisable because the odds are extremely low, about 1 in 134 million. Instead, focus on growing your savings through investments, which offer more reliable returns.
To diversify your savings, consider spreading your investments across different asset classes, such as Australian and international shares. Managed funds with low fees can make this process affordable and hassle-free.
Yes, shares can be a good investment option for long-term returns. Despite market volatility, history shows that long-term investors often benefit from decent returns and tax-friendly dividends.
Managed funds can benefit everyday investors by providing a diversified investment portfolio with low ongoing fees. They offer a hassle-free way to invest in a mix of assets, potentially delivering long-term returns.
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