Menu
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, school fees; and 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.
Senior financial adviser at FMD Financial and Chair of the Pro-Bono Financial Advice Network, Nicola Beswick CFP®, says 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, 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.
According to Arch Capital managing director Nigel Baker CFP®, retirees tend to have a good idea of what’s going on with their finances but people in 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,” Baker says.
Baker adds he likes to make his clients’ lives simple by putting their whole financial picture on a page. It’s a simple way of showing bank accounts, car insurance, home insurance, property, shares, and so on. When clients come in for a review they can quickly see where they stand financially.
Kathryn Creasy CFP®, Capital Partners Private Wealth Advisers, agrees 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 the spending no longer following the plan?
There also needs to be a check in to know you and your partner are on the same page. Creasy says a woman she saw recently didn’t realise her husband of 10 years had a secret debt through multiple credit cards.
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.
The Money & Life website is operated by the Financial Advice Association (FAAA). The views expressed in this article are those of the author and not those of the FAAA. The FAAA does not endorse or otherwise assume responsibility for any financial product advice which may be contained in the article. Nor does it endorse or assume responsibility for the information accessible via any links provided in the article. Please consider seeking advice from a qualified professional to ascertain how the information in this article and the links provided may relate to you.
