by Lonni Aylett
When you have a growing family, there are so many demands on your time. Pressing needs like school lunches, daycare pickups and work commitments take priority because they are the ‘squeaky wheels’ calling for oil the loudest. But we all know that there are important issues in our lives being put off until we just have a minute or two to breathe.
Our finances are one of those issues – we feel guilty that we haven’t considered our budget, our life insurance or our savings goals, but our immediate lives take priority. Over the holiday season we might have a few weeks to consider and resolve to do something about it, but soon the new year starts and we’re back to fire-fighting – where is that sports uniform? I’m sure I washed it yesterday!
Regardless of our financial circumstances, setting financial goals and making good decisions is important and getting yourself organised as soon as possible pays huge dividends over the long-term.
The sooner the better
When it comes to saving, the earlier you start, the more powerful the effect of compound interest is. For example, if Celia decides to save $100 per week for 10 years, earning 4% on average on her savings, then after 5 years she would have $28,730 saved.
After 5 years, Celia’s sister Renee looks at her savings and decides she wants a piece of the action. She realises she’s behind so decides to save double the amount – $200 per week – to catch up. At the end of the 10 year period, they have both invested the same amount ($52,000), but Celia has $63,808 and Renee has only $57,459. A $6,349 benefit for starting sooner.
The earlier you start, the less you have to sacrifice to get the same result.
This is particularly relevant for retirement savings which have many years to grow, but is also relevant for extra mortgage payments, which have a huge effect on total interest paid to the bank over the period of your loan. So the earlier you get your finances in shape, the better off you will be and the smaller the sacrifices you will need to make later.
Life is too busy to budget?
I often see clients with young families who are so busy that they cannot focus further than the week ahead of them. With this level of busyness, having time to keep an eye on your budget is really challenging, and this can easily lead to living paycheck to paycheck through lack of intentional planning, communication with your partner and financial discipline. Getting control of your budgeting removes a layer of stress from life and it’s worth spending a little time on.
What would happen to your family if something happened to you?
The most neglected area I see in the finances of young families is their life insurance position. I can tell you sad stories of clients I have met after they have experienced tragedy without adequate financial protection, but instead, let me encourage you with the news that the cost of life insurance is very reasonable, and with premiums often able to be paid for from superannuation there is no reason to overlook it. Most people find it a huge weight off their shoulders to know that their family would be looked after if they were sick, injured, or worse. This is one issue not to put off any longer!
I’m worried about making poor decisions!
Making good financial decisions is so much easier when we know where our financial situation stands and have an understanding of the implications of different choices. Some people are comfortable making decisions and hoping for the best, but others do nothing because they are paralysed by the fear of making a poor decision. There are dangers to both approaches – I have seen people who make poor decisions because they didn’t get advice, and those who do nothing, paralysed by the fear of making a wrong decision and opportunities are lost.
Professional advice is affordable, and a good adviser will deliver value greater than their fees. It never hurts to have a chat with a professional, and most advisers offer free initial meetings with no obligation.
How might a financial adviser help? What is your process?
Together we explore your unique financial situation. Getting a handle on your current position is the first step. Next I present a report containing my advice, which includes projections of different options. I meet with my regular clients face-to-face once per year to present an annual report on their financial situation. We sit together and look at what has worked and what needs adjustment. I make sure they are organised and they are taking best advantage of the opportunities available to them. Sometimes I need to have tough conversations about overspending, and other times I get to celebrate the achievement of a long-term goal. A big part of what I love about my job is helping real families navigate their finances well, through both life’s good times and hard times, and have the confidence to make good decisions.
Lonni Aylett is a local mum and a financial adviser at Ord Minnett Financial Planning. She has a passion for helping young families achieve their financial goals and values the long-term relationships she builds with clients through the different stages of life. Her office is in the Sydney CBD and she does local home visits in the evenings within the Ryde area. Her number is 0403 344 816 or click here
for further information.
Lonni Aylett is a Representative of Ord Minnett Ltd (AFS licence 237121) and Ord Minnett Financial Planning Pty Limited (AFSL 237122).