It’s definitely time to get your financial SHIT together

I don’t mean to be rude, but you need to get your financial SHIT together. That’s your Savings, Housing, Income and Taxes.

Allow me to simplify personal finance into a word we’ve all used at some stage to describe our financial position: SHIT.

Your money can be as complicated or as simple as you want to make it. This SHIT strategy makes it super simple.

Take care of the SHIT and you’ll take care of your money. Here’s how it works.

1. S is for Savings

Building your wealth all starts with building your savings. That means, you put aside money from your income on a regular basis and do something with it.

You might invest your savings in shares or property, or lock it into a term-deposit that earns you reasonable interest (good luck with that lately). Whatever you choose to do with your savings, the saving itself shouldn’t be a choice. It should be a given.

Having savings basically mean you’re spending less than you earn. If you don’t learn to save, you won’t ever be wealthy. That’s the bottom line, no matter how much you earn.

So, to get your financial SHIT together, you first need to have a savings plan in place.

Whether that’s saving a set amount each month, or a percentage of your income each month, or tucking away every little bit you can, doesn’t matter. Just pick a strategy and save.

Put your savings to work

Once you’re into a rhythm, it’s time to put your savings to work. You need to harness the might of compounding to grow your savings into wealth.

One way to do that is to invest your money. You can get started micro-investing, or hit the sharemarket, or get into ETFs. You could also put your savings into investment property, maybe even commercial property.

Talk to a financial adviser to determine which investment option suits you best (learn how to find a good one here). And keep on saving and investing and saving and investing until you die. No, really.

2. H is for Housing

Getting your financial SHIT together around housing is all about home ownership, mortgages and maybe even becoming a landlord (see above).

There’s no doubt (literally zero doubt) that buying your first home in Australia at the current time is its own kind of shit show. Property has never before been so far out of range of the first time home owner than it is right now.

That said, if your dream is to own your home, you’ve just got to crack on with it. Ramp up your savings (see above), pauper your expenses (see here) and just keep chipping away at it.

If you’re already on your way

If you’re already lucky enough to be mortgaged up to the eyeballs (‘luck’ has its own kind of agenda when it comes to home ownership), good for you. Your aim is to pay that bastard down as quickly as you can.

There are many good strategies here and here, but the main thing that will get you there is putting as much of your savings into your mortgage as makes financial sense.

3. I is for Income

There are two ways to grow your wealth: either save more or earn more.

Asking for a pay rise is an obvious way to grow your income, but it’s not the only way (and it’s also not the easiest).

Try monetising a hobby into a side hustle, or setting up a passive income strategy for starters. You might be surprised how easy it is to diversify your income streams. Ever thought of dropshipping, teaching or renting out your car?

Beware of lifestyle inflation

A word of caution here: you may think that earning more automatically means you’ll increase your savings, but that’s often not the case. Lifestyle creep is very real, folks. Learning to ‘live within your means’ is one thing, but learning to live well below them is next-level genius.

The more you can increase the gap between your expenses and your earnings, the faster you’re going to get your financial SHIT together.

You’ll also need to consider the tax implications of increasing your income. For that part of the financial SHIT sambo, read on.

4. T is for Tax

Blergh, ugh, blah, eyeroll. Now we’ve got that part of the tax conversation out of the way, let’s talk about why you need to get savvy about tax.

The fact is, if you let it, your tax will eat a far bigger portion of your savings than it should. There are so many legal ways to reduce your tax obligations in a fair and just way on offer. Why wouldn’t you?

Start here: Tips and tricks to maximise your tax return Then go here: Is salary sacrificing right for you? And finally, head here: Make a super plan for the new year.

All three of those articles will give you plenty of options for reducing your tax bill. Every dollar you don’t pay in tax is a dollar you get to save and invest. The faster you can do that, the faster you’ll get your financial SHIT together for life.