GET SMART: Paul Clitheroe recommends regularly setting aside money for savings and avoiding high-interest debt that funds purchases of no lasting value.
GET SMART: Paul Clitheroe recommends regularly setting aside money for savings and avoiding high-interest debt that funds purchases of no lasting value. JOEL CARRETT

Five steps to a financially stable life

ACHIEVING financial independence doesn't have to be complex.

In my experience, five commonsense steps can help you enjoy the life you want to lead.

First and foremost, take control of your money.

I know life is expensive and you probably think you'd be okay if you earned a few thousand extra dollars.

But we are humans. The truth is we always seem to be able to spend 10 per cent more than we earn, no matter how much we earn.

That's why it's so important to budget, regularly set aside money for savings and avoid high-interest debt that funds purchases of no lasting value.

Step two is simple. Avoid silly risks with your money.

Humans seem to instinctively want an easy way to make money with little effort, which explains those get-rich-quick schemes that flood our email inboxes.

Invest regularly but manage risk by diversifying across a range of quality assets.

Next on the list is planning to own a home debt-free at some stage.

I know that dipping into home equity can be a low-cost way to fund myriad goals but think about how you will manage if you're still paying off a mortgage in retirement.

Owning your place debt-free is financially liberating and something worth aiming for - preferably before you retire.

Step four is straightforward. Learn to love your super. Don't wait until you're in your 40s, 50s or even 60s to get serious about your retirement savings. Choose a super fund that works for you, take it with you from job to job and add to your retirement nest egg wherever you can.

As part of a long-term plan, superannuation makes tremendous sense. It's generally invested in high-quality asset, it's tax efficient and you can't readily get your hands on the cash while you're in the workforce, which is a huge plus.

Step five is protect what you have. We all understand the need to insure assets like a home, its contents and other valuables. This type of cover is essential.

But the other asset you need to protect is you.

The start of the year is an ideal time to think about whether you have sufficient life cover and income- protection insurance in place to protect your family, yourself and your financial well-being.



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