We've just started a new decade. Why not start the first year with a bang and make 2020 your best financial year?
Here are two of the things you can do to improve your finances in 2020:
Track your net worth
One of the most important things with improving your financial situation is to actually see how it's actually going. Can you imagine how crazy the share world would be if businesses didn't do their annual financial statements. How would they know how they are going? How would they know if what they're doing is working? How could they make informed decisions?
It doesn't matter what your starting net worth is, the important thing is to track it and see that it's going in the right direction over the longer-term.
What should you track? My household tracks our total cash in bank accounts, our share portfolio and our superannuation balances. I like to track non-super wealth, the superannuation balances and the combined figure.
It's motivating seeing that monthly figure rise over time.
Understand your superannuation
Superannuation is the most important wealth-building tool for most younger Australians, though your own property is important too.
Investing $500 a month, compounding at 10% per annum, turns into almost $2 million over 35 years. Shares have compounded at around 10% per annum over the long-term, so this isn't exactly an optimistic scenario.
But there are two important things to remember with your superannuation. First, fees can reduce your future retirement balance like termites. Where possible, you want to reduce your investment fees as much as you can, which is why the financial services royal commission was such a painful experience for financial companies like Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group (ASX: ANZ), National Australia Bank Ltd (ASX: NAB) and AMP Limited (ASX: AMP).
The second important thing is to consider your investment option within your superannuation account. Unless you're close to retirement you don't need an investment in cash. That's why younger Aussies should consider aged-focused investment options, high-growth investment options or consider choosing the shares and international share options yourself. These options should produce the best returns over the long-term as they have since 1900.
Foolish takeaway
If you do these two things then you'll be improving your financial position enormously over the long-term. You can become a millionaire if you put your mind and money to it.
