The breadth of financial advice may feel overwhelming at times but when it comes to making your money work harder for you, there are a few basic principles we should all have in place.

But if you’re struggling to know where to start, financial adviser and author of On Your Own Two Feet, Helen Baker has three money questions everyone should ask themselves — and advice on how to turn things around if your answers are less than positive.

“People always say to me: ‘I’d be so much further ahead if I had met you five years earlier’, but it’s OK,” she says. “We can work with what we’ve got now and move things forward as much as we can.”

Question 1: Am I looking after all ‘five foundations’ of my finances?

According to Ms Baker, too many people are swayed by money trends like cryptocurrency or a company that’s dominating the share market, without first ensuring they have these “five foundations” in place.

These money principles act as a backup plan in case of unexpected life events like losing your job, a relationship breakdown or an unexpected illness or injury.

“You want to put in place these measures to protect the wealth you build,” she says.

“You don’t want to get into trouble or be forced to sell an investment if you lose your job, or get sick. You want to have these backup plans in place.”

They are:

1. The emergency fund

Prior to Covid-19 Ms Baker recommended her clients build up a safety net with three months of expenses, however now she recommends increasing that to six months. This will safeguard against difficulties that may come up if you were suddenly forced to find another job.

2. A spending and an investment plan

Instead of dividing your income into set percentages around how much you can spend on your expenses, ‘fun money’ and savings or investments, Ms Baker prefers to give people more flexibility and freedom.

After client’s calculate their set non-negotiable payments (your rent or mortgage repayments, food and bills etc.), she calls the leftover sum your “choice” money.

“You can choose to draw that down or prop that up depending on how healthy you’re feeling with your finances at that point in time,” she says.

“After you understand your commitments around bills, you can go: ‘What choices will I make about fun,’ and then look at what you want to do with the leftover money. Maybe you pay off more of your home or invest it in super or other investments.”

3. Ensure you’re adequately insured

This looks at ensuring your private health insurance, general insurance (car, home or business insurance) and your personal insurance (life, health or disability insurance) are at an adequate level. Some of these insurance may also be included in your superannuation fund.

4. Understand your superannuation

This involves making sure you’re in a super fund that’s right for you, as well as knowing whether you might need other investments or savings so you’ll get the retirement you want.

Ms Baker says that the best way to do this is to visit a financial adviser, who will be able to come up with a plan that’s personalised to you.

“Every single person is different, everybody’s lifestyle is different, everybody’s spending habits are different,” she says. “That’s why it needs to be personalised to you – in order to calculate what will be enough for you, we need to understand your goals first.”

5. Estate planning

While. it’s not the cheeriest topic, ensuring your will or trust is updated, and putting your powers of attorney in place will protect not just you but your loved ones as well.

Question 2: Am I doing enough to safeguard my retirement?

Too often, people don’t think about their retirement until it’s too late but it’s important to be aware of how much money you’ll need for when you stop working.

“The question clients ask the most is ‘do I have enough for my lifestyle now and for my retirement later?’” says Ms Baker. “If not, we need to look at what you need to do to help achieve that.”

“It’s better to find out that you need to start putting away $10,000 a year now, than realise that at age 60.”

Like all investments, the benefits will compound over time, so a small change you make now could have a big impact on your finances in the long run.

Ms Baker, also recommends people take advantage of Catch-Up Concessional legislation. If you’ve had to take time out of the workforce (for example, to study, for maternity leave or care for loved ones), this allows you to top up your super fund with five years worth of concessional contributions at a later date. This could be an option if you’ve come into an inheritance or made a profit through the sale of a property or other investment.

Question 3: Am I being realistic with my savings plan?

Whether you’re padding out your emergency fund or trying to hit a savings goal of a home deposit, it’s important not to overcommit too much of your income.

Ms Baker likens this to being on an overly-restrictive diet that becomes unrealistic and may result in preventable splurges.

“You can take a short term hit and tighten your belt for a few months or a year if you were saving for a home but it’s unrealistic in the long run,” she says.

“You have to look at what are the fun things you want to do, and what are you going to trade off and be realistic about it. Otherwise you just blow it.”

“Murphy’s Law says the moment you need to sell an investment is usually when the markets are down, which means you could loose money, (and you don’t want) to look at that as all your hard work coming undone,” says Ms Baker.