It’s a new financial year — so what better time is there to take a fresh look at your finances? By getting organised now, you can take control of your financial future and make this financial year a year to remember.
The start of a new financial year is the perfect time to give your finances an overhaul. So here are five tips to help you save money, cut debt and grow your wealth for a very happy new financial year.
1. Take stock
A great way to start is to work out how much you earned and what you spent over the last 12 months. Did you manage to save? Or did you spend more than you earned? If so, have a close look at where your hard-earned cash is going to find where you can start saving. Remember, just a few dollars each week can gradually add up to something big.
Take your home loan, for example, if you have one. How much did you pay off in the last 12 months? Can you increase this by upping your payments or paying fortnightly rather than monthly? Interest rates have changed a lot over the past year, so you might also save by refinancing your loan. One powerful strategy is to save on interest by refinancing to a lower rate, but keep your repayments at the same level, so you pay off your loan faster. Whether this is possible will depend on the rules of the mortgage that you transfer to.
Now is also the time to check the Australian Tax Office’s website to see if there have been any changes to taxation in the new financial year that could affect you.
2. Plan your spending
Once you know where you are financially, you can work out where you want to go and how you’re going to get there.
Do a budget now for this financial year, so you know your income and expenses for the next 12 months. Make sure you include big financial milestones such as car registration and holidays, as well as regular direct debit payments. And don’t forget to budget for Christmas — usually the most expensive time of the year.
3. Plan to get out of debt
Personal debt is the enemy of wealth creation, so it’s important to get those debts under control. Personal debt is any debt that is not acquired for the purpose of generating wealth or income. One common rule of thumb is to keep personal debt at less than 10% of annual your household income (other than your mortgage). It’s often best to pay off personal loans with the highest interest first. And, if you’ve got a lot of credit and store card debts, think about consolidating them all with a low-interest card or a personal loan. When you’ve got those debts sorted, you can pay more on bigger debts, such as your car loan or mortgage.
4. Plan to save
You use up most of your income paying other people — but do you remember to pay yourself, so you can invest for a better future?
By setting up a regular savings plan that automatically transfers money from your account as soon as you get paid, you can pay yourself first and make sure you don’t fritter your cash away on unnecessary spending. Many people aim to save 10% or more of each pay, while also keeping some emergency funds aside so they can take care of unexpected expenses without falling back on credit cards.
A great way to stay motivated is to divide your savings between short-term goals, like holidays, medium-term goals, like educating your children, and long-term goals, like paying off your home loan and preparing for retirement. That way, you can enjoy a reward in the near future while still creating a better future for yourself and your family.
5. Protect your family by protecting your finances
Even the best financial plan won’t always keep you afloat if you lose your income. Without an income, you could struggle to keep up with home loan and car repayments, bills, school fees and everyday living expenses. So it’s worth thinking about protecting your financial future with income protection insurance.
Income protection insurance can pay you a regular income if you get sick or injured and are temporarily unable to work. Many insurers let you choose your own waiting period, the length of time you’d like to be covered, and how much income you want to be paid, so you can tailor your cover to match your budget and your lifestyle. Even better, your premiums are generally tax deductible — making income protection even more affordable.
This information is general in nature and does not take account of your financial situation.
These articles are provided as reference material to allow more informed decision making, but are not intended as being a complete source of information on any topic. All readers should make their own independent analysis on the topic to make sure they have considered the aspects that are important to them.