Spring is a time of renewal and regrowth, a time to dust off the cobwebs and let the sunshine in, and it’s also a good time of year to take a look at your finances.
It’s been a challenging year on many fronts and spending a day getting on top of the state of your finances, putting some measures in place to make some savings, could be time well spent.
Try to arrange your financial spring clean on a weekday so you have scope to call banks, credit card issuers, health insurers, and other financial services providers who are easier to contact during office hours. And you will also need all your tools — financial records, current tax return, mortgage, credit card and bank statements — close at hand. Internet access is also important as there are many things you can do on line.
Hitting the target
So, what are your objectives? Well, there are two sides to this coin. The first objective is to put more $$ in your pocket by saving a little more of and spending a little less of your income, without making your life a penny-pinching misery in the process. The second is to discover some cheaper ways, if they exist, to pay for some of life’s essentials.
Start at the beginning by reviewing your monthly budget — or constructing one, if necessary — so you can pinpoint the big expenses before trying to pare them back. Take your power bills, for example. Some power companies will not only reward you with a discount for combining your gas and electricity, they will also allow you to pay them with a pre-set monthly direct debit, avoiding the shock of that big quarterly hit and smoothing your cash flow.
Monthly payments or saving targets can be an excellent budgeting tactic. In fact, you can even create your own monthly debit system for major expenses such as school fees, annual holidays and Christmas by estimating the cost and transferring monthly instalments to a separate savings account. You’ll most likely be able to setup automatic transfers with your bank so your savings build over time, without a second thought.
If you can manage it painlessly by cutting one or two unnecessary expenses, one good outcome of a budget review would be to save an extra 1 per cent of your salary — just $1 out of every $100 you earn — for a major objective like a renovation or even pumping up your rainy day fund. The best budgets can be ruined by unexpected emergencies, whether it is a burst water heater or a change in your financial circumstances.
Once you have your budget review completed and have set up new direct debits and/or opened one or two new dedicated savings accounts, you should still have a few hours of your Financial Spring cleaning day left to look for some significant savings on financial services.
Credit cards are a black hole in many budgets. Could you save by switching to a cheaper card? Are you paying off your card within the interest-free period? What about rewards programs — if you are paying for them, are you using them? Some supermarket reward programs now offer a “double reward” so it may pay to investigate your options. You can compare cards on line at several sites such as www.creditcards.com.i And if you do decide to change card companies, you might find one that will give you an interest rate holiday for the first 3–6 months as a reward for switching.
A recent Choice survey found 82% of Australians are concerned about health costs, making it the main household cost concern.ii Your current health insurance plan may be worth reviewing because your family circumstances might have changed since you took out the plan, or the market may have newer, more flexible options providing better value. There are many sites that allow you compare plans, including a Government comparison website www.privatehealth.gov.au.
And finally, have a think about your goals and dreams and make sure that any decisions you are making in the present are not at the expense of your future financial security.
Stuart Fitzpatrick and Excel Financial Advisors Pty Ltd are authorised representatives of Interprac Financial Planning Pty Ltd AFSL 246638 registered office at Level 8, 525 Finders Street, Melbourne VIC 3000. This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information. Investment Performance: Past performance is not a reliable guide to future returns as future returns may differ from and be more or less volatile than past returns.