MAKE it a happier new financial year with these six painless money tips to help boost your bank balance.
A more financially rewarding future is achievable for those who follow this advice from money coaches: avoid the hangovers that plague people every July, and set some realistic goals for the year ahead. Experts say many people fall at the first hurdle in money management — failing to plan properly each new financial year. This often results in them getting to June 30 and wondering why they are no better off financially than they were a year before, says Wealth For Life Financial Planning principal Rex Whitford.
“Take responsibility for yourself — lower your expectations of what the government will do for you,” he says. Whitford says many people enter July with a financial hangover after exhausting their resources in the lead-up to June 30, often chasing tax deductions by spending money they don’t really have.
As we move into a new financial year, here are five key areas of focus that can help make June 2015 a time for celebration rather than regret.
1 DUMP DEBT
REDUCING your spending is only one aspect of good money management. Reducing debt should be the key focus. If you’re racking up debt you can’t pay back, it’s time to have a serious think about things to compromise or sacrifice to get back into the black. Personal finance expert David Koch says keep track of what you owe — particularly on credit cards — and pay it off as a priority.
“If you have some debt, you should have no savings and no new investments. Any spare cash should go toward getting rid of debt,” Koch says. Go over bank statements thoroughly, check what fees you’re being charged. You may be able to reduce the amount by changing your banking habits. Only use your bank’s ATMs and if paying the minimum amount on your credit card, pay on time to stop late fees and extra interest.
If your debt is spiralling out of control, let you bank and debtors know as soon as possible so that they can work with you on an achievable plan to get your finances back in the black.
2 START A BUDGET
Anglicare financial counsellor Phil Powell says a budget is a vital self-education tool that allows you to know exactly how much money you have and exactly where it is going. “You can be in control of your money, instead of having your money limit what you do,” he says.
“Be realistic. A plan that you can live with is going to achieve far more than a drastic cost-cutting exercise that is too hard to follow.” There are many examples of free budget templates online, and Powell says all budgets should include a person’s income, expenses and priorities for spending.
3 AVOID TAX MISTAKES
H & R Block regional director Frank Brass says July is a nervous month for anyone who is not confident about tax. “They never seem to have an understanding of what their position is, and a lot are worried they may have to pay money — they just find it a stressful time,” he says.
Understanding the biggest mistakes people make can help prevent tax time problems, says Brass, and the biggest error is failing to keep records of what you spend and can claim as a tax deduction. “The tax office is concerned this year with phone and computer use for business and work. When working out your claim, it is a matter of being able to justify it — keep a record of all use for one month.”
4 SORT OUT YOUR SUPER
Super remains the best structure to save for retirement, despite constant government tinkering, because of its low tax rates. Wealth For Life’s Rex Whitford. says now is the time to act. “Make sure you set up your salary sacrifice early in the financial year as you can’t go back and do this at the end,” he says.
5 INVEST NOW
Whether it is shares, property or even collectibles, the most important rule in investing is to start as soon as you can and embrace “the power of time”, says CMC Markets chief market strategist Michael McCarthy. “The sooner you start, the greater opportunity you have for the income you have to earn more income, and that’s how people get wealthy,” he says.
McCarthy says each investor is different and should understand the relationship between risk and reward, and how they can diversify their investments to help manage that risk. “It’s rare to get a high return without taking a high risk. Diversification can spread risk and lower risk but it does have an impact on potential returns.”
6 MAKE MONEY FUN
Money is simply a tool to help people reach their goals. Setting a savings goal is of little use if you have no reason for saving the money such as travel, a child’s education or a luxurious retirement. Anglicare financial counsellor Phil Powell says every household budget should include some “fun money” for each family member.
“Budget for a fun item, such as a holiday or a toy,” he says. “After a loan is paid off, keep paying the loan amount to yourself — make a holiday fund or a next car fund.”