When it comes to finances, 2009 was a rocky year for many, with the global financial crisis lingering like an unwanted Christmas house guest. If you’re keen to start 2010 on the right financial foot, consider some of these simple steps as part of your New Year’s resolution.
It’s as simple as mapping out your income and expenditure but it can be a powerful tool – highlighting the problem areas and the opportunities – and there are many free resources online to help you do it. Try some of these to get you started:
- Aussie Budget Planner
- Fido Budget Planner
- Understanding Money Budget Planner
Christopher Zinn, spokesperson for independent consumer group Choice, explains there’s often money to be saved by conducting a ‘life audit’. “Look at your statements when they come in … You can be billed for goods and services you haven’t had, you no longer want or have forgotten you were already paying for.”
Taking a holiday, saving for your children’s education, planning for retirement – whatever your goals, short or long term, now’s the time to review them. Think about these goals when budgeting so they can guide your monetary decisions throughout the year.
Consider committing to a savings strategy that suits you, like setting aside a portion of your pay packet to go straight into a savings account, or putting your lunch money aside and bringing food from home instead. Even the smallest amount of savings can start earning you interest and bringing you closer to your financial goals.
Increasing the frequency of your repayments can make a huge difference to the amount of interest you pay on your home loan, and will help you pay it off sooner. Check if extra repayments are possible on your account and consider a weekly payment plan or budgeting for a regular top up from your pay packet.
There’s a real chance that there are more interest rate rises on the horizon. If you need the comfort of knowing exactly what your repayments are going to be, fixing your loan for a set period of time is worth assessing.
According to Reserve Bank figures, in September 2009 Australians owed more than $45.1 billion in credit card debt, and our credit card purchases in December are generally at least 15 per cent higher than the average monthly purchases throughout the rest of the year. The New Year is a great time to put a plan in place to pay them off.
“Our advice with credit cards is if you are regularly paying interest on your credit card, migrate to a no-frills card,” says Zinn. “The rate is much lower. As soon as you’re paying interest that negates any benefits you get in terms of points or hair curlers.”
Check what interest rate you’re paying on your personal loan and whether it makes more sense to combine it with your mortgage. But remember, consolidating to your home loan could affect your home equity position, so assess whether it’s the right option for you. “It does really depend on circumstances,” says Zinn. “People can actually put a personal loan into a mortgage and spend 25 years paying it off and in a way that can be much more expensive.”
Most of us don’t think twice about insuring our homes, contents and cars. But many of us aren’t protecting our livelihoods or the wellbeing of our families, should something happen to the primary bread-winner. Life insurance in its many forms – such as death cover, income protection, total and permanent disability cover – is often available through superannuation, creating a tax-effective means to achieve peace of mind.
Zinn explains that many people have multiple super accounts because they have had multiple jobs. “They’re paying several sets of fees and charges, and it’s eroding the value of their super,” he says. If you spent a day or two consolidating your super, in 10 or 20 years time that would be perhaps the best one or two days paid work of your life, because the potential return is great.”
Zinn says it pays to be nimble when it comes to your financial products. “The terms and conditions and the prices do change and there can be more competitive offerings,” he says. “You could be missing out on some much more innovative, interesting and worthwhile offers.”
So don’t get stuck in a rut with your finances. Make a resolution to start – and finish – 2010 on the right financial foot.