Five ways to give your finances a check-up


In the past few weeks significant numbers have told a story about the state of Australia's economy - GDP and interest rates. Looking at either in isolation might spark ideas about how to approach your own financial situation, such as adjusting your mortgage payments or cutting out some grocery items from the weekly shopping list.

But single steps like this may not provide enough relief from the combined impact of the economic forces at play.

Your goal should be to conduct an end-to-end review of your affairs and build the financial nous to adjust the settings as the needs arises. Your annual financial check-up should encompass everything from savings, investments, budget, mortgage and credit cards.

give your finances a check up

The following steps will help put you in the best position to weather any economic turbulence.

1. Examine your mortgage

Examine the structure of your home loan and what you can do today to prepare for rising interest rates. If you are on a fixed rate loan, use a loan calculator to assess what payments will potentially be when the fixed term ends - this will help you understand the impact to your monthly repayments and plan accordingly.

If your fixed loan is not up for renewal until next year try to get used to the potential increase in payments now before the rate expires. This could be done by either paying down the debt or saving more so you have a buffer next year. Start talking to your lender now about the options for new loans and compare their offerings with alternative providers.

2. Create healthy credit habits

Resist the temptation to use a credit card or buy now, pay later services as a regular solution to household budget pressures. Excessive use of either will simply build your overall debt at a time when the overwhelming preference should be to pay it down.

Pay down your existing credit card balance and understand whether your card is the right one. For some people low interest credit cards are useful while for others a card that offers rewards might be better.

3. Budget wisely

Now is probably the right time to spend a rainy weekend compiling a spreadsheet of your regular expenses so that you know exactly where your money is going. Be brutal in your assessment of which are entirely necessary - like that second streaming service - and which could be culled without a dramatic impact to your lifestyle.

This process will also give you a good sense of other items which you'd like to retain now but may need to reconsider if you need to tighten your purse strings in the months ahead.

4. Stocktake your avings accounts

With the rising cost of living you have probably noticed you are spending more and saving less. With this in mind conducting a stock take of your savings accounts to check they are meeting your needs is important.

While saving in a time of rising inflation can be difficult it is important to always try and maintain an emergency fund to be able to handle the unexpected. Even a smaller amount of emergency funds can make all the difference.

5. Check your investments

If you have a wealth portfolio now is the time to check its overall construction as well as individual investments within it. Check whether your asset allocation matches your risk appetite and if you have any speculative holdings which may not perform well in a high-interest rate, high inflation environment.

While Australia's interest rates continue to rise you may also wish to consider looking beyond Australia for opportunities. With this in mind, keep an eye out for opportunities in markets outside of the conventional western markets that may not be as affected by rate hikes.

When it comes to your finances a complete financial check-up is important in helping you to avoid any nasty surprises particularly in an economic climate that continues to experience turbulence.

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Jessica Power is the head of wealth and personal banking for Australia at HSBC. She joined HSBC in 2018 from Westpac, where she held several senior retail positions. Prior to that, she worked for Citigroup Australia. Jessica has a Bachelor of Economics, Finance and Marketing from Macquarie University, and a Master of Applied Finance from Securities Institute Australia.