How to manage your money in a new financial year (and a recession)
One in five Aussies had less than $1000 in savings in 2019. Since then, the coronavirus crisis has hit, employment is falling and it's more important than ever to take control of your finances.
The 2019 study by the University of Melbourne also found that one in three Australians were dissatisfied with their financial situation, and 77% had money regrets.
So what can people do to revamp their finances given we are starting a new financial year?
1. Know your numbers
Use a budget tracking tool or app. This will help you understand where you spend your money.
Once you know exactly where you spend your money it will help you better prioritise what spending habits you will change.
2. Be deliberate with saving
The real crux of budgeting is to set aside a percentage of your net income to go towards an investment plan.
My personal budget allows 10% of my net income to go towards my investment plan. This money is put aside each month without fail and what is left over is what is available to spend on household necessities and discretionary items.
3. Be organised
With most bills and invoices these days being electronic, there is no excuse not to create a simple filing system.
Here are some quick and easy ways to be organise your bills:
- Create a Tax 2020-2021 folder in your email and save all emails with bills, invoices and receipts to this folder.
- Set up a Dropbox or Google Drive folder called 'Tax 2020-2021' and as soon as you receive a receipt, statement or invoice - save it directly to this folder.
- Use technology well. Programs like MyProsperity have a document portal where you can upload tax statements, bills and receipts. The benefit of a program like this is that you can give access to your accountant to gather what they need to complete your tax returns.
4. When was the last time you reviewed your mortgage?
Aim to review your mortgage and investment loans every three or four years. Banks can be a little sneaky with variable interest rates. They entice you with a low rate when you first join, then slowly increase the variable rate.
They know that a little increase here and there, or not passing on the full RBA rate cut, will not have customers leaving in droves, but after a few years the increases add up. However, after a few years, the numbers may stack up. Refinancing can be a pain but going with a new lender can provide substantial savings.
5. Write down your achievements and goals
People who write down their goals succeed more than people who do not, but many people still struggle to put their goals on paper.
Here is a different approach: start writing down what you have achieved over the past one, three and five years. Take the time to reflect on your achievements.
This creates a good mindset to start writing goals for the next one, three and five years.
Think about what you would like to achieve when it comes to your family, finances, community, health and fitness, and career.
We're cutting through the confusion to help you manage your money during the coronavirus outbreak. Click here for more on how COVID-19 could affect your job, budget, super and investments.