MY MONEY

Why you need to start tracking your spending this year

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Budgeting might not have been top of mind when preparing for Christmas, but now that the festivities are behind us and a new year has begun, it's a good time to think about finances and savings to start the decade in a better position.

According to Jonathan Philpot, wealth management partner at HLB Mann Judd Sydney, making small tweaks now can have a material impact on the bottom line over the long-term.

1. Keep track of spending

track your spending

The biggest impact you can make on your new year spending is to use a monthly budget to help you forecast what expenses might occur.

At the end of each month, you should put in the actuals of what you have spent next to what is budgeted for, to know where you are sitting.

If you do this over a period of time you get a real idea of where the money goes and, importantly, can add goals into the budget, start to build that in and make it a reality.

But things change in life, and by going back and doing the actuals you'll know what happened that month or that year. This includes keeping track of when your car insurance, school fees, and rates are due so you can get a good grasp of what you're spending.

Find a way of keeping track of your budget that works for you and monitor it monthly.

2. Focus on superannuation

On the super side of things, look at super as a tax-planning tool for the year ahead. Personal super contributions can be made to claim a tax deduction -while adding to your retirement savings.

For those who are earning more than $90,000 a year, you will be paying 39% tax on earnings above this amount but if you put it into super you will immediately receive a 24% tax benefit.

For example, if you put in $10,000, it's a tax saving of $2400, which is added to your retirement savings.

Find out how much you are contributing to super and check that it is within the concessional contribution limit, and whether you could be contributing more. Salary sacrificing and co-contribution arrangements should also be reviewed.

Now is also a good time to reassess the performance of your super fund, and whether you should switch super funds or investment options.

Also, check whether the nominated beneficiary of your super account is still the appropriate person.

With a high rate of divorce recorded over the Christmas holiday period, super fund members need to be mindful that divorce does not automatically cancel a nomination.

3. Check your insurance

The main issue on the personal insurance side is underinsurance, especially when it comes to income protection.

Household income is one of the main family assets, and certainly one of the most important, so a family should consider what would happen if the primary earner falls ill or has a serious accident.

It's a cheap kind of insurance compared to home and car insurance (the amount you are insuring for is generally a lot more than home and car insurance) and it's also a tax-deductible expense.

People often think they are insured through their super fund, but it may be too basic to address their real requirements. So, this is a good time of year is good  to make sure you have appropriate life insurance in place.

And if you're able to, it's a good idea to review your home loan repayments and provider.

And you should also make sure you have your wills and estate plans in order.

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Julia Newbould is a financial writer and commentator with a background in journalism. She was previously editor of Financial Planning and Super Review magazines; managing editor at InvestorInfo and at Morningstar Australia. Julia co-authored The Joy of Money, a book on women and personal finance, which will be out in April. She holds a Bachelor of Economics from the University of Sydney where she serves on the alumni council.
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