Your end of financial year
stock take

The end of the financial year is always a good time to take stock of where your finances are at, how far you’ve come and what you need to adjust. Here are some suggestions to help you tick all the boxes, before stacking them away for another year.

Budget, don't fudge it

Budgeting is very important right now. Part of taking control in an out-of-control environment is knowing how much money you have, how long it will last you, and what you can do to stretch it. A good budget can help guide you through that. 

The good news is that these days, ‘There’s an app for that!’ and there are plenty of budget planners online as well. (You’ll find one at moneysmart.gov.au which should only take about 20 minutes to complete.)

The best place to start looking for finance related apps is with your bank. The apps they provide generally include budget (or spending) trackers and can save you time if you can sync them with your bank account, as you don’t have to manually enter all your incomings and outgoings.

Some of the most popular budget and spend tracking apps are: Pocketbook, Pocketsmith, MoneyBrilliant, Money Tree, Goodbudget and Frollo.

Like many apps, there are free versions and paid versions with more features.

Are you covered?

Insurance is one expense we try not to think about, unless it’s our car. You probably know how much your car is worth and what it’s covered for without checking the policy. But do you know what you’re worth?

If you’ve done your budget, you’ll have a good idea of what it costs to run your household, and you’ll know what your pay packet is. Have you considered what would happen to your family if that income disappeared from the equation? And what if your expenses blew out by some hefty hospital bills?

Do you realise how much you’re worth now?

Any time is a good time to review your income protection and life insurance. (If you’re young, single and have no dependants, its’ probably not as important to you. Make sure you’re only paying for insurance that is right for you, as paying for insurance cover you don’t need or want or one that won’t cover you when you need it could reduce your retirement savings without adding any benefit.)

The next question is “What’s the best way to pay for it?”

Paying for life insurance through your super is a tax-effective way to make sure you’re covered. The alternative is to pay for it with after-tax money but you may not be able to claim it as a tax deduction. If you run your own small business, or use a family trust, it may be another tax effective option.

Of course, you have to make sure your insurance is right for you, and not just from a cost perspective. If you have insurance through your EISS Super account, it covers you against Covid-19, provided it is not a pre-existing condition (see the Product Disclosure Statement for further information). And if you’re in a hazardous occupation, your EISS Super’s Default Cover will cover you too, including if you work over 10 metres which is where some other insurances won’t.

Got a home loan, or thinking of getting one?

Interest rates have never been lower, but the banks haven’t shared the full rate cuts. It’s a good time to call your home loan provider and remind them (politely) that you’ve been a loyal customer and deserve a rate review. You’ll be surprised how well it works.

If you’re working, it’s a good time to shop around and refinance as rates are low. Also, keeping your repayments at the amount you’ve been paying after you refinance will help you pay off your loan faster.

And, if you’re thinking of applying for a loan now, the market is slow. It’s more difficult to inspect properties, and many are being held back from listing but there are still online auctions proceeding.

If you’re not working, and need some repayment relief, you have a couple of options:

  • Banks are offering six-monthly repayment holidays. But be aware, if you take up the bank’s offer to suspend your repayments, the amounts you don’t pay go back onto the home loan which you’ll be charged interest on and eventually you’ll have to repay it.
  • Think about going into an interest-only loan. It reduces your repayments and keeps the amount you owe the same, but it’s only a short-term option.

Personal debts

Interest rates on personal debts are still quite high with credit card rates still in double digits, and some personal loans are around three times higher than home loan rate. If you’re in this situation, this is a debt trap you need to get out of.

Here are some strategies to consider:

Consolidate all your credit cards into one with a 0% introductory offer. There are many cards which offer 0% for 6 to 12 months, which will give you some short-term relief. But, you need to commit to paying off the full amount before the term expires, otherwise you will be hit for the a full amount of interest over the whole period. Always make sure you research what the rate is, as they can be as high as 20%. Ouch.

Make it a secured personal loan. If you’ve bought a car, you may be able to secure the loan against it, which means the interest rate you’ll pay is closer to 9% than 20%.

Consolidate your personal debts into your home loan. The upside is that you’ve crunched your interest rate down to around 3% or even lower and you won’t have creditors chasing you. The downside is that you’ve added to your home loan, you’re paying it off over a longer term and could end up paying a lot more. The trick is to increase your home loan repayments by the same amount you were paying off on your personal debt, which will make this work in your favour.

Cut up your credit cards. Use a debit card. This way you have all the access and convenience of a credit card, without the high interest rate. And you set the limit by whatever is in your account.

Look at the big items

While you can save by not buying a coffee every day and making your own lunch, you can save even more by reviewing your big ticket items.

  • Have you considered how much your car costs you every week? It will run into the hundreds, and depending on your situation it might be cheaper to use Uber or hire a car when you need to.
  • International travel will most likely be out of the question this year, so think about how much you can save by taking a local holiday.
  • Shop around for better health and car insurance. There are plenty of rate comparison sites to make it ‘simples’ for you.

The aim is to critically review everything you’re doing, research the alternatives, and shop for the best options.

If you’d like to find out more about managing your money, visit Money Matters, our e-learning platform.