Housekeeping now will pay off later
Good housekeeping is the key to meeting financial goals.
By now you will probably have made and broken quite a few New Year's resolutions.
Resolutions are great idea, but often only that - an idea. For most people it's the financial housekeeping items that can make the biggest difference in the year to come - and beyond. Here are a few:
- Mortgage If you have a mortgage, it's probably your largest monthly outgoing. Start the year by ensuring that you are paying no more than you have to. The difference in repayments between a $400,000 25-year loan at 5.7 per cent and 4.7 per cent, is more than $200 a month. Also, ensure that your loan is right for your circumstances: offset accounts, redraw, interest-only and lines of credit are valuable features, but only if you use them. If you're confused about what's best, see a mortgage broker.
- Savings If you haven't bought a home - and you want to this year - you'll need to save a deposit. Have a look at your savings plan: why did it work or not work in 2014? Assess it honestly and make a new plan to save. Small, regular deposits work better than occasional lump sums; a separate savings account is better than using your daily transaction account; high interest and no/low fees make a real difference; and making a luxury-sacrifice to your savings is always effective. For example, drop your caf coffees every day and bank the money you save.
- Income Financial housekeeping has to include your earnings. If you want to earn more this year than last, you have to work out what needs to change: do you need new skills? A new qualification? A new employer? A new industry? Do you need to start your own business, or just do your job better? Maybe you have to communicate better with your employer, and just make your case for a pay rise?
- Costs Most households can find simple savings, ranging from phone plans and electricity usage to vehicle mileage and the eating-out budget. Many small cuts can add up to a large saving at the end of the year, giving you more options with your income. The great thing about cutting costs? It can be as large as a pay-rise, but it's tax-free.
- Super Make an audit of your superannuation and assess whether your current contributions are sufficient for retirement. Use the online calculators to see how you can boost retirement savings by putting in your own contributions; use the comparison sites to see what your fees cost you - they range from 0.7 per cent of your balance to around 2.0 per cent, and this is a big difference over 20-30 years. Perhaps see a financial adviser?
- Control debt Are you being smart about your debts? High-interest debt just compounds against you, so doing nothing is a poor option. Make a plan to pay off the debt, the most expensive first. Make a schedule and stick to it.
The financial housekeeping is never glamorous. But if you address it early, it can set you up for a successful year. Good luck.