Didn’t reach your financial goals in 2023?
While a new year won’t wipe away pressures like rising costs, there are a few things you can do now to refresh your money mojo in 2024.
1. Inflation proof your budget
To help tackle any financial curveballs, organise your accounts with purpose. Don’t just dump everything into one bank account. I personally operate on a zero-based budgeting system; assigning a purpose to each dollar of income, ensuring all expenses are justified and (more importantly) not paying more than I have to.
Ideally, you want one main transaction account and then several other accounts that are clearly labelled (bills; splurges; emergencies, etc.). Your pay goes into the main account then funds are automatically dispersed into the appropriate “buckets”.
You need to work out how much money should go in each bucket, but once you get this right you should never find yourself short on cash again.
If you have a home loan, talk to your lender about how many offset accounts you can have attached. An offset account is a transaction account linked to your home loan. The benefit of an offset account is that the money you have in this account can be used to “offset” the amount you owe on your home loan, and you’ll only be charged interest on the difference.
Setting up your accounts like this means your money is still organised into buckets and collectively these buckets all work together to offset the interest on your home loan.
2. Slash your bills
Household bills like home and contents insurance often increase from one year to the next. The good news is you can always find savings if you put in the effort.
Start by making sure you have the right product. When your insurance renewal slips roll in, check your cover is still what you need. Next, compare with offers from other providers before automatically paying again.
Even if you swapped last year there’s nothing stopping you from swapping again this year. The best deals are often reserved for new customers, so it often doesn’t pay to stay. The same goes for phone service providers – check out the deals on offer and choose the one that best suits your needs. Think about how you use your phone and what’s right for you.
Use comparison tools. For example, Energy Made Easy is a free Australian government energy price comparison service for households and small businesses in NSW, Queensland, South Australia, Tasmania and the ACT. You can upload your existing energy bill and find out if there are cheaper alternatives.
Canstar Blue also has a similar bill uploader. The potential savings from switching your household bills can be huge. According to Canstar’s cost of living index, you could potentially save more than $12,000 from switching your regular household bills from the average cost to either the cheapest or 5-star rated products.
3. Autosubscribe investments
If you subscribe to Netflix, chances are you’ve never missed a payment. Why? Because automating your subscriptions guarantees you pay on time, every time. Which is why you should always treat your investments like a subscription.
The good news is that you don’t need to invest a lot to become a successful investor. Thanks to the magic of compound interest and dollar cost averaging, saving little but often can see your investments grow exponentially over time.
Micro-investing apps let you get started with as little as $5. Raiz is just one micro-investing app that allows you to automatically invest your spare change into a diversified portfolio of exchange traded funds (ETFs).
An ETF is a managed fund that you can buy or sell on an exchange, like the Australian Securities Exchange (ASX). They typically track the value of an index, for example the ASX 200 or a specific commodity such as gold.
The value of your ETF goes up or down with the index they’re tracking. The big plus with ETFs is that they charge incredibly low fees.
Other micro-investing apps include CommSec Pocket and Sharesies. You can also invest directly in an ETF through a broker or one of the many robo-advisors (automated financial advisor).
Keep in mind that fees can easily eat into your investments. Keep an eye on not only the dollar value, but what they work out to as a percentage of the money you’ve invested.
4. Resuscitate your super
Why focus on super now? Because it is generally taxed at a lower rate than your regular income. You typically pay 15 per cent tax on your super contributions and your withdrawals are tax-free if you’re 60 or older.
The investment earnings on your super are also only taxed at 15 per cent, regardless of how much your annual income is.
There are a few simple steps you can take to make sure your money is working for you. Ask yourself the following questions.
Where is my money invested?
Conservative, balanced or growth? Returns can differ greatly. Check your super statements to see what asset class your money is invested in.
Do I have the right insurance cover?
Many of us have insurance through our super. Take a look at how much the cover is costing you and if the level of cover suits your current circumstances. Because you pay for your premiums out of your super balance it can impact your retirement balance.
It’s also important to check you’re in the right work rating. Premiums are more expensive for blue-collar workers, and for some super funds, the default cover is blue-collar.