Spring can be the perfect time to complete a financial clean-up. Here we share a few financial tips that may help you in sprucing up your financial outlook for the season. No mop required!
It’s hard to stay on top of everything in our day to day lives, which is why when we find moments of inspiration or momentum, it helps to get as much done in one go as we can manage. Your finances should be simple in order to increase your likelihood of managing them effectively each month. The less you have to work through, the more time you’ll have back for the things that matter.
It’s a good idea to focus on quick, easy-to-manage personal finance fixes that will put you in good shape for spring and summer — like the ones you’ll find below:
- Top up your emergency fund
An emergency fund is money you save to cover urgent or unexpected costs. This could be car repairs, unexpected travel or an urgent medical bill. It’s estimated that more than 40% of Australians don’t have enough funds to cover a $3,000 emergency, although most personal finance experts recommend setting some money aside for unexpected expenses like medical emergencies, sudden loss of employment/income, or vehicle repairs. Emergency funds provide a financial safety net so you don’t have to borrow money if something happens to you or your family.
Even if you can only save a little, make a start and keep saving. The more you can regularly save, the better. If you put $20 a week into a savings account, you’ll have over $1,040 by the end of the year. That’s the start of a good amount of savings to give you some financial breathing space. A good target is to have enough in your emergency fund to cover three months of expenses.
- Set up automatic bill payments
Set up automatic payments in your account for all of your regular bills, including the minimum payments on your credit card. Consider switching to auto-pay whenever the option is offered – Australian households tend to have different bills to pay all due at different times; so it can be easy to accidentally overlook one. Otherwise, it’s easy to miss payments, which can unnecessarily trigger late fees.
Likewise, automatic payments to your savings account can help you build a financial reserve, too. Check with your bank on how to set up these payments — the option might be buried in your bank’s website or app, but it’s a common checking account feature. If you switch to an auto-pay billing option, payments are deducted automatically when they are due, so it’s one less thing to worry about each month. Just be sure to occasionally review your statements to ensure the right amounts are being deducted.
- Make a few calls to lower your rates
One of the most underrated personal finance moves you can make is to simply ask your service providers for a discounted rate from what you currently pay — whether that’s your mortgage provider, your insurers, credit card companies, utilities, or cable/internet service providers.
Take a few minutes to shop around and compare the fees or interest rates you’re on the hook for with others on offer. Interest rates are currently quite low, which will give you some leverage when contacting your providers.
- Update your beneficiaries
It’s easy to forget about marking changes to your beneficiaries, but you should review and update them for life insurance policies and super at least once a year. If you’ve been through a major life change like getting married, getting divorced, or having kids, then your beneficiaries will have changed.
- Change over your passwords
This can be a pain, but it’s necessary if you want to avoid identity theft. Typically, experts recommend changing passwords every three months, but at the very least, do it once every year. This also might be a good time to sign up for an all-in-one password manager.
- Audit your current subscriptions
The average Australian spends more than $300 a month on subscriptions, either for streaming TV services, apps, or paywalled news providers. But how many are actually used? Are you getting your money’s worth, or could you pare down your list to save money?
Going through your monthly memberships and subscriptions is a great way to quickly lower your expense ratio. Chances are you’ll find you are paying a monthly fee for something you seldom use, or at least can live without. Do you need both Netflix and Hulu? Both Spotify and iTunes Music? Both Blue Apron and Hello Fresh? Probably not.
- Shop around for a cost-effective credit card
The pandemic has impacted the credit card market considerably, and if you’re still clinging to a travel rewards card, maybe this is the time to trade it for a cash-back card, if you don’t have one already. Take the time to shop around for an option that’s right for you! Don’t settle for a high interest rate or overly-fancy perks that come with hefty annual fees, especially if your financial situation has changed during the COVID-19 pandemic.
Bonus tip: Tweak your budget for the coming season
When is the last time you sat down and wrote out a monthly budget? Do you know your debt-to-income ratio? Setting a budget can be intimidating, but it’s more manageable if you view it merely a record of your current expenses as against your monthly income. You don’t need spreadsheets or fancy budgeting apps to do this (although they can be convenient).
The goal, of course, is to move beyond living paycheck-to-paycheck and to put money aside for you emergency fund, investments, saving for major purchases and other financial goals.
Disclaimer: This article is not intended as legal, financial or investment advice and should not be construed or relied on as such. Before making any commitment of a legal or financial nature you should seek advice from a qualified and registered Australian legal practitioner or financial or investment advisor.