Budget

The word “budget” hasn’t got a great reputation. However, while we are good at pinpointing our monthly and annual income, many of us aren’t so good at quoting our outgoings. Track your spending by looking at your bank card and credit card statement(s) regularly, to identify potential savings opportunities. This is also a good way to keep track of your account balance and debt levels. 

Instead of simply putting aside what money you have left over from each pay cheque (if any!), individuals should plan a roadmap to identify key milestones and set money aside as a priority. For example, if you plan to go on a holiday in a year, you should work backward from the planned date to assess how much money you will need to save from each pay to achieve this goal. From there, it’s easier to develop a plan to achieve this – consider money in a high interest savings account or perhaps investing in blue-chip shares and benefiting from compounding returns.

It’s also good to have at least three months’ salary saved for emergencies, such as unplanned medical expenses. Due to low interest rates, if you have a mortgage with an offset account or redraw facility, it can make sense to put your savings in this and reduce loan repayments at the same time.  

Also, be mindful to budget for more financially-draining times of the year, such as Christmas.

Bank fees and credit card interest rates

Do you know how much you are paying in monthly fees or interest rates? Often, a chat to the bank can have fees reduced or removed from accounts. Further, while home loan rates have decreased with the official cash rate, credit card rates have not. Find a low rate card or pay off any debt as soon as possible to avoid a bad credit rating.

Superannuation

 Many of us see ourselves jetting around the world in retirement, or splashing cash at great restaurants. However, following the Federal Government’s decision this week to hold the super guarantee (SG) rate at 9.5% until 1 July 2021, and Association of Superannuation Funds of Australia (ASFA) statistics showing the average Australian superannuation balance is currently well behind what is needed for a comfortable retirement, individuals will need to become a lot more proactive about saving for retirement.

Although the SG rate is 9.5 per cent, research shows the average Australian will need to save at least 15 per cent of their salary for a comfortable retirement. Consider salary sacrificing the gap and putting it into your nest egg. Additionally make sure you check your super balance at least once a year so you can assess whether and when you to start making additional contributions to meet your end goal.

It’s also important to check the investment option you are in and keep an eye on its performance through SuperRatings. If you are in the default option or the fund continues to perform poorly, consider switching. Lastly, if you have more than $250,000 in super, consider speaking to a financial adviser about setting up a self managed super fund (SMSF). SMSFs have generally tracked better than industry or retail funds due to their higher exposure to shares.