Start 2021 with a financial checkup

New year, new you, new focus on financial health. Here are a few ways you could look into getting your finances in order in 2021, or in the years to come.

Compare your income to your expenses

Haven’t made a household budget? This could be a good place to start.

Add up how much money you’re taking home on a regular basis, both from your job and from any side projects you may have on the boil. Look at your income per month, and per year.

Then, look at all of your regular expenses – bills, ongoing charges, rent, mortgage payments and more. Again, look at these both per year and per month.

When you compare your monthly income to your monthly expenses, ideally look to see a positive number on the income side at the end. If you’re spending more than you’re earning, you’re putting your finances at risk.

Check to see if there are any recurring expenses in your household budget that you could reduce or cut out altogether to help relieve your budget a little.

Compare insurance cover

Do you have insurance policies in place to help protect your home and contents, your car, or your health? You may be able to get a similar level of coverage while paying less – all you have to do is compare a few different insurance offers.

Keep in mind that some insurances are required in certain financial situations. For example, your car likely requires Compulsory Third Party (CTP) insurance, and if you have a home loan, you may be required to hold a home insurance policy to meet your mortgage lender’s eligibility requirements.

In other cases, you may consider insurance to be an optional expense. If you choose not to take out insurance, you may also want to consider keeping some money aside in case of emergencies.

How’s your super?

It’s easy to forget about your superannuation – after all, you’re not likely to see a benefit from it until you retire, so why would you think too hard about it today?

However, the choices you make about your super today can affect your retirement in the future. If the money in your super fund gets eaten up by fees, or doesn’t earn the returns you were expecting, you may find that you’re more reliant on an age pension when you leave the workforce.

If you haven’t done so already, it’s often worth looking into consolidating multiple super funds into a single account, so you can minimise the fees you’re paying, and reduce your risk of ending up with lost super. You can also compare super funds to look for an option that best suits your needs and financial situation.

Managing debts

Do you have a home loan or a car loan? How about a personal loan or a credit card with an outstanding balance? While some debt may be useful in the right circumstances to help achieve your goals, there’s a risk that too much debt could end up being a drain on your budget and put you into financial stress.

Consider whether you can afford to make extra repayments towards your debts to help clear them sooner, reducing the total interest you’ll pay. One option could be to consolidate multiple small debts into a single loan, so there’s just one interest charge and one payment to manage. Keep in mind that you could still end up paying more total interest on your debts if you consolidate them into a loan with a longer term, even if the interest rate is lower.

You may also be able to refinance certain debts, such as switching your home loan to another lender with a lower interest rate. For credit cards with outstanding balances, you may be able to switch to a balance transfer credit card with a 0 per cent interest offer to quickly clear your outstanding balance before it has a chance to build up interest charges. Just keep in mind that you’ll be charged interest at the full revert rate once the interest-free offer expires.

Seek more advice

While these general tips can be helpful, they may not all apply to your specific circumstances. To get a better idea of what you can do with your money in the new year, consider making an appointment with a financial adviser and/or a mortgage broker. These professionals can look at your finances and make recommendations that are specific to your circumstances, helping you manage your money with new confidence in 2021 and beyond.

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