By Helen Baker
With borders reopening and a sense of optimism these simple tips will ensure your finances also enjoy a HAPPY 2022.
to our health, careers, and happiness. Given the pandemic shake-up weโve all endured, I suggest financial health should be top priority.
1. Revisit everyday finances
A budget (I prefer the term โspending and investment planโ) is one of the five foundations on which financial security and independence are built. But things change over time, so it needs regular updates.
Incomes change with promotions, new jobs, bonuses, or redundancies. Meanwhile, spending changes with marriage, divorce, growing your family, moving house etc.
Adjust your plan to your new reality. If costs have risen, look for savings elsewhere. If your income grows (go you!), you may have more to save or invest.
If you donโt know how, my book On Your Own Two Feet has you covered!
2. Consider refinancing
Interest rates at record lows, but is your mortgage rate? Lenders wonโt offer discounted rates unless you ask!
Given recent property value gains, you should have more equity in your home as leverage.
If possible, keep your loan-to-value ratio (LVR) below 80 per cent (i.e., your total loan amount is less than 80 per cent of your propertyโs current value). This will put you in a stronger negotiating position.
3. Travel temptations
If youโre like me, border closures have left you with seriously itchy feet. But donโt book your next trip on a whim.
You may need proof of vaccination; particularly challenging since every country, and each Australian state and territory, has its own requirements. As do airlines. You may also need to quarantine on arrival and/or on return.
There may be fewer flights than pre-COVID, reducing availability. And prices will likely be much higher.
Check your travel insurance carefully too โ sudden changes due to public health restrictions may not be covered.
4. Living arrangements
With borders reopening, many Aussies may look to change where they live: moving interstate or overseas; returning from abroad; a tree or seachange; upsizing or downsizing to more appropriate digs.
Others feeling isolated may want to move in with their partner or family, while lockdown stresses may dissolve some partnerships.
If new living arrangements are on the cards, consider not just the costs involved but how those new arrangements will impact your finances and your and their estate planning.
5. Monitor online spending
Online shopping is booming, but donโt let your spending boom unchecked too.
Jumping from site to site, you may not realise how much your credit card is racking up. Check it and pay it off regularly to avoid a nasty debt accruing.
Also weigh up buy-now-pay-later schemes. Sure, they break your purchases into more manageable instalments. But the costs spiral if you pay late or miss instalments. Will they affect your credit rating?
6. Super catch-up
If you lost work or withdrew super funds due to COVID, your superannuation took a hit. Now that youโre (hopefully) working again, try to replenish those funds.
Super catch-up rules (what the ATO calls โcarry-forward unused concessional contributionsโ) enable you to make additional contributions without attracting extra tax.
Not replacing that money could lose you as much as $200,000 towards your retirement.
7. Save surplus cash
Anyone able to keep working during lockdowns likely saved money โ lots of it. All those meals out with friends, coffees, lunches, family outings, and daily commutes really add up!
Use those savings wisely. You could:
- Pay off debts โhigh-interest ones like credit cards
- Pay down the mortgage
- Pre-pay the full year on council rates or insurances (which generally attracts a discount)
- Make extra super contributions
- Build new investments (e.g., buying managed funds, shares, investment properties)
8. Analyse investment gains
Speaking of surpluses, you may have more than you realise. Investment markets have skyrocketed; sharemarket and property prices have soared. What will you do with those gains?
Consider whether itโs time to cash out or if you can leverage them to fund new investments. Also, how do those gains impact your tax liability? Gains are nice, Capital Gains Tax not so much.
9. Plan next Christmas, birthdays and Motherโs Day
It might seem strange to think about next Christmas while prepping for/recovering from this one.
But come Boxing Day, retailers slash prices to offload unsold holiday items โ decorations, wrapping paper, cards, and non-perishable foods. Those discounts can be 50 per cent or more!
Why pay full price next year when you can have the same items so much cheaper now? Put some gifts away for birthdays, Mother’s Day etc.
10. Visit advisors
Have you ever met with a financial adviser or seen your adviser recently? Nowโs the time to fix that. Quality advice generally pays for itself.
Yes, weโd love to see your smiling face! But importantly, lots has changed that you may not be aware of: super contribution rates and indexing levels, small business support, insurance terms, and tax rates to name a few.
In money matters, ignorance is never bliss. Quality advice generally pays for itself and helps avoid a costly mistake.
So, visit your adviser to keep informed of your options and make 2022 a financially healthy year!
Helen Baker is a licensed Australian financial adviser and author of the new book, On Your Own Two Feet: The Essential Guide to Financial Independence for all Women (Ventura Press, $32.99). Helen is among the 1% of financial planners who hold a masterโs degree in the field. Proceeds from book sales are donated to charities supporting disadvantaged women and children.
Find out more at onyourowntwofeet.com.au