Despite your best intentions, sometimes managing your money is one of those things we ignore, until you look at your account a week before payday and wonder how you will survive on $9 until those dollars hit your account. Yet you seem to be able to budget that $9 over the coming days like a champion!
People know they should save, invest and budget but sometimes that takes effort. Classic example are those people who let savings sit in a transaction account or savings account, earning the princely sum of 1.50% interest per year. In real terms, if inflation is running at historical 3% levels you are actually going backwards.
Here are some tips to manage your money a bit better for you
- Setup an investment
A Term Deposit might seem like a good idea (and certainly can be), but in reality the interest rates they are providing at the moment aren’t too flash. Term Deposits are certainly good for 1-2 year time frames when you think you may need access to those funds early. Another option could be to setup a Managed Fund, and have that fund do the investing for you. You will get exposure to more growth assets (think shares, property) which will give your funds more chance to reap the rewards you really want. The best bit is, you don’t have to do any of the hard yards in terms of market research, investing, monitoring etc. Its all Managed… hence the name.
- Automate your Money Goals
From your wages pay yourself first. What I mean by this, is take a portion of your wages eg. 10% and have a direct debit setup, so that it automatically takes the funds from your transaction account and pays them into your investment. This way you won’t succumb to the desire to spend that money.
- Use Apps to your Advantage
One of the best new ways to budget is through the use of Apps. Unlike the old days where we tried to write everything down to do with our expenditure then analyses the results at the end of the month, these days an App will give you real time results as to your savings progress. The best thing is it’s all automated. Pocketbook and Moneysoft are decent apps for budgeting. There are numerous ones around which will pull the data from your bank accounts and allocate the expense accordingly. Less work for you!
- Refinance and save stack of cold hard cash
This is a great way to save bulk cash. Simply refinancing your home loan or even consolidating those debts with high interest rates into your mortgage can save you heaps. From there you could even think about switching to fortnightly payments instead of monthly. Why? Because using fortnightly payments will result in you making an extra (monthly) repayment over the course of the year. The interest savings will all add up over time.
- Consider paying more off your debts
Sounds pretty straight forward right? The reason this can be good is that say your car loan is 10% and you earn $100k per year, if you paid $10,000 extra onto your loan you would save about $1,000 in interest, in simple terms. This is effectively a 10% return. Compare that to an investment that earns 15% from your $10,000, which is a $1,500 return. Sounds like a better choice right? but that $1,500 is taxable against your assessable income, so you will lose about 40% based on your $100k income. The net result is that you are left with $900. Of course this ignores capital gains tax, and franking credits etc, but it goes to show that sometimes the most boring option can be the best and also the safest option.
Overall though it is important to create a plan and work through that plan. Work out your goals and think about how your goals can be achieved by being smart with managing your money.