How to manage your finances in the new financial year
03 July 2020
The new financial year is here, and it represents a new opportunity for you to get your finances in order.
Perhaps you found yourself scrambling to make last-minute super contributions before EOFY, and maybe you’re thinking about how you could have done a better job paying down debt, saving for emergency situations or planning for your ideal retirement.
It’s time to take a look at the financial decisions you made over the past year so you can start the new one with confidence and enthusiasm.
Together, we’ll talk about sticking to a budget, growing your super through salary sacrificing and saving money through some financially-friendly lifestyle adjustments.
Ready to get started?
Start your year right. It’s time to readjust your spending and saving priorities.
New financial year, new budget
Even if you already have a budget, it’s important to periodically readjust it to reflect evolving circumstances, like changing income levels or new expenses. Big changes in your life, like going back to school, getting married, moving or having a child, can lead you to change your priorities and update your expenses.
If you don’t already adhere to a monthly budget, the new financial year is the perfect time to make it a habit.
First of all, take an overall financial snapshot. You’ll want to examine the balances of:
- Your transaction account
- Your savings or offset account
- Your super fund
- Your outstanding debt.
Next, set some goals for how you want these balances to look at the end of the next financial year. Ideally, your transaction account should have a small positive balance. Additional money could either be separated into an intentional emergency fund or invested elsewhere, such as your super fund. Growing your super will help set you up for your retirement.
You should also make it a goal to save proactively for anticipated expenses, like holiday presents, travelling costs or fluctuations in utility bills related to seasonal changes.
Break your savings goals into monthly amounts. Then, account for regular expenses, like housing, food and the standard cost for utilities. Next, accommodate optional and variable expenses like entertainment.
Once you’ve got a draft of your budget, compare it to your monthly income. If you have a shortfall, you’ll need to readjust different items. If you have a surplus, consider making further payments on outstanding debt or making contributions to your super.
Make salary sacrifice contributions
One of the best monetary decisions you can make for this financial year is to start making salary sacrifice contributions to your super.
There are three good reasons for this:
- You’ll save more for your retirement. When you salary sacrifice you benefit from compound returns, so the earlier you start the more it's likely to benefit your future super balance.
- You’ll lower your taxable income. Salary sacrificing contributions (up to certain limits) are what’s known as concessional, which means they’re taken out of your paycheck before tax is assessed. Sacrificing some of your salary into super reduces your taxable salary, and as a result, you may pay less income tax.
- You’ll pay less tax on your super. Concessional contributions are still taxed, but they’re typically done at 15%. For most earners, this is lower than the marginal tax rate.
You are able to contribute up to $25,000 in concessional payments each year. Salary sacrificing also makes saving for your retirement easy and convenient - since the money goes straight into your super, you won’t be tempted to break your monthly budget or splurge on any EOFY stocktake sales.
Learn more about salary sacrificing and if it’s right for you.
Switching to energy-efficient appliances around the home can help you save money and the planet.
Save even more than your budget requires
It’s always better to be ahead of your budget than behind, right? Perhaps it’s also difficult for you to meet your monthly savings goals based on your expenses.
These small everyday changes can make a big difference to your savings:
- Be your own barista
Little everyday expenses really add up. Think about your morning caffeine fix for instance. How often do you visit a coffee shop before your workday starts? Multiply each cup by the number of visits, and you’ve got a math problem nobody wants to solve!
For a budget-friendly go-to coffee, try brewing a cup at home in the morning and pouring it into a reusable cup to take with you.
- Ride together
This might not be available everywhere, but consider if public transport is an option for your commute. Perhaps you could save on petrol by opting to take the bus. As a bonus, you’ll also reduce your carbon footprint!
- Make energy efficiency one of your values
Reducing fuel use and electricity consumption is definitely more sustainable than the alternative, and it can help you save money, too! Use energy-efficient appliances, turn them off and unplug them when they’re not in use, and make sure your home is ready for winter weather.
See just how big of an impact these small changes make to your savings with our Small Savings, Big Change Calculator.
If you’re ready to commit to a prosperous new financial year, you may benefit from a professional advice to help you reach your goals with confidence. Request an obligation-free appointment with one of our financial planners today.
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