Managing your finances can often feel overwhelming, but with a structured approach, you can simplify your money matters and ensure a more secure financial future.
Here are seven ways to streamline your finances effectively.
1. Automate your budget
Creating and sticking to a budget is essential for financial health. Start by assessing your income and expenses to determine where your money goes. Categorise your spending into essentials (like housing and groceries), discretionary expenses, debt payments, savings, and investments.
To simplify this process, consider using budgeting apps that automatically track your income and expenses, providing you with insights into your spending habits and helping you stay on track with your financial goals.
Did you know? ‘Almost 1 in 3 millennials use online tools to track their spending.’
Read this article on managing your budget.
2. Automate your bills
Automating your bill payments is a great way to reduce stress and avoid late fees, which can negatively impact your credit score. Set up automatic payments for all your bills, such as credit cards, mortgages, and utilities. Ensure your payment dates align with your payday to avoid overdrawing your account.
‘…work out your regular, ongoing expenses such as credit card, home loan or personal loan repayments, utility bills, rent, groceries, insurances, transport expenses and any direct debits such as mobile phone bills, gym memberships or streaming services. Looking back through three months of bank transactions can provide visibility over this and ensure you don’t leave anything out.’
3. Strengthen your savings
Building a strong savings habit is crucial for financial security. Automate your savings by directing a portion of your income to a separate savings account each month. Whether you’re saving for an emergency fund, a big purchase, or retirement, automating this process ensures that you’re consistently setting money aside without thinking about it.
‘According to data from NAB, the average Australian had around $34,000 tucked away in a savings account as of late 2022.’ But don’t feel bad if you are not there yet, think of this amount as something to aim for.
4. Investments
If you haven’t done so already, consider setting up automated additional contributions to your superannuation fund. Whilst your employer should already pay 11.5% of your wage by law, you can also add to this amount.
If you’re self-employed, you would be wise to set up your own automated contributions too.
According to the ATO, ‘You can boost your super by adding your own personal contributions, which are the amounts you contribute directly to your super fund. If you claim a tax deduction for them, they’re concessional contributions and are effectively from your pre-tax income. They are taxed in the fund at a rate of 15%.’
5. Simplify debt repayment
Managing multiple debts can be challenging, but a strategic approach can help. Consider using the debt avalancheor snowball methodto pay off your debts faster. Automate minimum payments on all accounts and focus any extra funds on one debt at a time.
Debt avalanche = Make a significant lump-sum payment, above the minimum required, to the debt with the highest interest rate each month.
Snowball method = Pay off the smallest debt first, and once that is paid off, pay off the next smallest and so on.
Alternatively, consolidating your debts into a single loan with a lower interest rate can simplify your payments and reduce the overall cost.
6. Consolidate accounts
If you have multiple financial accounts, such as old savings accounts or different superannuation funds from previous employers, consider consolidating them. This not only reduces fees but also gives you a clearer picture of your financial standing. By having fewer accounts to manage, you can more easily track your progress toward your financial goals.
Regularly review your savings accounts and investments to ensure they’re aligned with your financial goals. Consider high-yield savings accounts to maximise your interest earnings.
Additionally, periodically reassess your contributions to your savings and investments, increasing them as your financial situation improves.
7. Audit expenses
Conduct a thorough audit of your expenses to identify areas where you can save.
The average Australian household expenses are $2507 per week, which can really add up.
Use comparison websites to find better deals on insurance, utilities, and other recurring costs. Also, consider adjusting product settings or opting for higher deductibles on insurance policies to reduce premiums. Even small changes can lead to significant savings over time.
