Sort out business of living
It’s worth taking time to get your finances in order
A FRIEND of ours took a week off work recently and we asked what she’d done, where she’d been and the highlights.
“I just relaxed at home and focused on my Life Admin.” “What?”
“All those things you never get around to but can make your life function so much smoother and reduce stress.”
It inspired us to spend a weekend getting our financial foundations right.
1 ORGANISE YOUR TAX
We can’t believe the number of times people ask us whether the Australian Taxation Office really cares whether or not you’ve done a tax return for a few years … hell, yeah they do.
Saying you’ve lost receipts or payment summaries (group certificates) won’t cut it and you’ll, at the very least, get slugged with fines if they find out. So put the effort in now.
That means chasing, sorting and filing deductible receipts and group certificates. Make sure you know your Tax File Number and keep it in a safe place. Gather documents for any investments and get banking records sorted.
Go to www.ato.gov.au to fill in simple tax returns and use the resource centre for specific information. It’s also worth hiring a tax agent … their fees are tax deductible.
2 SORT IMPORTANT DOCUMENTS
If you died suddenly, would loved ones be able to find all the important documents like investment details, insurance, will, house deeds and banking?
If your answer is “no”, do something about it … now.
Buy a good old fashioned expandable file and get collecting. Once you’re finished, tell loved ones where to find it. You’ll feel enormous relief and your partner will sleep better at night.
3 GET ON TOP OF YOUR FINANCIAL POSITION
Family finances don’t quite add up? Increasingly hard to make ends meet?
Go grab a budget template from your bank’s website and start filling it in. Separate fixed expenses to survive with variables like entertainment, travel and subscriptions. Find the financial leakages you didn’t know about and plug them.
Start with recording (on paper or in “notes” on your smart phone) all your incidental expenses for a week … takeaway coffees, bought lunches; then see where you can improve.
Once the household budget is under control review your investments, or, if you haven’t any, plan to start building some wealth outside of just the equity in your house. Consider an appointment with a financial adviser to review your portfolio or design an investment plan.
Get some referrals from friends, most banks have their own financial planners or contact the Association of Financial Advisers www.afa.asn.au for a recommendation.
4 ASSESS YOUR INSURANCE
Stop automatically renewing your insurance policies. It doesn’t matter whether it’s life, income protection, car or house and contents, they should all be reviewed regularly.
Start with whether the level of cover is right, because your circumstances may have changed. Then ring your provider and ask them to review your policy to see whether they’ve launched others with better value for the same cover.
After getting a recommendation, contact competitors for quotes. If you get a better offer go back to your provider and ask them to match it … it’s less hassle to stay put but only if the value is there.
5 SLASH BANK FEES AND INTEREST
How much do you pay in interest and fees to your bank in total? Add them up … loans, credit cards, transaction accounts … everything.
We reckon you’ll be amazed … no wonder the banks make big profits. Now start culling.
Close accounts you don’t need; keep within fee-free rules; ask for discounts on loan rates; shift to simple no-fee accounts. You’ll save a lot.
6 READ YOUR WILL … OR GET ONE DONE
No-one likes thinking about dying … but it will happen.
Making sure you have a proper will to reflect your financial circumstances and protect loved ones is part of being a responsible adult who cares for others. And it has to be reviewed regularly to reflect changed life circumstances.
It you don’t have a will … get one done. From a simple one bought online to sitting down with a lawyer for complicated situations, just do it.
If you have a will but haven’t read it for a while, get it out and review whether it still complies with your wishes.
7 UNDERSTAND YOUR SUPERANNUATION
Do you really understand your superannuation fund … how many you have, fees, performance, what investment options you’re in and how they compare? Remember your superannuation fund could turn into the most valuable investment you have so it’s worth looking at it closely.
If the fees are too high, or it’s underperforming, or you’re in the wrong investment options, it could severely affect its value and your retirement lifestyle.
Start by going to the Australian Taxation Office website (www.ato.gov.au) to see if you have any past super funds you’ve forgotten about. If so, consolidate them into one. Then get out your last superannuation statement and compare fees and returns using a comparative data site like Canstar (www.canstar.com.au).
Flip over your statement and find which investment options you’ve chosen and whether they’re still appropriate for your circumstances.