2020 was a rough year and it may have taken a toll on our finances. With 2021 hopefully being a bigger and brighter year than the last, now is the time to manage your family finances and get them into shape. With help from the experts at Savvy, here’s how you can make your family finances fighting fit – and set yourself up for success in the future.
Set up your apps for budget success
47% of Australians use a digital wallet and in a couple of years, that number might be double. With most people using a smartphone and NetBank apps, you can audit and set up a budget using in built tools.
This helps you get a handle on where your money goes. Many apps let you categorise purchases: utilities, transport, food, health and lifestyle, entertainment, and other expenses such as paying off debts or contributions to tax, if you’re self-employed.
You will need to go through your purchases or bills one by one to calibrate the app first. Once that’s done, you can get a snapshot of your incoming and outgoing cash. Some apps can also let you forecast your cash when you set up bills to be paid via BPAY.
Get rid of unwanted clutter – physical, digital, and otherwise
It’s the old adage – the death via a thousand cuts. If you’ve determined your cash is going out in little bits and pieces toward coffees, gym memberships you don’t use, or subscriptions gathering dust, it’s time to get rid of them. If your kids are grown up and you’ve got attics or sheds full of toys and clothes, list them on Gumtree or eBay and invest the money into something productive.
Poor planning proffers poor results; planning your expenses such as meals each week can stop you splurging unnecessarily. Paying $20 for lunches every day means you’re wasting $100 a week; or $5,200 a year! That’s almost a whole family holiday paid for right there! Buying your groceries in bulk from markets or wholesalers like Costco can shave off even more money from your budget, giving you an opportunity to redirect it towards savings, investment, or debt reduction.
Consolidate your debts using a personal loan
A lot of us run into financial trouble because we rack up big numbers on our credit card and only pay off the minimum. Paying the minimum can take years – even decades – and cost you tens of thousands in interest. Personal finance expert and Savvy Managing Director Bill Tsouvalas says that consolidating your credit card debts by applying for a cheap personal loan can save you thousands of dollars and headaches in keeping track of all these small, high-interest debts.
“A debt consolidation loan can wipe out your credit card debts overnight and leave you with one regular repayment that is fixed and will eventually whittle down to zero,” he says. “Credit cards are revolving credit, which means you’ll be paying for it even if you don’t use the card, such as annual fees. This is a great opportunity to cut up your credit cards or reduce your credit limit so you aren’t tempted to splurge and live beyond your means.”
See a financial adviser
According to a survey conducted in 2020 by Savvy, 84% of respondents said they’d never seen a financial adviser. The survey also showed that 42% of people never audited their finances and a little under a third had less than stellar financial knowledge.
“A financial adviser or debt counsellor can help you with all the nuts and bolts of your money to see where you can save, where to invest, and other tips and tricks to grow your wealth. Yes, they do cost a bit of money but you’ll thank yourself in five, ten, twenty years’ time.”
Pass it on: let your kids pitch in
Finance is a bit like the birds and the bees: we don’t often discuss it in polite company and kids end up learning it through trial and error. With the former that means early and unexpected grandchildren; with finance it could lead to all sorts of trouble.
Teaching kids about money is made easier using kid-oriented money management apps like Rooster Money or Spriggy. These apps allow them to budget, manage their finances, and even gives them a debit card to use like a “grown-up.”
“Kids are naturally curious and you need to use that to your advantage,” Tsouvalas says. “If you’re cutting costs kids will want to know where their favourite show went because you unsubscribed from Netflix. Saying ‘we can’t afford it’ isn’t going to cut it with most kids. Include them in the budgeting process, get them engaged with finance and money.”
It will do them a world of good.