Targeted approach to success
MoneySmart Week is here but it pays to be smart all the time. By Nicole Pedersen-McKinnon.
MoneySmart Week is here but it pays to be smart all the time. By Nicole Pedersen-McKinnon. Good riddance winter, with your one-after-the-other cold, mould and reality shows Channel Ten has oversold.If the change of season/programming has you all inspired to embark on a spring clean, then don't forget that all-important financial house.Here's a handy money-health checklist, inspired by the Australian Securities and Investments Commission's efforts for this week's MoneySmart Week.DO YOU HAVEFINANCIAL GOALS?I write often about the importance of actually having a target if you want to hit one. Think about it: how much money have you earnt over your working life, and what do you have to show for it? If the answer is "not much" you're likely focusing too much on "here and now" rather than "somewhere else and later". To resist the consumer temptations thrown at us every day, you need a tangible, ultimately achievable reason - so get dreaming.ARE YOU OPTIMISING INCOME AND EXPENSES?A little extra goes a long way - unless you simply adjust to spending it. First, are you getting all the benefits you're entitled to? Think family tax benefits and Centrelink payments, and giveaways for lower earners such as the superannuation co-contribution. Ensure you are earning what you are worth (ladies, I am especially talking to you).The other key part of your personal balance sheet is what you spend. Just like striking the delicate balance that is calories in, energy out, if money out exceeds money in your finances will spiral out of control and become unhealthy. And in this case it's your debt that may bloat.Do you know where your money goes? ASIC says only 54 per cent of us do. Noting it or signing up for the regulator's TrackMySpend smartphone app can yield all sorts of surprises. A relatively painless place to start "trimming the fat" is to get a good deal on so-called fixed costs such as utilities.IS YOUR DEBT ONTHE DECLINE?Give some thought to whether your overall money equation is getting better or worse.Sure, throwing extra money at loans does wonders to clear them early, but there are also easier ways - like getting a better home-loan deal while keeping your repayments the same.For example, move a $300,000 loan from a big bank charging 6.8 per cent to one of the 5.8 per cent lenders and maintain your former repayments and you'll save $54,219 and nearly 4? years. You should be accelerating personal loan payments, too.With credit cards, transfer any outstanding balance to a card offering no or low interest for a period. Our sister publication Smart Investor magazine has just named ANZ's First Visa Card, which charges 2.9 per cent for 12 months, as the best value.The best way to attack your debts from a mathematical perspective is from highest to lowest interest - and set a time target (with the aid of a site like infochoice.com.au) to keep motivation up.ARE YOU GETTING WEALTHIER?I mentioned the financial-fitness equation earlier if you are managing a money surplus, are your savings or investments growing? And does that mean you have a cash stash that you could access in an emergency?A caveat here: if you still have debt, repaying it is one of the smartest possible financial moves (and house any emergency funds in or alongside a loan too).You earn an effective return equal to your interest rate - which could be 20 per cent or even higher on a credit card - and this is tax- and risk-free. Otherwise, you need well-diversified investments.WILL YOUR SUPERCOVER YOU?Jump on the tremendous super calculator at moneysmart.gov.au to project the potential size of your super fund at retirement.You need an amount large enough to generate annual income of two thirds of your final salary a rough and ready lump-sum guide is 20 times that salary.If you're nowhere close, look at clever ways to redress this, such as before-tax salary sacrificing but just be aware the new limit for concessional contributions (which includes your employer's) is $25,000 a year.Before we leave the subject of the future, it's vital to also check that you and your family are protected with adequate insurance and that you have up-to-date wills in place.At moneysmart.gov.au you can input your details into a questionnaire, which will then give you feedback about your progress and make suggestions.Of the 4000 Aussies who have taken the test so far, the most common failings were missing a tax return, having no income-protection insurance and foregoing available income. How will your finances fare?