Just as businesses finalise their cash positions at the end of the financial year to make sure they are best placed to begin trading on 1 July, so too, should individuals take stock of their finances at this time.
Companies will often write off badly performing assets on 30 June to stop them dragging down the business in the new financial year.
To start your year with your best foot forward, you should also take the time to consider which of your ‘assets’ have been letting down your cash position.
Now is the optimal time to review your bank accounts and insurance policies, as well as to shop around for better deals from utilities that supply your power and telecommunications.
Bank savings
Unless you haven’t been paying attention, by now you will understand that most banks do not have your personal interest at heart. You should make your financial institution earn their keep, not the other way around.
While we have historically low interest rates, it doesn’t mean you have to put up with them. There are institutions that will reward you with higher interest on your savings than is currently on offer from traditional banks.
RaboBank, despite allegedly letting down some farming borrowers, according to evidence given at the banking royal commission, has an attractive introductory rate of 3.05 per cent for four months for balances under $250,000.
Canstar lists 23 institutions that tailor their rates to retirees. Some of these accounts do not even require a minimum balance.
The reason it is important to shop around for a better rate if you are on the Age Pension is because the Government will apply a deeming rate to your savings, regardless of how much interest you earn.
Currently, if you are single, you are deemed to have earned 1.75 per cent on investments of less than $50,200. Any investments valued above that are assumed to have earned 3.25 per cent. The Government then adjusts your Age Pension payments in line with its assumption.
So if you are earning next to nix, search out a better rate. But before swapping accounts, read all the fine print and make sure there are no unreasonable conditions or exit penalties attached.
Insurance
Do you know whether your insurance policies are fit for purpose? If your circumstances have changed since you bought those policies, chances are you are paying more than you need to.
For instance, if you bought home and contents insurance many years ago when there were several members of your family still at home, the value of the household’s possessions was possibly higher than it is today. Subsequently, you may still be paying a premium for valuables you either no longer own or that have depreciated considerably.
Do a stocktake of items that you want insured and see if the value matches the cover for which you are paying.
Canstar lists 10 contents insurance policies that have earned its five-star rating. But there are dozens of other policies whose terms and conditions may suit your circumstances better, so do the research before switching.
While we are on insurance, health cover cannot be ignored, especially as it is one of the biggest costs in retirement. The Government has a handy comparison site that can be searched while not bombarding you with marketing bells and whistles.
There is a risk that you may lose benefits if you switch health funds, however. Some older policies have legacy benefits that may no longer be included in health insurance today. So check out the details of a new policy and compare it with what you have before swapping.
Goods and services
While energy suppliers are working overtime to attract your business, there may be some traps for the unwary swinging customer. That said, there are also some great deals that do not come with hidden costs, so don’t put this in the too-hard basket.
Government website energymadeeasy.gov.au will guide you through a series of questions to maximise your research and help you decide whether a switch will be cheaper in the long run.
Whether you are wondering how to reduce your credit card debt or get a better mobile phone plan, comparison sites can be useful tools. Government website MoneySmart has a guide to using these sites wisely so that you do not get caught out by limits imposed by some companies.
If you are happy with your service and product providers but would still like to know where there are savings to be had, joining the mailing lists of retailers or coupon companies will keep you up to date with discounts.
Money for jam
When was the last time you looked at your bank statements carefully? Is it possible that you are still paying subscriptions for services you no longer use?
Did you take a subscription with multiple movie streaming companies such as Stan or Netflix, but only use one of them? Are you still signed up to online newsletters or courses that you no longer read or are interested in?
Many organisations will continue to direct debit you regardless of whether you use their service unless you proactively tell them you no longer want to be a paying subscriber.
Finally, is there anyone else dipping into your accounts without your knowledge? With Australians losing hundreds of millions of dollars each year to scams, it is probably just a matter of time before you become a target.
Scan your credit card and other statements and if there are dubious entries from a third party that you do not recognise, speak to your bank. The entries may be small enough that they do not concern you, but if you ignore them, over time they could add up to a sizeable chunk of your money.
Do you have any tips for members on how to start the new financial year in the best shape possible?
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