Money

Getting your finances in shape

If you’re concerned about rising living costs in 2012, it’s worth embarking on a savings plan.
If you’re concerned about rising living costs in 2012, it’s worth embarking on a savings plan.

A NEW Year provides the incentive to sweep a new broom through many areas of our lives, and there's no better place to start than with your household finances.

Kick off a personal money makeover by listing your assets - things of value you own like your house, savings and investments. Then compare this to your liabilities - your mortgage, personal loan, car loan and credit card debt.

If your assets are worth substantially more than your liabilities give yourself a pat on the back, you're on the way to achieving financial security. But if your liabilities are close to, or overtaking your assets it's time to get serious about bringing debt under control.

Your home loan is likely to be your biggest debt, and while it's backed by a property that should grow in value over the long term, it's still important to look at ways to cut the cost.

You can save substantial amounts of interest by shopping around for the most competitive home loan, and switching to it - but do check what switching fees might apply first. Some of the best rates at present include UBank (6.14% for refinancers), eMoney (6.33%) or MyRate (6.35%).

Next, take a look at your credit card balance. Despite two cuts to official interest rates late last year, card rates remain very high, averaging 19% on premium/gold cards or about 15% for standard cards. At this level, even a small card balance could generate a substantial annual interest bill.

There are more than 100 different balance transfer offers available, each charging very low rates for limited periods. However I reckon simply knuckling down to pay more off your card each month is a far easier, and potentially more effective solution.

Making a commitment to pay an extra $20, $50 or $100 off your card each month will see you clear your card balance ahead of schedule, with big savings on interest in the process. Avoid taking on fresh debt by leaving your credit card at home and using a debit card when you go shopping.

If you're concerned about rising living costs in 2012, it's worth embarking on a savings plan. Having a pool of spare cash makes it far easier to meet regular bills or even emergency expenses when they arise. 

Setting up a regular automatic transfer from your everyday account into a high interest savings account makes it easy to stick with a savings goal. Find the extra cash by drawing up a household spending budget, or keep a spending diary for a week to see exactly where your money is going and where you can cut back.

Next, give your personal insurances a thorough check. It's important that your most valuable assets like your home, its contents and your car are adequately protected by a competitively priced policy. If you have undertaken any home improvements in 2011, update the insured value of your home. It should involve only a small increase in the annual premium.

Finally, take the time to work out a couple of few simple goals for 2012. Something as easy as setting up a savings account for the kids or hunting down any lost super can make a big difference to your family's financial wellbeing over the coming year and beyond.

Paul Clitheroe is a founding director of financial planning firm ipac, chairman of the Australian Government Financial Literacy Board and chief commentator for Money magazine. For more information visit www.paulsmoney.com.au

Topics:  finances, investment, money, paul clitheroe



Pennant season out of sync?

SWING DOCTOR: Norman Carmichael, pictured with Julie Keegan, has sadly passed away.

Greg Kelly: On the mat.

GALLERY: Tweed top cop Stuart Wilkins retires

MURDER-SUICIDE: Stuart Wilkins revealed the discovery of two bodies at the Pottsville dunes in 2014 as the Commander of Tweed-Byron police. INSET: Showing confiscated weapons during a Tweed bikie crackdown.

etective Superintendent Stuart Wilkins was farewelled from the NSW P

Defiant Gulaptis dumped after speaking out on greyhound ban

Chris Gulaptis  Photo Contributed

Gulaptis dumped for speaking out on greyhounds

Latest deals and offers

Branson "amazed" he's still alive after cycling crash

Branson saw "his life flash before my eyes" during a bike crash

John Krasinski has better sex now he's in good shape

John Krasinski says there's at least one good reason to get jacked

Kanye West gets 'free reign' at VMAs

Kanye West has been let off the leash for the VMAs

Robbie Williams sings at manager's funeral

Robbie Williams and Lamar sang at the funeral of their manager

Twice as much Troy will please country music lovers

CATCH HIM WHILE YOU CAN: Singer Troy Cassar-Daley plans to take some time off to spend with family next year.

TROY Cassar-Daley is releasing a new album and book.

Courtney Stodden gets Reborn Doll

Courtney Stodden is trying to get over her recent miscarriage

REVEALED: Pat Rafter's $18m Coast house on the market

Check out the photos of the Coast's most expensive property for sale

The "correction we had to have" in Gladstone's rentals

UPWARD MARCH: The rental vacancy rate in Gladstone has improved for the first time in more than a year, providing a confidence boost in the market.

Vacancy rates improve with signs that things are getting betterF

ISLAND FOR SALE: Cheap Fraser Coast island drops price again

Suna Island in the Great Sandy Strait will be auctioned by Ray White Hervey Bay on Saturday morning.

This is the cheapest island you will find for sale in Australia

How a family home can fit on a 250sq m block

This is what you can build on 250m2.

Here's the floor plan of a home built on 250sq m

Investors eye Gladstone's $4m island with resort approval

UP FOR SALE: Turtle Island is on the market.

CHINESE and Sydney investors flag interest in Gladstone island.

Take a sneak peek at this $19m Whitsunday mansion

Mandalay House features a private helipad.

Mandalay is currently on the market with an asking price of $19m