Most Australians do not have a clear idea of where their finances are headed, the corporate regulator has found.
In a recent ASIC survey, only 38 per cent said they had a short term (three- to five-year) financial plan in place. Of these, 36 per cent had not monitored their progress over the past 6 months.
Even fewer – 22 per cent of the 1,379 respondents – had a long-term, 15- to 20-year plan in place.
“Many Australians could benefit from taking a longer-term view to financial goals and planning,” says ASIC MoneySmart senior executive Miles Larby, although he notes it is “encouraging” that 90 per cent keep track of their money “in some way” from day to day.
AustralianSuper spokesman Dean Felton tells The New Daily that the holidays are the perfect time to do a financial health check.
“It’s worth finding the time at least once or twice a year to have a close look at how your finances are tracking. Most people will have a few days’ downtime over Christmas, so that’s an ideal opportunity to do it,” Mr Felton says.
Here is more advice on how to plan for your financial future.
ASIC’s Miles Larby says it is “always a good practice” to regularly check your bank and credit card statements.
A monthly reconciliation, where you compare receipts to expenditure, will help you find overcharges and fraudulent transactions, Mr Larby says.
Keeping receipts is handy as well, to aid your reconciliation and make your yearly tax return easier.
“We have to be realistic about it, but certainly for large transactions, particularly for ones that might have an implication for your tax return, it’s really important to keep receipts,” Mr Larby says.
Plan your spend
Setting a budget is the “cornerstone” of financial progress, according to ME Bank.
“Budgeting is the only sure-fire way to spend less than you earn on a regular basis,” says an ME Bank spokesperson.
In the ASIC survey, more than a third (38 per cent) said they had no budget or did not stick to one.
The ASIC MoneySmart website offers a free online budget planner that takes out most of the hard work and all of the math of making a budget.
Stay on top of your retirement
AustralianSuper spokesman Dean Felton says Australians need to keep an eye on their super to make sure it is working for them.
A third (30 per cent) of respondents to the ASIC survey did not know their superannuation balance, and a third (34 per cent) had only a rough idea.
“People should be watching their annual returns, comparing the fees they’re paying and what sort of investment options their fund offers them. If their fund isn’t meeting their needs, they owe it to themselves to shop around,” Mr Felton says.
Also, think about consolidating your super into one account to avoid unnecessary fees, and making regular voluntary contributions, he suggests.
“Thanks to compounding returns, putting as little as $50 a month into your account now can add tens of thousands of dollars to your retirement.”
Save for the future
Setting up an automatic deposit from your everyday account into a high-interest savings account can be “a really neat way” to save, Mr Larby says.
“You don’t see the money come out of your account, so you’re not tempted to spend it.”
Only 22 per cent told ASIC they used this method.
Prepare for the unexpected
Another “good tip” is to set up a rainy day fund, separate to your regular account, with enough money to cover three months of living expenses in the event of an emergency, says Mr Larby.
“You can be following a budget closely and then your washing machine breaks down and it can throw you out completely, so the idea of having a buffer or an emergency fund in place can help you get through that,” he says.
You might also want to regularly check your insurance coverage. Review what would happen to your money, wage and possessions in worst case scenarios – such as death, injury, theft, fraud and loss of income.
“Insurance is an incredibly important risk management strategy,” Mr Larby says.