6 Ways to Spring Clean Your Finances
With Spring now upon us, you’ve probably got a list of jobs that need to be done around the house. But with Christmas coming up, there’s no better time to give your finances a good spruce up too. Here are 6 simple ways to clean up your finances so you’re in tip top shape for the year ahead.
1. Update your budget
You might already have a budget in place, but new expenses might have creeped in, or you might just need to double check everything’s on track.
If you don’t already have a budget, now is the perfect time to start! First step is knowing exactly how much is coming in, and how much is going out. Sit down with your last 3 months bank statements and categorise your expenses so you know exactly where everything goes. From here you’ll be able to prioritise needs and wants and decide exactly what costs can be cut back.
2. Review your short term debt
Short term debt includes credit cards, store cards, hire purchases and personal loans. Generally interest rates are higher and you are enticed with hard to say no to terms such as 0% interest or no payments for 2 years! Get copies of your latest statements and check whether you are paying interest and at what rate. If you are paying interest, increase your repayments as much as possible so you can pay the debt off faster. If you have multiple short term debts, consider consolidating them so it’s all in one easy loan, this can help you pay off your debt sooner. And remember there are usually always monthly or annual fees which adds further to the cost of short term debt.
3. Pay extra off your home loan
With mortgage rates back at all-time lows, now’s a good time to increase your repayments and start chipping away your principal faster. Small increases now can make thousands of dollars in interest savings over the term of your loan and help you pay off your loan years earlier. Also, when rates do inevitably rise, you’ll be buffered from the effect of any increases and the hit won’t come as such a shock.
4. Keep an eye on bank fees
Review your accounts to check what fees you’re being charged, there are plenty of fee-free options available but there are also accounts charging $5, $10 or $15 per month in account maintenance fees. Just $10 per month adds up to $120 per year and it's easy to save. Also you're less likely to be charged an account maintenance fee on a savings account, but it does happen, so if you're saving cash you should also check whether you're paying for the privilege.
5. Review your insurances
When it comes to insurance, your needs are constantly changing. Whether it’s how much life cover you need to pay off your debt, how much income protection you need to protect your income or the value to rebuild your home, it’s worth reviewing your insurances at least on a yearly basis to ensure you not only have the right cover but that you’re not paying for more than you need. A good insurance adviser will review your needs annually and make sure you’re getting the best deal.
6. Check your Kiwisaver
Check what you're paying in KiwiSaver fees, these can add up over the life of your savings and there are plenty of options out there. Also, check whether you're in the right KiwiSaver fund, if you have a long time until you need the money and are in a default or conserative fund, you could be short-changing yourself by hundreds of thousands of dollars.
Jiji Couch is a registered financial advisor, for a no obligation review of your finances contact her today.