While Australians are committing to get fit and feel great by cutting the booze, the smokes and the kilos, Chartered Accountants ANZ is also recommending cutting the credit card.
2022 offers a fresh start in so many ways and CA ANZ is recommending Australians use the New Year to also focus on their finances and set themselves up for success as Australia leaves another weird year behind.
CA ANZ Financial Advice Leader, Bronny Speed, said January provides an opportunity to set new goals and develop healthy money habits.
“The past two years have been incredibly challenging,” Ms Speed said.
“Some people lost their jobs. Others were fortunate enough to build a healthy pool of savings or pay down their mortgage.
“Whatever the scenario, as the economy recovers and businesses and the markets rebuild confidence, we have five tips for improving your financial health in 2022.”
1. Pay off debt
“According to Finder, Australia is ranked the fourth highest country in the world for household debt, made up mostly of mortgages, investor debt, personal debt, student debt and credit card debt,” Ms Speed said.
“Many of us chalked up some debt over the past two years to make ends meet, so it’s time to hit reset and bring that debt under control.
“We suggest you focus on small debts to begin with, as little achievements keep you motivated, and prioritise those debts with high interest rates, as those are hurting you the most. Also be sure to pay off non-deductible debt first.
“And if you find yourself in serious financial difficulty, you can call the National Debt Helpline on 1800 007 007 to receive some free financial counselling.”
2. Commit to a savings target
“Many of us have the best intentions to save, but when pay day hits, we can get carried away and quickly spend what’s in our account – prompting us to think ‘ah well, I’ll try again next month’.
“To avoid this cycle of good intentions but poor self-control, we recommend setting up an automatic transfer on pay day.
“This means when the money drops in your account, your nominated savings amount is squirreled away immediately.
“Look for a savings account with a competitive interest rate (as far as is possible these days) and aim to build at least three months of income as an emergency fund in your savings.
3. Consider your investment options
“The thought of investing is daunting for some. You can invest in shares, bonds, managed funds, or real estate, to name a few asset classes.
“While it can be overwhelming to explore, it is worth doing your homework and assessing what potential investment options are right for you.
“But be wary of investment opportunities promising quick and significant returns – if it sounds too good to be true, it probably is!
“As always, there is risk when you invest, so speak with a professional financial adviser before making any decisions, and do your homework too. That doesn’t necessarily mean believe all that Twitter or TikTok tells you!”
4. Seek advice from your accountant
“Chartered Accountants have done years of study and professional development, to get to the point that they can advise you on the best way to structure your finances. Those additionally trained in financial advice can also make sure your money is working hard for you.
“For example, you may be able to make voluntary superannuation contributions and enjoy a tax break on them, when to pay down debt and in which order, and the taxation implications of different investments.
“We can also help navigate a complex tax situation if you’ve just moved countries, which is certainly on the cards for a lot of people post-pandemic.”
“We can help with investment suggestions for that excess cashflow, should you have some.
5. Treat yourself when you hit your goals (within reason)
“What’s the point of success if you don’t enjoy it? Within reason of course.
“If you’ve successfully hit your savings goal, or paid off your credit card debt, celebrate with a nice meal or a special leisure activity. You’ll be helping local business and feel like you’ve earned the reward.”