Sorting out your finances can be easier said than done, especially in the aftermath of the short Easter break when distractions are unrelenting and stress levels are worked up at fever pitch.
But according to an expert from one of Australia’s leading accounting associations, Chartered Accountants (CA), people who have hoarded a sizable chunk of coin during the height of the COVID-19 lockdowns are well insulated from further potential unforeseen economic catastrophes.
It may come as a shock to those who are well aware that those pent-up savings might have meant bad news for many frontline industry sectors like retail, hospitality and tourism, whose dependence on people casually burning their disposable income on their products and services is critical to their survival.
But CA ANZ financial advice leader Bronny Speed feels there’s a silver lining for committed savers, and there’s no time like the present to create a robust plan that cushions people’s delicate nest eggs in potential times of financial strife.
The Commonwealth Bank has estimated that Australians collectively netted a handsome total of $250 billion in personal savings – and about six million Australians got a further one-off $250 tax-free payment in the budget as well.
But Ms Speed warned that with cost of living starting to bite, expected interest rate hikes and other financial clouds on the horizon, “Easter is a perfect time to take stock”.
“While the past two years have been incredibly challenging from a health and welfare perspective, others were fortunate enough to build a savings war chest or pay down their mortgage,” Ms Speed said.
To combat the big problems that Australians have with mortgages, rent, depreciating assets and the risk of having to budget for bills that may ultimately result in cuts to other household essentials, Ms Speed has offered a handy checklist of six tips that can potentially help savers navigate the hazardous terrain that may yet lie ahead.
The first includes a firm warning not to waste your savings on depreciating assets, like a car.
“Easter often throws up temptations – usually of the chocolate variety – and it can be the same when you have a nice pot of money sitting there, to purchase something flashy,” Ms Speed said.
“But cars are often money pits, especially the luxury ones, so think carefully before using your nest egg to buy a new set of wheels. Think about how you can get your nest egg to work for you, rather than burn a hole in your pocket.”
Her next salient advice is to use some of that extra cash lying around to pay off some debt.
“Australia still has high household debt on an international scale so a good place to use some of your nest egg would be to pay down mortgages, investor debt, personal debt, student debt and credit card debt,” Ms Speed said.
She also feels it’s worth thinking about using any surplus funds to bring debt under control, and initially focus on small debts and ones with higher interest rates, especially as they tend to sting the most.
Another important piece of advice from Ms Speed is to top-up super, especially as many people decided to make significant withdrawals from their super accounts when the federal government opened the floodgates in the early time of the pandemic in 2020.
Another tip from Ms Speed is to practice good saving habits, which she feels got a good headstart during the pandemic because lockdowns “provided a once-in-a-generation savings lifeline”.
She cites the small things to be a good saver, like borrowing power tools from friends, neighbours or local neighbourhood ‘tool libraries’ instead of buying them from the hardware shop.
Although it might be tempting to head out for an overseas trip to unwind, Ms Speed warned to hold off on “luxurious” holidays for now, especially given how inflated travel prices are right now.
And finally, she recommends seeking advice from an accountant to better protect the liquid and illiquid assets, which require a dose of effective know-how in balancing the books and ensures people are well prepared for potential future challenges to their personal finances.
If you need help to manage your money more confidently so you can pass on good habits to your kids, give us a call at (08) 8231 4709 or send us an email at info@centrawealth.com.au.
Article courtesy of Nestegg.
