With interest rates rising and the cost of living rising, Australians are dying to protect their savings.
Helen Baker, Australian Chartered Accountant and author of the new book Alone: The Essential Guide to Financial Independence for All Women, says that while we all wish we all had more money to meet the challenge ahead, careful planning can help us achieve it. better use of what we already have.
Helen, only one percent of financial planners with a master’s degree in the industry, shared her seven best ways to keep your savings on the right track and grow them further in the months and years to come.
Helen Baker is a licensed Australian financial advisor and author of the new book On Your Own Two Feet: The Essential Guide to Financial Independence for all Women.
Helen recommends having three spending plans. That is, allowing you to enjoy a refined lifestyle; one to squeeze a little more than every dollar; and a minimally survivable
1. YOU HAVE TRIPLE SHOPPING PLANS
You should already have a budget, or as I call it, a spending plan, a plan that shows how your income will be distributed to meet the various needs in your pocket.
However, I recommend having three spending plans. That is, allowing you to enjoy a refined lifestyle; one to squeeze a little more than every dollar; and one that allows you to survive minimally.
This exercise will help you review your spending and classify the basics from fun things.
And if you have to deal with your finances (like layoffs or health issues) unexpectedly, it’s much easier and quicker to switch to a frugal lifestyle.
2. NO SAVINGS
Have you ever plundered your savings to pay your daily bills? Most of us have done this at some point. But was that money ever exchanged? May be not.
Worse, you may have sold income-generating assets such as stocks or bonds and lost both the value of that asset and its future income.
That’s why an emergency fund is important – it’s at your disposal in the event of a disaster, so you don’t have to deplete your savings and lose the gains they bring.
Resist the temptation to dive into your savings whenever possible – once you get up, it’s hard to rebuild.
An emergency fund is essential – it’s at your disposal in the event of a disaster, so you don’t have to deplete your savings and lose any of their earnings.
How much do you have in your “emergency fund”? This is the exact amount you should aim for.
Queenie Tan, a Sydney-based financial expert, said she and her 30-year-old boyfriend, Pablo, had set aside $30,000, enough for six months without pay.
After living together for six years, the couple bought an apartment together and set up an emergency fund to provide financial security for their future.
“We have a $30,000 emergency fund, so if we stop making money, we can live for six months,” Queenie said.
†Emergency fund three to six months livelihood Saved cash in case something unexpected happens.
He said the couple used a free financial app called WeMoney to help them recover a $30,000 target for emergency funds.
Queenie said that the amount you save each week has “fallen down to what you can easily save.”
Queenie Tan (left) from Sydney said she and her 30-year-old boyfriend Pablo (right) have saved $30,000, enough to last six months without paychecks.
3. USE YOUR PRICES TO YOUR BENEFIT
The silver cloud of rising interest rates is that they apply not just to loans, but to savings as well.
As interest rates rise, so do savings accounts and time deposits, which have remained at very low levels for years.
And as we were taught in school, compound interest is our friend.
4. VIEW YOUR CREDITS
Speaking of loans, now is the time to review your mortgage and any other loans you may have.
Consider whether they offer the best value for money. Ask your current lender for a better deal – you’ll never get it if you don’t and most lenders would rather give you a better rate than lose you as a customer altogether.
Also look for the type of mortgage that suits you best: Should you block or change interest rates? Does the mix of both provide greater flexibility and greater cost security?
And don’t forget about the benefits of a mortgage swap account so you can accumulate your savings and still reduce the interest charged on you.
As interest rates rise, the yields of savings and time deposits, which have been at very low levels for years, also increase.
5. PAY THE DEBT
Interest rates are rising with more possibilities along the way. But all this hype belies a simple truth: Despite recent hikes, interest rates are still historically very low and there is still time to pay off debt faster.
Reducing debt now means more savings later.
6. PROTECT YOUR INCOME
The sad truth is that some companies and industries are more sensitive to interest rates than others.
Consider whether your job is a vulnerable job. If so, what about your backup plan?
Such a plan may include income diversification so as not to be tied to one single source; development of skills to improve your future job prospects; or retraining as part of a career transition to a safer industry.
7. EXECUTE YOUR TAX ENTRY
We are fast approaching the end of another financial year. For many, this means tax returns are coming soon.
In a way, it works like a forced savings, as long as you have the discipline not to spend it once it is deposited in your account!
How many mortgage payments do salaries eat?
AUSTRALIA: 26.8 percent
SYDNEY: 37 percent
MELBOURNE: 29.8 percent
briban: 23.1 percent
ADELAIDE: 23.1 percent
PERTH: 16.3 percent
Source: Moody’s Investors Service, average calculations for voice actors paying their mortgages in May 2022
Source: Daily Mail
