Build an emergency fund
To avoid going into debt again and to get a good night’s sleep, it’s a good idea to have 3-6 months’ worth of living expenses easily in the savings account to cover major unforeseen expenses or periods of unemployment . Do not invest this money. And don’t invest until you have it.
Save a home deposit
Homeownership is still hands down one of the best tax deals in town, with any gain in the value of your primary residence being tax-free.
And the old age pension is woefully inadequate for everyone who still pays rent after retirement.
Smart souls can devise strategies for renting and investing, but I believe that owning one’s own home remains a worthy aspiration for most young people.
If your time horizon is long enough, examine the First Home Super Saver Scheme, with which you can save in the low-tax environment of the pension.
Ask for a raise
Set yourself a deadline and ask the big question.
Request a salary review meeting with your boss. Write a one-page summary of all the ways you add value to your business and/or act beyond your original job description.
Be polite, but firm. Don’t make the first offer. See what they come up with and then ask for more. You can also request non-financial benefits, such as extra time off or more flexible working conditions.
Maximize Super Contributions
Voluntary contributions to super can be a great way to build your lifelong savings.
Find out how much of your $27,500 annual concessional contribution limit you have used this financial year, plus how much you have outstanding years, by logging into the ATO portal on MyGov.
Consider coming up with a plan to sacrifice regular paychecks in super the next fiscal year to maximize the cap. Note that it also includes your employer contributions, which will increase to 10.5 percent in the coming financial year. You can also make more irregular contributions from your after-tax savings.
If you’ve figured out your housing plan, have an emergency fund, don’t have high-interest debt, and don’t want to lock in your savings until age 60, you might want to consider starting investing – through real estate investment or stocks. For stocks, look into cheap exchange-traded funds to start building your portfolio. Ideally, you should have a time horizon of at least ten years to safely circumvent the inevitable volatility in stock values.
Listen to podcasts, buy some books and, if necessary, seek financial help to invest for the long term.
Track your expenses
Knowing where your money is going is a good idea.
You can use my . to use expense tracker if you like a paper based system, or are starting a simple spreadsheet for yourself.
Commit to tracking your expenses for a month and see how you feel afterwards. Some of us start and love it so much that we never stop.
Set up a ‘future fund’
Think about some infrequent major expenses you’ll be dealing with in the coming fiscal year — such as water bills, council fees, tiered fees, insurance or car maintenance costs — and consider setting up “future funds” to save and cover these costs.
You can save regular amounts in a separate bank account or my . to download worksheet “future fund”†
Create an annual budget
Give it a try and then track your expenses throughout the year to see which expenses you forgot.
Strive for progress, not perfection. Having an idea of your annual living expenses will not only help you plan your retirement and borrow responsibly, but you can also rest assured that your emergency savings will be adequate.
Happy new year everybody. Let’s hope it’s a good one.
- The advice in this article is of a general nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making financial decisions.
Jessica Irvine is author of the new book Money with Jess: Your Ultimate Guide to Household Budgeting† You can follow more of Jess’ money adventures on Instagram @moneywithjess and sign up to receive her weekly email newsletter†
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