Save money with new financial year clean-up

Ignoring your personal finances can drain your bank accounts but there are ways to reverse it - start 2020-21 with these savings

A new financial year creates fresh motivation for Australians to improve their personal finances, and the process is much simpler than many think.

From debts and household bills to superannuation and investments, a few phone calls and online checks can deliver thousands of extra dollars annually.

Examining and switching personal finance products was “one of the easiest things you can do,” said financial comparison site Mozo.com.au’s spokesman, Tom Godfrey.

“A little effort can go a long way to improving your finances,” he said.

Here are eight key clean-up areas to examine now.

HOME LOANS

“The biggest area you can save is on your home loan,” Mr Godfrey said.

Negotiating a better mortgage rate could typically save an average borrower $3000 a year, he said.

Data from Canstar shows average variable rates sit near 3.2 per cent, but the lowest are under 2 per cent. If you’re paying the average on a $400,000, 30-year home loan it will cost you $1741 a month, but when rates drop below 2 per cent repayments are less than $1490.

Borrowers should compare their current mortgage rate, contact their lender to ask for a better deal, and be prepared to switch.

CREDIT CARDS

Mr Godfrey said many consumers treated credit cards as “set and forget” and simply paid the monthly interest bill, even if it was the industry average 20 per cent.

He said someone with an average credit card debt of $4000 who switched to a low-rate card charging 7.49 per cent could save an average $567 a year.

People with multiple credit cards can get stuck in a spiral and should consider debt consolidation loans or balance transfer cards that charge zero interest for a period.

Reward credit cards are popular for collecting frequent flyer points and other benefits, but only make financial sense for people who pay off their balance each month.

Mozo’s Tom Godfrey says switching financial products is easy. Picture: Supplied.

MOTORING COSTS

Petrol prices across Australia have surged since 2020’s lows, and most states have pricing cycles that fluctuate 30-40c during a month.

If your vehicle uses 40 litres of fuel weekly, getting the timing right can save you more than $800 a year.

People can save money on repairs and maintenance by looking beyond car dealers that charge inflated prices. In most cases it won’t risk new car warranties.

And if Covid changed your transport habits, work out if your household needs multiple cars that multiply the costs for registration, maintenance and insurance.

INSURANCE

Whether it’s home, contents, car or life insurance, this is a product people pay for but hope to never use – so why not pay as little as possible for the right protection?

“Car insurance is a big one, and you can save up to $902 a year (by switching),” Mr Godfrey said.

“Insurance is very much a case of a loyalty tax – the longer you are with your insurer, chances are you are not getting the best deal.”

Check online to see what your insurer charges new customers for a similar policy, then demand they do the same for you.

PAYING BILLS

MyBudget director Tammy Barton said bill providers knew people were time-poor.

“They know we put payments on set-and-forget and those charges begin to fly under the radar,” she said.

Ms Barton saved $800 on an insurance bill last year after spending just 10 minutes online, and recently revisited phone costs.

“My daughter’s phone contract recently expired so I jumped online to look at the options – we’re now paying around half with more inclusions and without changing carriers,” she said.

Households in most states can choose their energy retailers, so visit energymadeeasy.gov.au to work out whether your current provider is charging too much.

Mozo’s Mr Godfrey said changing to a cheaper NBN provider could save a household around $710 a year.

MyBudget’s Tammy Barton says controlling spending habits can save you thousands annually.

DITCH DAILY HABITS

If spending money on morning coffees, bought lunches or after-work drinks is a regular robotic habit rather than for enjoyment, think about stopping it.

The numbers add up quickly. Paying for lunch daily can cost more than $50 a week and $2400 a year, while coffees can cost more than $1000.

“Watching your daily spending habits is a great way to save thousands gradually every year,” Ms Barton said.

However, don’t stop all your little luxuries – they’re what makes money fun.

SUPERANNUATION

Crystal Wealth Partners executive director John McIlroy said people with financial capacity should consider contributing more to superannuation.

He said tax deductions could be claimed for contributions up to $25,000 – rising to $27,000 in 2021-22. But this cap also includes salary sacrifice and employers’ compulsory contributions. Many people can make catch-up contributions from the past two financial years.

“If you haven’t been salary sacrificing then consider asking your employer to make an additional monthly contribution from your salary as this might be easier to manage from a cash flow perspective,” Mr McIlroy said.

Super fund members should also check their investment mix, fees and performance over the past five years.

INVESTMENTS

Mr McIlroy said people should examine their investments and act quickly on capital gains tax issues this year, while some might want to consider ethical and responsible investing.

“There are many investment options out there – including super funds – where you can make sure that your money is being invested in a way that you want it to be invested,” he said.

And have a plan for your financial future. “Most people do not plan out where they want to be financially in five or 10 years until they are almost ready to retire,” Mr McIlroy said.

Greta Gotterson can save thousands of dollars on bills and loans. Picture: Tim Hunter.

How three phone calls can save Greta $4000

Greta Gotterson, 32, is savvy when it comes to spending money, so she was surprised to discover she can save almost $4000 by making a few phone calls to switch to cheaper financial providers.

Ms Gotterson went through an analysis of her personal finance products with Mozo.com.au and found savings in several areas.

“I was really surprised that I was able to save so much because I don’t have any personal loans or spend much on credit,” she said.

“And I do research before I buy.”

The analysis found:

• Mortgage savings were the biggest, with Ms Gotterson able to wipe $3336 off annual home loan repayments by switching from her big four bank to a cheaper online lender.

• Home internet savings of $300 a year were achievable by switching her NBN service from Telstra to another provider.

• Electricity costs could be trimmed by $71 by changing energy retailers.

Ms Gotterson has also discovered potential savings of more than $400 a year by changing car insurers.

“I was surprised as we were going through the process – I’m going to follow up on car insurance, she said.

Ms Gotterson is making calls to cement the cheaper deals and recommends others take a similar look at their bills and debts to search for potential savings.

“It adds up to a large amount,” she said.