Cairns accountant advises the best way to manage money

There are countless stories about how cutting a coffee a day could save you hundreds of dollars, but is it really the most effective approach to budgeting?

The cost of living is almost a guaranteed burden that promises to rise each year and put Australians under enormous pressure to manage their finances.

Technology has made it easier to purchase items online, receive a one-minute credit check, and buy now and pay later.

These digital crediting agencies paired with the power of direct debit, only make it easier for “minor” weekly deductions on banks’ cards to sneak through and add up to large sums over a longer period.

Cairns accounting firm Halpin Partners director Shaun Donaldson says it’s important for every individual to keep track of how much and where they are spending, whether online or at the shops.

He says even if you don’t have a savings goal presently, tracking expenses could save heartache in the future.

BUDGETING

Shaun recommends using a digital budgeting tool to monitor expenses, and most banks provide these tools for free with their internet banking services.

“You can’t run your life just from gut feeling and just looking at your bank balance whenever you’ve got the courage to do it,” Shaun says.

Shaun recommends using a digital budgeting tool to monitor expenses. Picture: Istock

“Going through and getting a proper analysis of where you’ve spent your money can be a confronting experience, because sometimes you don’t want to know the answer. But once you get over the shock of it, it does really focus you in on how much different things are costing.

“Budgeting has benefits. It lets you know exactly where you’re spending your money so if you want to save money you can focus on the right areas. People say I’m not going to buy a cup of coffee a day and maybe that adds up, but it probably doesn’t either; there’s probably bigger fish to fry.

“It could be subscriptions for pay TV, or streaming services. It might only be $10 a week but you add that up over a month and a year and all of a sudden it’s a big figure.”

Shaun says using a budget and minimising spending could also pay off when applying for, or refinancing, loans.

“With home loans, you used to be able to provide an assessment of what your expenses were so the bank could work out serviceability.

“These days banks will get three months of your electronic data, load it into a program and it will analyse where you’re actually spending your money.

“So a lot of people actually get a nasty shock and have loans rejected because they’re spending at too high of a level to support the loan,” Shaun says.

CREDIT CARDS

As easy as it can be to make purchases with credit cards, it can be worryingly difficult to then make repayments. Especially if a credit card was used to purchase goods and services, when money was already tight.

Rolling a balance onto a new credit card can be an option for those who’ve incurred a hefty balance on their current card. Picture: Istock

Shaun says, if acting responsibly, credit card holders could avoid the 15 or 20 per cent interest rates awaiting them at the end of their repayment terms.

“With credit cards, it’s common at this time of the year that people might’ve been on holidays and spent money on Christmas presents, so they might’ve racked up a bit on their credit card.

“So for a lot of people they might find that they’re able to move over to another credit card. Quite often credit card providers will offer introductory rates, so if you roll your credit card balance over you’ll get an interest-free period or you’ll get a low interest period.

“So you might be able to roll a credit card and not pay interest for three or six months. In that three or six months you might be able to knock that whole balance off.”

TAX

Shaun says the most common mistake people make in missing out on tax refunds is not keeping receipts.

“Most of us are pretty hopeless at keeping little bits of paper. So an easy way to do that is take a photo of it on your phone then some people like to use apps to keep receipts or you can even email it to yourself and put it in a folder.

“The bushfires are a good example. So something happens during the year, so you feel obliged to give and you make a tax-deductible donation. If you don’t keep that receipt or you haven’t filed it properly, when you come to do your tax 12 months later, it’s really impossible to remember every single donation or every single purchase you’ve made over that period.”

Originally published as Cairns accountant advises the best way to manage money