How to streamline your costs and instantly up your income

In personal finance parlance, what it takes to enjoy good wealth is often paralleled with good health. There are many similarities – principally, balancing the energy or the money that comes in with what goes out.

On the economic side, that equation has probably been out of whack a good while.

Personal finance is a delicate balance of money in, money out. But there might still be a bit more money you can get out if you try these tips.Credit: Getty

Expenses are now squeezing our incomes an extraordinary amount – and Reserve Bank governor Michele Bullock struck fresh fear into the hearts of mortgaged homeowners last week, implying that higher rates are here to stay.

But you can most likely still rebalance your “money in and money out” equation using a technique you may not realise exists. Today, I give you a type of RBA-inspired budgetary boot camp.

An instant way to up income

Here, you probably think you’ve tried – or are trying – to pull every lever possible. If that’s not worked so well, the surprise silver lining is that any income you delay by three weeks will fall into the next, lower-taxed financial year.

The stage three tax cuts that come in for all from July 1 make it smart money management to delay boosting your pay. Like I said, (small) silver linings.

However, there is a simple but powerful strategy to boost your income if you get a tax refund every year: get that tax refund spread across every week.

You need to be careful about over-estimating your refund when you ask for this. The end of the low and middle income tax offset in 2022 means that you should use as a guide your 2023 tax refund – and you should only do that if you expect your deductions to be as high.

But those who are confident they will be owed money at the end of the tax year might well choose to receive that money along the way; letting the ATO keep it for 15 months or more seems a little ludicrous when times are so tight.

Undertake an extreme streamline of your finances and get financially stronger today.

You do this by filling out a simple withholding variation form on the ATO’s website. Processing of the online version takes about a month so it will be in place almost at the beginning of the new financial year.

That the arrangement also lasts the remainder of one financial year means it’s the perfect time to fatten your pay packet.

Canny ways to cut expenses

When it comes to discretionary spending, you can embrace extreme frugality or a technique like zero-based budgeting (you basically throw out all your spend and start from scratch with its necessity).

But less challenging is to stem the leaks that will still be in your finances. Set aside a couple of (probably lucrative) hours to do a full expense audit – your every bill and premium. By how much have these escalated over the years, maybe invisibly via direct debit?

There will almost certainly be newer, better-value options. A raft of comparison websites is there to help you identify them: try Australia’s oldest, Canstar, or CompareClub, Finder or RateCity. In fact, try a few as none carries all available products.

But crucially, consider cheaper product settings. With car insurance, do you still need comprehensive cover? With house insurance, check any add-ons like motor burnout – are they worth the extra cost? Think about a higher excess as you would hope to seldom pay it.

Speaking of excesses, with health insurance, you can now up yours to $750 as a single and $1500 as a couple and still be exempt from the Medicare levy surcharge. Your saving would be around $500 a year.

Also call and make sure you are not still paying for obstetrics and reproductive services if you are done with having children – this generally adds another $500 to an annual premium.

You can significantly cut the cost of income protection insurance by opting for a longer delay before it pays (be confident you could cover your costs for that time, first).

Most electricity and water providers, as well as councils for rates, let you pay instalments on the same cycle as your salary lands. It just helps with bill smoothing (and it’s a pay as you go rather than in advance, which is the case with annual rates.)

Be wary of switching to monthly premiums for insurances, though. This leeway usually comes with a 15 per cent-plus loading, so it’s setting you back. Save adequately each month for these instead (in your mortgage offset account to save loan interest if you still have one).

It may well be your mortgage – and those higher rates themselves – that is squeezing your finances most. If it’s just become too much, and assuming you won’t qualify for a refinance, ask your lender for concessions. You will get them.

Undertake an extreme streamline of your finances and get financially stronger today.

Nicole Pedersen-McKinnon is the author of How to Get Mortgage-Free Like Me, available at www.nicolessmartmoney.com. Follow Nicole on Facebook, Twitter or Instagram.

• Advice given in this article is general in 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 any financial decisions.

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