5 money tips to help you get on top of your finances in 2021
Even if you missed the GameStop rush and don't have a wallet full of Bitcoin, there are plenty of ways to fix up your finances – starting now.
What people do with money often follows a pattern along these lines: Earn, spend, save (if you can), repeat. Even with the pandemic and economy shaking everything up over the past year, some form of financial routine has remained.
But with JobKeeper, JobSeeker and payment pauses all winding back during the first half of the year – and FOMO frenzies over the stock market, cryptocurrency and property – people are looking to strengthen their financial footing. Here are five tips you can use to get started.
1. Pay off credit card debt
Australians are collectively paying interest on $21.2 billion of credit card debt and Finder analysis of RBA data shows the average credit card interest rate is almost 20%. Even if you only owe a small amount on your credit card, interest charges add up. That, in turn, drags out the process of paying off your card.
If you want to save on interest charges while you chip away at the debt, one option is to switch to a card that offers 0% interest on balance transfers for an introductory period. After that, interest charges kick in, often at a higher cash advance rate. This means you get the most value from a balance transfer when you pay it all off during the interest-free introductory period, which usually ranges from 6 months to 26 months depending on the offer.
For example, the Bendigo Bank Low Rate Credit Card currently offers 0% p.a. on balance transfers for the first 18 months, with a one-time 2% balance transfer fee. At the end of the introductory period, any remaining balance transfer debt is charged interest at the card's purchase rate (currently 11.99% p.a.), rather than the more common cash advance revert rate. See Bendigo Bank's terms and conditions for the full details of this offer – and make sure you do the same for any other credit cards you're interested in so you know exactly what's involved.
2. Switch cards to save on new purchases and other costs
Even if you don't have credit card debt, take a moment to check how your current card matches up to others on the market. If you're paying a high interest rate on purchases or a high annual fee, you could save by switching to a lower-cost card. Low rate and low or $0 annual fee cards often have fewer bells and whistles than those with higher costs, so remember to check if there are features you want and currently use.
If you're not using them at the moment (e.g. complimentary international travel insurance or airport lounge passes), you might want to change cards now and revisit your options at a future date. And if you have a small balance you're paying off, you could even take advantage of a short balance transfer offer – such as the 0% p.a. for 6 months available on some Bendigo Bank cards – as part of the switch.
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3. Look for a higher-interest savings account
When the Reserve Bank of Australia (RBA) dropped the official cash rate to a record-low level in 2020, it wasn't great for savings accounts (although it did save a lot of people money on home loans). Some savings accounts reduced their interest rates and others added more conditions for getting the highest possible rate.
That makes it important to check your current savings account rate and make sure it's the highest one you can get. If you want to switch or set up a new savings account, keep an eye out for accounts that offer introductory or bonus interest rates that help give your savings a boost.
4. Keep track of your money
Do you know how much money you have coming in and going out each month? If you don't, this is a simple step that can have a giant impact on your finances – once you know what you're spending, and where, you can make changes that fit with your goals. And there are plenty of ways to get started, including:
- Budget planners: These are great for giving you a snapshot of your money right now (and how it would look in the future if you didn't change anything). There are plenty of free ones online that will walk you through the process. For example, Moneysmart's budget planner has eight different sections for you to fill in, while Bendigo Bank's budget planner breaks it down by "Income" categories and "Expenses" categories.
- Money-tracking apps: These apps track what goes in and out of your accounts. Some banks have a money-tracking feature as part of their apps, but you can also get independent apps that let you link all your accounts for a detailed breakdown of everything that's going on (such as the Finder app).
- Budgeting spreadsheets: If you want to be really hands-on, a spreadsheet gives you a way to break everything down at your own pace. You can get budget templates for Microsoft Excel or other programs (MoneySmart has one for Excel on its budget planner page). These templates have pre-defined fields that you can customise or update. This approach usually takes more time but it does help track and also predict your spending and saving in the future.
5. Make the most of discount offers for insurance and other services
Some health insurance funds offer discounts of up to 4% when you pay your premiums yearly or when you set up direct debit payments. The same goes for energy companies, which often have discounts when you pay by direct debit or pre-pay part of your bill. You may even find a gym or other subscription service that offers discounts for annual payments compared to monthly, fortnightly or weekly ones.
So if you've got savings (beyond an emergency fund) or some extra cash in your everyday account, it's worth asking whether you can get a discount by paying for these kinds of services upfront for the year. As an added bonus, it means you won't have to think about it again for 12 months.
While we don't really know what the rest of 2021 will bring up, making some positive changes to your finances now will give you a stronger foothold if there are stumbling blocks ahead. Any of these tips can help – and you can always use more to tackle other financial hurdles in the future.
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