Build an emergency fund
To avoid going back into debt and to help you sleep well at night, it’s a good idea to have 3-6 months of living expenses easily accessible in savings to cover you for large unforeseen expenses or periods of unemployment. Don’t invest this money. And don’t invest until you have it.
Save a home deposit
Home ownership is still hands-down one of the best tax deals in town, with any gain in the value of your principal place of residence tax-free.
And the age pension is woefully inadequate for anyone still paying rent in retirement.
Savvy souls can come up with strategies to rent and invest, but I believe owning your own home remains a worthy ambition for most young people.
If your time horizon is long enough, investigate the government’s First Home Super Saver Scheme, which allows you to save in the low-tax environment of superannuation.
Ask for a pay rise
Set yourself a deadline and pop the big question.
Request a pay review meeting with your boss. Write a one-page summary of all the ways you are adding value to your company and/or acting above 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 ask for non-monetary benefits, such as extra time off or more flexible working conditions.
Maximise super contributions
Voluntary contributions to super can be a great way to build your lifetime savings.
Find out how much of your annual $27,500 concessional contributions cap you used this financial year, plus how much you have outstanding from previous years, by logging into the ATO portal on MyGov.
Consider coming up with a plan to salary sacrifice regularly into super throughout next financial year to max out the cap. Just remember it includes your employer’s contributions, which are rising to 10.5 per cent in the coming financial year. You can also make more infrequent contributions from your after-tax savings.
If you have figured out your housing plan, have an emergency fund, are carrying no high-interest debt and don’t want to lock away your savings until age 60, you can consider starting to invest – either via an investment property or shares. For shares, take a look at low-cost index exchange-traded funds to start building your portfolio. Ideally, you should have a time horizon of at least a decade to safely ride out the inevitable volatility in share values.
Listen to podcasts, buy some books and seek financial help, if needed, to invest for the long term.
Track your spending
Knowing where your money goes is a good idea.
You can use my spending tracker if you like a paper-based system, or start yourself a simple spreadsheet.
Commit to tracking your spending for one month, and then see how you feel after that. Some of us start and love it so much we never stop.
Establish a ‘future fund’
Think of some irregular big expenses you will face this coming financial year – such as water bills, council rates, strata fees, insurances or car maintenance costs – and consider setting up “future funds” to save and cover these costs.
You can save regular amounts into a separate bank account or download my “future fund” worksheet.
Create annual budget
There is still time to work quickly through my “annual budget worksheet” to estimate your living costs for FY2022-23 (also available in Excel version here).
Have a stab, then track your spending throughout the year to see what expenses you’ve forgotten.
Aim for progress, not perfection. Having some idea of your annual living expenses will not only help you plan for retirement and borrow responsibly, but also give you peace of mind that your emergency savings are sufficient.
Happy new financial year, everyone. Let’s hope it’s a good one.
- 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.
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.