Are you looking after your financial health?

A thorough financial health check can lead to savings

Money is a common source of worry, so it makes sense to keep a close watch on your financial affairs. From credit cards to the cost of food, we look at some of the key areas for review – and how you can save money in the process.

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Financial concerns are our number one cause of stress, with a recent survey by the Australian Psychological Society showing that almost half of Australians worry more about money than any other issue. Despite this, only one in five people seek financial advice from a professional, and Australia’s overall financial literacy levels are low, according to Corin Jacka, an independent financial planner from Priority1 Wealth Management in Melbourne.

“It is almost an embarrassment for some people,” he says.

“They realise they don’t know about their money but instead of trying to find out, they put their head in the sand to ignore it and just live from pay to pay.”

Jacka says that with so many financial products on offer – from credit cards to reward schemes and health and insurance policies – trying to understand all the costs and benefits associated with each one can become so overwhelming that it is tossed into the too-hard basket.

Credit cards

Collectively, Australians own around 16 million credit cards so when looking at your finances, this is a good place to start.

These small pieces of plastic can be a convenient way to pay for goods and services, and a reassuring back-up in emergencies. That’s why, with approximately 200 different credit card products from about 70 different providers, it is important to choose one that suits the way you live and spend.

Credit card companies offer all sorts of perks and rewards to catch your attention – from low-interest rates to free flights, travel insurance, shopping vouchers and cash back. But are you taking advantage of them?

A mid-2015 survey of Australian credit card satisfaction by market research firm J.D. Power Asia Pacific revealed that, only 49 per cent of customers were aware of the benefits associated with their credit card.

You’ll also need to understand how your card works. J.D. Asia Power Pacific reported that just under half of customers (44 per cent) said they "completely" understood how to earn rewards with their cards, while just over half (56 per cent) said they understood how to redeem their points.

For example, to activate the travel insurance you may be required to book some of your trip on your card. It’s also important to find out what you’re covered for so you don’t waste money buying travel insurance you’ve already got.

For some families, consolidating all the household’s credit cards into one account may give better value to their credit expenses and offer an option to earn rewards points faster.

 

Insurance premiums

House and contents insurance, car insurance, private health cover … these are routine expenses for many people, but it is easy to get into the habit of simply renewing the same policy every year.

With new products and deals regularly coming onto the market, doing some research and reassessing any changes in your situation could save you money.

To make sure you are not swapping good cover for bad, says Jacka, it may be worth speaking to an insurance broker, who can compare the terms and conditions before you sign.

Phone and utility bills

Signing a new mobile phone contract is often accompanied with a spiel on all the accompanying bells and whistles that come with your new device.

However, according to Jacka, many people are not even aware of all their entitlements under a contract, let alone how much they are paying on services they aren’t using.

“I find people paying A$70 to A$80 a month but not using anywhere near that,” he says.

Eating out

Canberra-based independent financial planner Phil Thompson of Rise Financial, who puts everything on credit as an easy way of keeping track of his monthly expenses, believes that our love of takeaway food can take the biggest bite out of our finances.

“From my experience, where most people spend too much is on takeaway,” says Thompson.

“One extra night of takeaway Thai is another $100 rather than a $20 meal at home.... and these nights out add up far more than chasing the rewards systems and all the other noise about working out budgets and saving a few dollars here and there.”

Like 78% of Australians he also makes sure he pays his credit card off in full every month to avoid interest but says individuals have to understand their own spending habits and work out what is best for them.

“The common talk is to get your credit card paid off, but I find most people handle their cards pretty well.”

Don’t sweat the small details

Both Thompson and Jacka say people fret about the weekly ins and outs of their money when the big picture often tells a very different, and reassuring, story.

“A lot of people come in worried about their budget and spending too much, but when I show them the big picture it frees them up to enjoy their life a bit more,” says Thompson.

“I worry people have unnecessary financial stress, and focusing on the details in budgeting adds to the stress.”

Jacka suggests calculating how much you need to live on and paying a regular savings amount at the start of your pay cycle instead of waiting to see if there is anything left at the end.

“People will spend what they have,” he notes.

Know what you need

The Association of Superannuation Funds of Australia (ASFA) sets a figure of about A$60,000 a year for a couple to have a comfortable retirement lifestyle, not counting rent, mortgage or other ongoing debts.

This is a good guide for people at all stages of life, says Jacka, who adds another A$10,000 a year for a first child and A$5000 for each child after that – more for private education.

He says a good financial adviser is a behavioural coach who establishes good habits for spending and savings.

Thompson adds that he hopes the growth in independent advisers who don’t get commissions from selling particular products will give people the confidence to have their finances checked.

This sponsored content was brought to you by American Express. 

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