5 Ways to Fix Your Finances for 2021

5 Ways to Fix Your Finances for 2021

It’s been a year. Maybe you had great dreams of finally getting your savings together or being able to pay off that loan – which all went down the drain when the pandemic hit. On the other hand, maybe this year has left you with money to spend and you want to know what to do with it. Either way, we’re heading to a fresh start and it’s time to think about your financial situation.

A new year is a great way to set some goals for your finances and look at how you can get the most out of your money. Here are some great ways to do just that.

If it looks too good to be true, it probably is

If you have some savings to burn or you want to grow your money quickly, looking at investing is a good place to start. But investment scams are an easy trap to fall into.

Barry Oliver, Associate Professor in Finance at the University of Queensland, warns that schemes that guarantee a great return often turn out to be scams:

“If you find an investment that has really good returns, try and think about what risk those returns might be holding. We know today the interest rates on deposits aren’t much above 0% so once you find an investment that has higher return, think about what risks come with it. Often they are hidden, sometimes too well. If the investment has a return that is nearly too good to be true, it probably is too good to be true.”

Looking around for a good investment opportunity can be a great way to boost your profits. But make sure to do your research and consider the risk before committing your life’s savings to it.

Check that your insurance policies suit your needs

It’s easy to forget about your insurance, after all, it’s only there for when you need it. But insurance companies are reactive to big events, so it’s a good idea to make sure your policy covers you for what you need.

For example, remember earlier this year when travel insurance companies took anything to do with a pandemic out of their policies? It’s worth reading the fine print to make sure you’re not left out in the cold when a crisis hits.

Australia has recently endured fire, hail and, of course, coronavirus, so it might be a good idea to check that your home, car, and health insurance policies cover you for any events that might impact you. It can cost a bit more to add the extras you need, but it’ll be worth it if disaster strikes.

Round up your savings

Many banks and credit institutions now offer a round-up option. This simple but handy function allows you to round up or top-up purchases on a debit card to the nearest dollar, with the extra cents going into your savings account. Say you buy a coffee for $3.50 every weekday of the year, you’d get an extra $130 in your savings at the end of the year – just from coffee. It’s a simple but easy way to earn some extra spending money.

Check on your superannuation

A lot of people tend to ignore their super until closer to retirement, but it’s a good idea to be looking at it now. For starters, make sure that all your super is consolidated into one fund. It’s easy to set up multiple super accounts after switching jobs, as each employer will often have a designated fund, but this will not serve you in the long run.

Luckily, the ATO now allows users to track any super funds that are linked to their tax file number. Bringing them all together means your super will earn more interest and you’ll save on fund fees.

It’s also worth looking into what fees your super fund is charging and how its return rate compares to competitors. If you’ve been considering switching to a different super fund, taking the time to research over the holidays can be a great time to evaluate your options.

Get into good habits

If you’ve ever needed to apply for a loan, you’ll know that it often involves your credit score. This is a personal score built upon personal financial information that takes into account things like the amount of money you’ve borrowed in the past and whether you pay things on time.

A low credit rating can often stand out on a loan application, so you should start getting into good spending and saving habits now. Paying off your credit card bill, meeting your car repayments or settling any instalment purchases, like afterpay, on time is a great way to show you’re reliable and can handle your money. Letting debts get out of control is a red flag for any lenders, so if you can get in the habit of paying things off as they arrive, you’ll be better off in the long run.

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