Are you ever baffled by how some people can afford the social life they lead, the dream home they live in, or unexpected expenses that come their way?
While it often comes down to salary (and potentially the ability to borrow money), sometimes it also comes down to being smart with the money you have.
If it makes you wonder what you could change in your life to make your money go further, we’ve pulled together some basic rules of thumb to get you on your way.
To do this, we looked at a major consumer study undertaken in the UK1, which found the following rules of thumb were a good starting point, and then gave it a bit of an Aussie twist.
1. Clean up your finances regularly
Reviewing your finances every so often could help you to stay on top of your bills, eliminate any unnecessary fees and charges, and enable you to put your money where it matters most.
- Check your bank statements and credit card bills—This will give you a chance to review your spending on an ongoing basis and pick up any transactions that might look unusual.
- Cancel unused subscriptions—Think pay TV and streaming services, magazines, and if you have gym memberships you don’t use. You might be forking out more than what you should.
- Call your providers’ competitors—A recent survey shows a typical Aussie household could save up to $1,086 on their electricity annually just by switching from the highest priced plan to the most competitive on the market2. Now apply that thinking to all your service and product providers, and you’ll realise the potential savings you could make.
- Set monthly budgets—A budget is an essential tool. It lists the money you have coming in and going out. Our How to budget info page can help get you started.
- Check you’re getting any government benefits you’re entitled to—You can view all payments and services available on the Department of Human Services website.
- Check you’re not being taxed more than what you should be—You can check out the different income tax rates via the Australian Taxation Office website.
2. Manage your debt, don’t let it manage you
Whether it's a credit card, personal loan, student fees, car finance or home loan you’re paying off, making sure you’re in control of your debts could help you to reduce what you pay long term.
- Always know the real cost of the money you owe—This includes fees and interest charges, and keep in mind, if you’re only opting to pay the minimum rather than full amount owing, interest might be payable on the balance that’s leftover.
- Work out which of your debts to pay off first—If you have two $5,000 debts, it might make sense to pay off the one that’s charging a higher interest rate first, but check the conditions as some lenders may charge you for paying off certain loans early.
- Avoid using your credit card when you could take cash—Using money you’ve earned rather than putting things on credit could keep you from overspending. On top of that, remember that credit cards are typically more expensive than other forms of borrowing.
3. Save when you can - even a little can help a lot
Saving, particularly when you’re saving for something big, can sometimes seem like a mammoth task. But, breaking it down into bite-size chunks could make it an easier mission to accomplish.
- Save a bit of your disposable income regularly—A small amount deposited on a frequent basis can go a long way toward your savings goals, with 41% of Aussies saying that their approach is to save a little at a time3.
- Set your goals and start saving for them—Top preferences nationally include buying or renovating a home (48%), going on holiday (47%) and being able to enjoy the future (47%)4.
- Save some of your pay rise or bonus—A financial windfall isn’t something that comes around every day, so it’s worth considering what you'd do with it.
- Save on pay day rather than at the end of the month—Putting money aside for the essentials, as well as your savings goals, at the start of the month might make managing your money easier, as you’re then free to spend the money that’s left over.
4. Get involved with your super – it’s your future income
You might already have more cash in super than what you realise. And, if you act while you still have time on your side, this could make a difference to what you have when you stop working.
- Think about putting more towards your super—The amount you contribute doesn’t necessarily have to be large to have an impact, but remember contribution limits do apply.
- Consider consolidating your super—If you have multiple funds you’re probably paying multiple sets of fees, so it may be worth consolidating funds. Make sure you’re across any exit and withdrawal fees first however, and that you’re not losing any features and benefits that may be important to you, such as insurance.
- Understand how much you’ll need to retire comfortably—According to June 2017 figures, individuals and couples around age 65, who are looking to retire today, need an annual budget of $43,695 and $60,063 respectively to fund a comfortable lifestyle in retirement. This assumes they own their home outright and are in relatively good health5.
5. Plan for unexpected life events
Only 41% of Aussies have a stash of at least $5,000 to pay for an unplanned expense6. If you’re not one of those people, putting something in place could really help should the unexpected happen.
- Consider personal insurance—Knowing the level of cover you or your loved one may require can be tricky, so it’s worth thinking about how costs might be covered and existing debts paid off should things not go to plan. Our insurance calculator could help crunch the numbers.
- Think about the benefits of income protection—Benefits of up to 75% of your regular income might provide peace of mind that you’ll be supported if you’re unable to work due to sickness or injury.
- Look into contents insurance for valuable items—This covers the cost of repairing or replacing household items and personal possessions that may be lost, damaged or stolen.
- Nominate your super beneficiaries—When it comes to specifying your beneficiaries, most super funds will give you options as permitted under superannuation regulations. If you want your super to end up in the right hands, these options will be important because they’ll give you some say over how your super’s distributed. It’s also important, as super can’t be included in your will unless you’ve specified certain instructions with your super fund first.
- Create a will—A solicitor or estate lawyer can help you draw up a legally binding document that advises who should receive your estate assets when you die. Remember, if you don’t have a valid will, your estate may not be distributed according to your wishes.
Want additional help?
While getting on top of all your money-related tasks might not be achieved overnight, spending some time on these things regularly can help you to stay on top of things long term.
In the meantime, if you want help keeping track of where your money goes, you can view all your AMP and non-AMP accounts in the one place with My AMP.
You might also want to check out AMP's Bett3r Account, which helps you automatically pay bills, save, and know what's left to spend.
To determine what’ll work best for you, it might be an idea to speak to your financial adviser. And, if you don't have one, you can call us on 131 267 or use our find an adviser tool to locate one nearby.
1 Rules of Thumb and Nudges: Improving the financial wellbeing of UK consumers March 2017 page iii, 10 – 16,
2 Mozo research – Sick of high energy bills? paragraph 2
3, 4 MoneySmart – How Australians save money table 1
5 ASFA Retirement Standard June 2017 table 1
6 Finder - How a $500 emergency could spell financial ruin paragraph 10
Managing your money
Our free online learning module gives you tips around how to budget and save, and how to assess financial needs versus wants.
Check out these five hallmarks of a money-smart life.