By John Collett | 23 Jan 2019
Here are some one-off things you could do now, which may continue to boost your finances well past the beginning of the year.
It's that time of year when thoughts turn to making New Year's resolutions. Trouble is, many of us struggle to continue with the resolutions beyond March.
We've selected the five best tips from all those that have been published over the year.
They are all one-off things you can do now and forget, that will continue to boost your finances well past the festive season. No ongoing willpower is required.
1. Health insurance
While you shop around for cheaper financial products, such as credit cards and cheaper loans, health insurance is a financial product where easy savings can be made.
Many health funds offer discounts or promotions to attract new customers and will sometimes waive waiting periods on claims on their hospital and extras cover.
If you prepay 12 months of premiums, you'll beat the price hikes that start on April 1, plus many health funds offer discounts for annual payments.
Most people who have extras cover will have it with the same insurer. But sometimes it may be better to have hospital cover with one insurer and extras cover with a different fund.
Further, those on a couple's policy might be better off having two single policies if only one of you wants top hospital cover.
The same applies to extras policies; one person may want comprehensive extras for optical and major dental while the other might not need a policy.
2. Electricity costs
Most households can save by switching energy suppliers and can also save by taking some simple steps to reduce energy consumption.
Retailers offer discounts to their standard rates that can sometimes be very attractive.
You have to bear in mind the discount usually applies only to usage charges and not to the service charges.
Missing a payment by one day could mean you lose a discount and go back to the standard rate, or even the top rate.
Those customers on contracts have to be careful. If the contract is broken to go with another retailer, there could be a break fee and you want to make sure ongoing savings will be worth it.
Look for ways to reduce energy use by turning off lights when not in the room as well as replacing brown and white goods with energy-efficient models.
3. Consolidate super
It is important to consolidate super funds as each fund has fixed costs. With one fund, you are paying only a single set of fixed costs.
It is also important to not just consolidate to any old fund, as super fund performances differ more than you think.
If you are with an underperforming fund you will be retiring on tens of thousands of dollars less than if you were in a fund that is just mediocre, let alone a top performer.
It is the long-term performance of the fund and how it compares with other funds that invest in a similar way that matters.
Unfortunately, most of the superannuation researchers have locked away their data behind paywalls or only allow password access to the data for financial services industry professionals.
But figures from researcher SuperRatings show that to June 30, this year, the median return of the biggest-50 balanced investment options was 9.2% over one year, 7.3% over three years, 8.9% over five years, 8.5% over seven years and 6.4% over 10 years.
If you are in your fund's default offering and its performance is not at least around the middle of the pack over a period of at least seven years, you should be asking questions of the fund.
4. Salary sacrifice
Sacrificing some of your salary up to the annual cap each year, if possible, is one of the best things you can do to set up a comfortable lifestyle in retirement.
Because of the power of compounding, especially over a long period, the dollars that are put into super early in a working life are more valuable in retirement.
The idea of salary sacrificing is to swap the pay that would attract income tax at your marginal rate which, for most workers, is way above the 15 per cent superannuation contribution tax.
Once the money is inside super, it is lightly taxed. And the first $1.6 million per person, once in the pension phase, is not taxed at all.
The annual personal pre-tax contribution limit is $25,000 and includes the 9.5% of wages that you receive in compulsory super.
Don't worry if your employer doesn't offer salary sacrifice, as you can claim a tax deduction for personal contributions by filling out a form.
5. Do you need a car?
The running expenses of a car are a big part of most household budgets.
Those without children (who need running around) and live where there is good public transport should consider if they really need to have their own wheels.
There are plenty of car-hire companies for when you want to take that day trip. And there are ride-sharing services when you just need to get from A to B.
If sticking with a car, it is important to buy the car you need, not what you want.
Depreciation of the value of a new car starts the minute it leaves the showroom and then there is the insurance, registration and servicing.
And for those who have to borrow, the cost of finance is expensive – typically more than 10% from most lenders.
This article was originally published by The Sydney Morning Herald on 11 December 2018. It represents the views of the author only and does not necessarily reflect the views of AMP.
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