CANNY ACCOUNTING l Expert Advice for Setting Your 2021 Financial Goals
Letting your trusted team of advisors at Canny Accounting, Canny Advisory + Canny Legal help you set and achieve your financial goals!
Last year we all learned a lot about our spending habits, thank you COVID-19! Now let us help you put some plans into action that will really help to improve your financial life going forward. These are all very achievable and with the help of Canny Accounting, Canny Legal and Canny Advisory we can set you on a path to financial order.
Money is just a tool and learning to get your financial life in shape is just learning to use that tool well. We want you to feel in control of your money, not the other way around. And it’s not all about the money either, we have listed some other great strategies for you to consider as well.
Here are some manageable tips to get you started…
QUICK + EASY WINS WITH YOUR BANK
You get charged around 20% interest on credit card balances. Unpaid credit card balances are the fastest way to go backwards financially.
Focus on reducing your Credit Card balances to NIL before you do anything else. Then keep your spending down so you can repay your credit card balance each month.
It’s too hard to know where you are financially with just one bank account. Using 3 different accounts to keep your Bills money and your Cash Savings separate from your Everyday Account helps you tell at a glance what you can afford to spend each week. Go ahead and set these up now.
Pay yourself first! Have your bills and cash savings covered automatically – and then spend what’s left in your everyday account. So easy to keep on track by this one simple strategy. Set up auto transfers using internet banking to transfer a set % of your wages each week into your Bills Account and into your Cash Saving Account.
Aim to create a cash reserve to last you for 3 months. Most income protection insurance takes 1 to 3 months to start up – so you’ll need a cash reserve if anything stops you working. You can set up Cash Savings account separate to your everyday account. Try to put aside into this account 5% of your weekly pay and build up a 3 month cash reserve.
Your bank won’t offer you an interest rate reduction on your loan unless you ask for it. So… ask for it! This could save you thousands of dollars each year. When contacting your bank to ask for a reduction in your interest rate, have quotes available from another bank to show that you have done your homework and you know what is available out there!
BE TAX EFFECTIVE
Being smart about where you keep your cash savings can reduce your overall family tax payable. By moving your family savings into either a home loan offset account or into the name of your partner or spouse who has a lower tax rate can save you money.
We always advise clients not to have debt – if they are in that enviable position. But many of us are not. So, if you do have debt, the next best thing is that it is tax deductible debt. If you are considering borrowing money to buy an asset that is for work or business purposes, or perhaps an investment property where you should be able to claim the interest being charged, this is ‘good debt’ in that it is at least tax deductible. You should therefore prioritise getting rid of ‘bad debt’ such as credit card debt and your home mortgage as it is of no advantage to you in terms of tax deductibility.
Part of your savings plan may be to contribute to superannuation (on top of what your employer is putting in). Make sure that you understand how before and after tax contributions work so that you are getting the most benefit. When you contribute before tax, that is you get a tax deduction for your contribution, the maximum amount that can go into your super fund from any source is $25,000 in one year. When it is an after tax contribution there is a maximum of $100,000 per year that can go into your fund (or you can bring forward 2 extra years) You can also have a combination of both.
Other simple tax tips are – Keep all your receipts for anything that is purchased to help you do your job and record the travel that you do in your own car that relates directly to work. If you are studying and it is related to your current job, keep all your fees (not if you are paying via HELP) and any reference books, stationery, uni parking and internet costs to do with study and we will determine if you are able to make a claim.
GET YOUR AFFAIRS IN ORDER + THEN REST EASY
Make sure that if you are running your own business, you have a robust structure set up to protect your personal assets. If you are operating as a company, give some thought to who would be your replacement should something happen to you. We can help you to document a successor director.
While we are on this subject, give some thought to an Advance Health Directive. If you are unconscious or incapacitated and cannot make personal health decisions – you will need someone who can. This can be covered during an estate planning session with one of our lawyers and of course there is the matter of an effective Will.
If you die without a Will, the Public Trustee will charge your estate (could be up to 5% of the total estate) and your wealth may not go where you want it to. With your instructions and Canny Legal guidance, we can help to have your wishes carried out. Also, if there comes a time where you are incapacitated and cannot make decisions, you will need someone who can make financial decisions on your behalf. We can facilitate a Power of Attorney and you can rest easy that that is done!
We are here and happy to help you get rolling with the journey to reaching your goals, you just have to make the first move.