2020, the year that was, then wasn’t, then was, then wasn’t again. It is certainly a year to remember and to be forgotten. Physically, emotionally, mentally and financially very testing for different reasons. Bring on 2021! We’ve pulled together some Summer Savings for an endless summer you really deserve!
One of the main things that I’ve been focusing on with my clients during the pandemic was budgeting. Things became a lot tighter, and people had to really focus on what to spend and where. Obviously, with the restrictions, it was a lot easier in some cases of where to cut expenses, but I don’t know about you, but we seemed to be getting packages delivered every few days!
The important thing now that the restrictions are easing, and we return to some kind of (new) normal, is that we don’t go spending crazy! It’s especially harder with Christmas around the corner. We have to be mindful that we don’t undo any of the budgeting skills we’ve learnt by overspending, and accumulating a pile of credit card debt to start 2021.
According to the RBA in December 2018, spending on credit boomed to $30M. If you calculate that on average, it is estimated that 27% of people will still be paying off this debt two years later, the interest accrued on this alone, is in excess of $100M. This is why you can’t get too far ahead of yourselves, as you don’t want to ruin your summer, and the start of the year.
For those with credit cards, there is always the option of looking at those companies that let you roll over debt on to a 0% interest repayment for a period of time. What you can do then, is every repayment you make, you are paying off 100% principal. For example:
- EDWINA had a $2,000 debt that was rolled over with a 0% interest rate for 18 months
- Budgeting, she could pay $111 per month, and ensure that that debt was cleared entirely in that interest free period.
As a comparison;
- PHOEBE had a $2,000 debt with a 17% interest rate
- Budgeting, she could pay the minimum repayments on the debt and it would take 17 years to fully pay off that card.
This path is not trouble free though, because in some cases, any spending that occurs on these cards get placed behind the 0% interest rollover, meaning that you will not be paying off the debt that has high interested accrued on it.
SAVE SAVE SAVE!
A fun way to get the kids in to saving I’ve found useful is the Coke Bottle challenge. Basically this is where you collect your $2 and keep them in a used (and cleaned) Coke bottle. People have done the testing;
- 600mL bottle you can get around $1,000 saved
- 1.25L and 2L varieties, you can save $1,900 and almost $3,000 respectively
You can have them do it individually, or as a family and put it towards a holiday now that the pandemic is basically over!
Another one I like is where you start out by saving $1 in week one, $2 in week two, $3 in week three for example, for each week of the year. By doing this, you will accumulate $1,378 over the year. A fun way to do it is have a tally board off and cross off each donation. That way you can spread out the weeks that you have to pay more in, as your budget dictates, especially as where you have November/December payments where money may be tighter due to upcoming Christmas.
UPDATE YOUR BENEFICIARIES!
Lastly, I’ve had a few cases recently where new clients have had no or invalid binding death nominations on their life insurances and superannuation funds.
Superannuation is a non-estate asset, so unless you have a beneficiary that is your Estate, your Will will not deal with your superannuation benefits. This causes issues at time of claim, which is already a tough enough time for your loved ones, without delays and trouble with accessing funds at a time where it is urgent. Take 5 minutes and check to make sure that you;
- Have a beneficiary listed +
- Make sure that it is a valid beneficiary
Give us a call to discuss whether or not the beneficiary is valid or not because your nominated superfund will not tell you if you have listed an invalid beneficiary. Naming the incorrect person can be very costly! Our team of experts can help you ensure you’re not making unknown costly decisions, get in touch now and we can help you with your Summer Savings for a stress-free endless summer you wont forget!
Have a great Christmas and a Happy New Year, and we’ll see you in a hopefully brighter and better 2021.
Steve Reynolds – Certified Financial Planner