A new financial year can be the perfect time to reassess your budget and set out your plans for the 12 months ahead. Here’s how you can set yourself up for success.
1. New opportunities with higher interest rates
The new financial year provides new avenues to grow your savings. After a series of rapid interest rate rises, the options for savers look starkly different to the previous year.
“We have been in a low-rate environment for quite some time but with interest rates on the rise, now could be the time to consider really growing your savings,” Macquarie Bank’s Head of Payments and Deposits Olivia McArdle says.
With ample opportunities to grow their cash balance, savers could benefit from checking the interest rate on their bank accounts is competitive.
Australians also need to be conscious that some accounts come with catches. For example, some may pay low or no interest on transaction accounts. In other cases, they may require their customers to satisfy certain monthly conditions, such as depositing a minimum amount of money or completing a set number of transactions, to obtain a bonus rate of interest on their savings.
Others, such as Macquarie’s transactions and savings accounts for example, carry no such conditions.
“Sometimes interest rates are conditional on a customer completing some behaviour. Ask yourself whether you’ll remember to meet that each and every month in order to unlock the higher rate,” McArdle says.
By missing these steps, you may miss out on higher returns and the long-term impacts of compounding.
2. Set manageable goals
Once you know your savings are working for you, it’s time to decide how you want to use them.
Whether it’s creating financial security for you and your loved ones, saving for your dream home, or going on a holiday, it’s about setting goals that will keep you on track.
However, a goal is only as good as your ability to stick to it. Give yourself a head start by finding ways to fit yours into your routine.
To make sure you’re on top of yours, McArdle says you could consider putting your savings into different single-purpose savings accounts with a competitive rate. This strategy is often known as ‘bucketing’.
“Think about what you have planned for the year ahead. You might have a savings bucket you can draw on for everyday expenses, another one to fund an upcoming holiday, and a third to build up a buffer for your mortgage repayments,” she says.
You could then sit down and decide how much you need in each account and how you’d like to save for each goal.
When you get paid or receive a different form of income, you simply divert a set percentage or amount to each account.
By being very deliberate about how you use your money week to week or month to month, you can more steadily set out where you want to be in 12 months’ time.
3. Follow your funds
When it comes to your budget, the old adage rings true: what gets measured, gets managed.
After all, if you don’t know exactly how your money is being spent, it’s difficult to budget, save, and achieve your financial goals.
This rings especially true as Australians feel the effects of cost-of-living pressures and higher inflation.
For those looking to get ahead this year, becoming laser-focused on your spending may be the first port of call. However, this doesn’t have to mean more work. For ease, automate your tracking so you don’t lose steam.
“Turn on your alerts so you can get a notification on your phone or your wallet every time you make a transaction,” McArdle says.
“You can also tag each transaction so that your banking app is automatically discerning the intent behind each purchase and transfer. This will help track your spending and keep you honest against your budget and your bucketing strategy.”
4. Protect yourself from scams
Beyond growing your savings, it’s vital you also spare a thought to protecting it.
Scams soared last year with Australians losing $3.1 billion to fraudsters, according to the ACCC1. The figure represents an 80% increase on 2021.
“We know that scams and fraud are on the rise and savings balances are a target. Consider using all the tools at your disposal to ensure you are protected, including something like multi-factor authentication in order to keep your accounts secure,” McArdle says.
Macquarie customers, for example, can download the Authenticator app which allows you to approve, or deny, activity such as transfers in real time.
As scams become a bigger issue and Australians are increasingly targeted, it’s vital you to take measures to keep yourself protected.
Remaining vigilant and wary of the risk throughout the year could also help you stay alert and safe, McArdle says.
“If something seems like it’s too good to be true, it probably is.”
- Review the interest rate on your savings account and check to see if there are any catches tied to it.
- Articulate your financial goals and consider using a ‘bucketing strategy’ to make sure you’re making progress towards each of them.
- Manage your spending using transaction alerts to keep you on track.
- Be wary of the rising risk of scams and fraud to keep your savings safe.
- This article was written by our friends at Macquarie.