The financial services regulator is encouraging Australians to start the new year by setting financial goals, listing five tips to help achieve the feat.
According to ASIC’s senior executive leader for financial capability, Laura Higgins, one of the most popular New Year’s resolutions is for people to “take control” of their money.
However, Ms Higgins highlighted that ASIC research has found that while 44 per cent of Australians said that they have a short-term financial plan in place, only 23 per cent admitted to having a long-term plan.
“Having a financial plan in place is key to getting on top of your finances,” Ms Higgins said.
“Start by identifying your financial goals and what you want to achieve. Next, you can consider the steps you’ll need to follow to make them happen including how long it will take.”
Suggesting that those wishing to track their progress can use ASIC’s MoneySmart TrackMyGOALS app, the executive also outlined these five tips to help those looking to set a financial plan this year:
1. Make a plan
According to ASIC’s research, nine in 10 Australians kept track of their finances, with eight in 10 having a budget.
Single parents with children at home were the most likely to report having a budget (at 94 per cent), followed by singles living in shared accommodation (84 per cent).
According to ASIC, having a budget is “the cornerstone of a financial plan as it can help track spending and identify money habits”.
2. Take charge
ASIC highlighted that the festive season can lead to high debts, with 32 per cent of Australians surveyed saying that they were buying their Christmas presents on credit. Therefore, it suggested that credit card users start making extra repayments on their smallest debt and then move to other debts.
The regulator said: “A credit card debt of $2,000 could take... over 12 years to pay off and cost about $2,150 in interest, if you only pay the minimum repayment.”
ASIC has a credit card calculator that can help users see how much time and money they can save by making higher repayments.
3. Create a savings balance
“Having a healthy savings balance gives you breathing space to deal with life’s ups and downs, and means you won’t have to borrow money if something unexpected happens,” the regulator said.
It suggested that consumers could build up a savings buffer to “set and forget” by opening a separate savings account and making regular payments automatically into the bank from their pay.
4. Take stock of insurance
Part of the resolution process should include reviewing insurance policies to “ensure they cover everything you want included” and are competitive. ASIC suggested that consumers “compare the policies offered by other insurers when... home or car insurance comes up for renewal”.
5. Maximise super
The last tip revolves around superannuation. According to ASIC research, a third of Australians did not know their superannuation balance.
ASIC suggested that those with super spread across multiple funds should consider consolidating their super into once account to save fees.
“Making extra contributions and reviewing... investment options can make a big difference to retirement funds,” the regulator said.
[Related: ASIC’s New Year resolutions]