With the end of financial year (30 June) quickly approaching, businesses all over Australia will be on the home straight. It’s a time when they need to get out of that last corner with plenty of momentum, setting themselves up for another lap in 2016/2017.
They’ll be allocating budgets, sending off tax returns and trying to strategise a way to stay on track for another 12 months, hopefully overtaking the competition.
Racing metaphors aside, families may not have the same urgency as their corporate counterparts, though they can use the same philosophies as businesses to improve their own financial standing.
Here is your cheat sheet for making the new financial year one that positively impacts your savings and financial security, and makes the end of financial year a breeze:
1) Look ahead for expenses
Businesses have capital budgets and operating budgets – things they’re going to spend money on outright and others they’ll pay for over time. Similarly, your household will have things you pay lump sums for and others you will pay on a recurring basis throughout the year.
According to the Australian Securities and Investment Commission (ASIC), the average family spends:
- $223 per week on housing
- $193 on transport
- $161 on weekly recreation
- $59 on furniture and the like
- $44 on new clothing
If you can work out more specific numbers on your weekly, fortnightly or monthly expenditure in the same way – that is, breaking down one-off payments into “operating costs” – you can start putting that money aside in your savings account.
Not only does that give you the cash you need when you need it, you’ll earn interest on it, too, giving you more money than you previously would have had.
Try and do the same with as many future expenses as possible. For instance, if you’re planning on going on holiday, work out where, estimate how much it will cost and divide the total so it fits into your monthly or weekly budget – ASIC averages holiday spending at around $52 per week.
2) Make time for budget planning
We don’t always take saving to heart when we’re young, and by the time the job and family commitments kick in, we rarely find the hours in the day to focus on it, either. Roy Morgan Research found that the exact same is true with superannuation.
A business can’t get anywhere without a budget, and you should probably take the same stance. It’s imperative that you make time for budget planning, and the beginning of the financial year is as good a point as any to get started, so you can measure your success over the year.
3) Don’t get lax on tax
Many households will have already paid tax on their paychecks, but if you earn income that has no tax deducted, you’re required to file an individual tax return, which makes the approach of the end of financial year an important time. Most of the time these are due on 31 October, but you can get ahead by putting things in order in the months running up to that date. If you have a self-managed super fund, you’ll need to have this audited, too.
Flip over to the other side of the coin, and the end of financial year can also mean you may also be eligible for a tax refund – 77 per cent of us are, according to separate ASIC research, and it totals an average of $2,283.
So, some families aren’t out of the woods yet. Take a leaf from the businesses that will be rushing to their accountants towards the end of June and start planning for tax time today.
4) Spare a thought for acquisitions
According to Ernst & Young, business acquisitions are at a six-year high, with 41 per cent of companies looking to buy or merge with another this year. Are you looking at a new acquisition – another addition to your family?
Around 800 babies are born in Oz every day, and the cost of bringing one up has risen by 50 per cent since 2007, according to the University of Canberra. It means more budgeting for things like extra furniture, more food, childcare and potentially moving house – and refinancing that home loan.
So, if this is even slightly in your family’s future, it’s time to get ahead of the game and put some more money aside.
Happy financial new year. Are you looking forward to it?