THE end of the financial year is the perfect time to step back and have a look at how you have spent the last 12 months — literally.
Some close scrutiny will soon tell you whether you have overspent, underspent or are on track to reach your financial goals.
Then you can get cracking on building your budget bucket list for the next fiscal year.
The bucket method is a popular tool that financial planners use as a straightforward way to organise your budget. Just follow these steps.
1. Income test
Work out where your money is coming from, says financial planner Cath Sharples-Rushbrooke, manager at Advice Services Australia.
This could include a variety of sources including salary/ wages from employment, small business profits, investments or even Centrelink benefits, says Sharples-Rushbrooke.
Then sort out where it is going to.
When people spend more than they earn it can lead borrowing money to fund everyday living costs which is expensive and often unnecessary.
Sometimes they are borrowing money for things they probably dont really need, she says. At its worst, sometimes this borrowing can spiral out of control meaning that people dont even have enough money for things they actually do need.
2. Grab your buckets
Create three buckets of money to regulate your expenses and get you in the habit of putting money away every pay cycle, says Gavin Fernando of Prosperity Advisers.
The first is for expenses that are pay less frequently than monthly such as utilities, car registration and insurance.
These expenses dont come in regularly but they happen every year, like Christmas, you just have to budget for them, he says.
The second is saving for discretionary expenses such as a holiday in 12 months time.
The third is for everyday living costs like groceries, entertainment, Foxtel etc
This way you regulate your costs and wont need to resort to a credit card when larger expenses come in.
It also forces you to examine how much you are spending and may prompt you to look for ways to save.
Look at big items and see how make a debt eg groceries a major component. Look in the fridge and see if you are throwing away consumables, he says.
Maybe it would be better to shop a little bit more often rather than cramming it all into one go or look at other suppliers for price and quality and weigh up if its better to do your grocery shopping elsewhere to save a few dollars.
For those who have a regular pay cycle, too much idle cash can burn a hole in your pocket, says Fernando. Make sure you have expenses covered for regular living but if you save a bit more than when the fridge blows or the car needs something youve got a safety net.
3. Make a deal
Shop around for better deals on everything.
Take advantage of low interest rates, says Sharples-Rushbrooke: Lenders are keen to retain business, so even calling your own bank to see if they can give you a better deal might yield instant savings.
Examine your usage and cut where you can then start calling providers for better deals on insurance, gas, electricity, phone and data plans, groceries,
Pay down your most expensive debts first (usually credit cards)
Start saving whatever you can whether it is into a bank account, for investments, or adding to super.
BANKING customers could be delivered much cheaper deals on daily banking products if a smaller home loan lender wins its battle to gain approval to roll out other offerings.
Loans.com.au remains one of the fiercest lenders in the mortgage market and has snared tens of thousands of customers by delivering razor-sharp home variable interest rate deals as low as 3.39 per cent.
This arguably has put the heat on rival lenders who have been forced to offer even cheaper deals.
But Firstmac managing director Kim Cannon who owns loans.com.au said he now wants to smash the bank oligopoly and provide a whole suite of other banking products.
To do this he said the lender faces the giant hurdle of trying to secure a banking licence which would allow them to take deposits and offer other deals such as day-to-day transaction accounts and credit cards.
What weve done in the home loan space I want to be able to do in banking and credit cards and really provide some sort of competition, he said.
At the end of the day the four major banks run and control about 99 per cent of business.
We proved it (we can increase competition) in home loans so why cant we do this.
Gaining a banking licence in Australia remains difficult the Australian Prudential and Regulation Authority is responsible for authorised-deposit taking applications while the Australian Securities and Investments Commission allows an organisation to conduct a financial services business.
But Mr Cannon, who is yet to apply for a licence said his biggest challenge to get a licence himself was being restricted because an individual person is unable control more than 15 per cent of a bank.
We have bank ownership law problems and a lack of competition, we dont have competition in this country, he said.
If he is eventually successfully he wants to deliver single-digit credit card interest rates and minimal interest returns on day-to-day transaction accounts.
This week the big four banks came under scrutiny at a parliamentary inquiry into banking practices including their treatment of customers.
The Australian Bankers Associations chief executive officer Steven Munchenberg has hit back at claims there isnt enough banking competition in Australia, but conceded it was a challenge for new institutions to obtain a banking licence.
If you do a bit of work on a financial comparison site you can get a free transaction account, a credit card with an interest rate less than 10 per cent and a home loan with a rate less than four per cent, he said.
The main challenge to get a banking licence is around deposits, you cant take deposits without a banking licence.
We have a system in Australia if you put your money in a bank or authorised-deposit taking institutions then theres a very strong guarantee its safe.
Mr Munchenberg said to maintain the banking guarantee which was instilled during the global financial crisis and protects a depositors funds of up to $250,000, a tight reign needed to apply on who could successfully obtain a banking licence. br
Consumer watchdog Choices spokesman Tom Godfrey said while maintaining strong banking competition in Australia was critical to ensure customers walked away with the best deals possible, he believed relaxing rules wont protect consumers.
Its more likely to lead to sharks and shonks entering the industry, with consumer losing even more, he said.
Consumers do need better offers and a more competitive banking system.
The Federal Government should conduct a thorough review of competition in the banking sector to explore options that will shake up the big banks and protect consumers, not harm them.