Create a few perks from your salary

David Koch & Libby Koch

Now is the time to get financially fit. All you need is a little resolve and a few simple exercises

During the year there never seems enough time for a bit of “financial housekeeping”, as we call it the little checks we constantly need to do to make sure we’re not wasting money or opportunities.

But the start of a new year brings new enthusiasm and good intentions. So, over the next week, see how many things you can cross off the checklist. Call it a financial fitness test and reap the benefits.

Find out your credit rating
Discover how lenders see you and whether there are any blemishes that have crept on to your record by mistake.

It’s pretty easy.

Get a copy of your credit file so you know what’s on it. Then set up an alert service so you’re notified of irregular activity.

Veda Advantage holds our credit records. Its alert service tells you every time an application for credit has been made in your name or if your personal details have changed.

Get your credit under control by paying down a balance and making a promise to keep it well below any credit card limits for the rest of the year.

Upgrade to a better card
Rewards, rates and fees change often, particularly when official interest rates are changing so rapidly. Search canstar.com.au or infochoice.com.au to make sure you have the best credit card deal you can get.

Current rates range from 10 per cent to more than 20 per cent. Make sure the features of your cards match your usage.

There have been a lot of debit cards launched over the past year, which offer a terrific alternative. You get the convenience of a credit card while using your own money and avoiding crippling interest.

Haggle a better interest rate
Contact your bank and ask for a cheaper rate on your home loan. Most bank managers have some discretion to offer a discount to good customers of, say, 0.25 of a percentage point.

If you have your insurance, credit cards and investments with the same bank, you’re in a strong position to emphasise how deserving you are of a better deal.

Triple the return on savingsDo you have cash going nowhere in a cheque or savings account? Bank savings accounts typically pay less than 1 per cent interest. Online accounts with a number of financial institutions pay between 4 and 5.25 per cent.

There is just no excuse for putting up with low rates anymore.

Add to your superannuation
Compulsory super contributions of 9 per cent of your salary just won’t be enough to maintain your lifestyle in retirement. Go to your bank website and use one of the calculators all the bank websites have them to work out how much super you’ll need to stash away to meet your lifestyle. If there’s a gap, then look at making extra contributions.

It’s arguably the most tax-effective investment available.

Manage like a pro
If you have a diversified investment portfolio, the run-up in the share market over the past year has probably thrown your mix out of line, increasing risk and eroding returns.

In this situation, professional investors will realign their portfolios back to their strategic mix. For example, the 45 per cent run-up in the sharemarket over the past year may now mean the equities portion of your portfolio will be above what you’ve allocated.

Track your returns
It’s a pain to figure out how your investments are doing, especially if they are scattered among several accounts.

Spend time setting up a portfolio tracker so you can calculate your own rate of return.

Most online brokers offer clients quite sophisticated portfolio management tools or you can buy specific software (like Quicken) which allows tracking of investments and offers other tools

Find out if you’re being paid what you’re worth
Before you can make your case for a raise, you need something to measure yourself against. Go to a recruitment website and price your job.

Find out what other companies are paying for your skills and, if there’s a big gap, broach the subject with the boss.

Estimate your life insurance
How much cover is enough? For a fast, ballpark estimate, multiply your annual income by five, but it also depends on your obligations and life stage.

Life cover should at least be enough to pay off debts and have some left over to provide for any surviving relatives.

Learn your tax bracket
Knowing what rate you pay on the last dollar you earn can help you to, among other things, work out the tax implications of various investment options.

Pull out last year’s tax return, check out the taxable income, adjust for any big changes in income or deductions and then go to the Australian Taxation Office website at ato.gov.au to use a calculator and work out what’s happening.

Pay less car insurance
Paying the annual car insurance premium can become a reflex action. It comes in and you just pay the bill.

This year, stop and check whether there is a better deal on offer somewhere else. Again, there are plenty of comparison websites that list all the car insurance policies available with calculators to adjust for the car model and your location.

Your first stop should be a call to your existing insurer to see whether they can do better.

Save more of your wage
Set up an automatic debit which kicks in on pay day and sweeps 10 per cent of your salary into a separate investment account.

You’ll be amazed at how easily you will adjust your lifestyle to function on the remaining 90 per cent of your salary and you’ll be equally amazed at how quickly those regular 10 per cent contributions grow into something substantial through the magic of compounding.

Wealth-building is all about the discipline of putting a little bit away on a regular basis.

Create an insurance recordWalk around your house with a camera. Shoot close-ups of your jewellery, artwork and other valuables. If disaster strikes, this proof of what you owned will speed your claim and help you get a better settlement. Keep copies of the video or photos in your safe deposit box or elsewhere outside your home.

Assess recurring charges
It seemed like a good idea for just $16.99 a month, you could rent three DVDs at a time as often as you wanted. But how often is that really? Scan your credit card statement for those automatic monthly charges you normally just pay.

Ask yourself whether you’re getting your money’s worth. How often do you go to the $75-a month gym? How about that cheese-of-the-month club? Cancel what you’re not using.