In a recent article, we gave you some tips about tax deductions that could save you money when you’re submitting your 2021/22 tax return to the Australian Tax Office (ATO).
One point raised in that article was the importance of keeping accurate financial records throughout the year, as doing so can make filing your return much easier.
In this article, you can read about seven more key reasons why you should be looking to keep your financial records up to date.
1. It helps you understand your finances
Just the very process of updating your financial records can help give a clearer idea of your finances.
If you’re starting from the position of not being particularly well-organised, taking some very simple steps initially can help you get started.
For example, you could create a very simple spreadsheet – although there are apps you can use if you’re feeling more adventurous.
It’s really down to you how detailed you want it to be. Maybe begin with a high-level overview before you drill down into more granular detail.
Check a recent bank statement and note down your income and outgoings. Then sort the paperwork, or online communication, for each item.
Just by doing this, you’ll begin to get organised, and will start to give yourself an idea of your financial position.
2. You’ll be able to keep better track of your outgoings
In most circumstances, your income will be constant. Although if you’re self-employed, or have variable income each month, that makes it all the more important to keep a record of your earnings.
Some outgoings will be constant as well, such as direct debit mandates and standing orders paying a fixed amount each month.
So, it’s your discretionary spending that accurate records will help you with in the first instance.
For example, if you’re wondering how much you spend on meals out in a month, accurate records will assist you in working that out easily.
It also means it’ll become far more straightforward to query anything you think is incorrect, such as the wrong amount being collected on a direct debit.
3. It will save you time
It may take some time to get yourself organised but, once you’ve started and have the foundations in place, you’ll have all your records to hand and a clear overview of your finances.
It then becomes easy to keep your records up to date.
One common method to keep up to date is by carrying out a quick monthly health-check – maybe on the first of each month, or when you get paid.
Make sure all your mandates and outgoings are correct. Then, take a look and see what insurance renewals or similar large, one-off payments are coming up and where you’ll need to take action. It’s much easier planning ahead for this type of thing rather than having to scrabble through lots of paperwork each time you get a demand or notice of renewal.
4. It can save you money
As you’ve already read, by checking everything is up to date, you’ll soon be able to spot any discrepancies.
Clearly, the key time when good record-keeping can help you identify cost-savings and tax deductions will be when you’re completing your tax return. But there may be other, ad hoc moments during the year when accurate record-keeping can help you.
It’s much easier to challenge potential errors with the information to hand, rather than having to make assumptions or rely on incomplete data. Remember: financial institutions aren’t foolproof, so they can make mistakes in terms of collections or failing to cancel out-of-date mandates, for example.
You may discover that you’re being over-debited or overcharged and be eligible for a refund you might not have previously anticipated.
5. You’ll be better placed to cope with an emergency
If your records are up to date, it’ll make dealing with any emergency event much more straightforward.
At this stage, it’s good to remember any other people in your household who may need to access your financial records in your absence.
So, it’s prudent to share details of how and where your records are stored, making available information about passwords and security as necessary.
6. You’ll have your retirement plans at your fingertips
From a financial planning perspective, once you’ve sorted your income and expenditure, the next top priority should be to ensure all your savings, investments, and pension records are up to date.
Planning for your retirement, in particular, is a key financial commitment, so it’s good to have a clear understanding of what you’ve got, where it’s invested, and the current value.
This can become increasingly important as you get closer to retirement so you’re able to see that you’re on track to meet your goals and make adjustments as necessary.
7. You’ll get valuable peace of mind
Finally, knowing everything is straight and up to date gives you the peace of mind and comfort you get with anything that’s under control.
You’ll have access to all your key financial details at your fingertips and will be able to easily react to unexpected financial events.
As well as a quick monthly “housekeeping” session, it’s worth having a more detailed regular review of your finances to ensure your long-term financial planning is in order.
An article we published at the beginning of the year should give you a useful steer as to the sort of things you should look to review annually.
We would also strongly recommend you speak to a financial planning expert who can guide you and ensure you’re getting the most from your money.
Get in touch
If you have any queries regarding your financial planning, please get in touch with us.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
This article is for information only. Please do not solely rely on anything you have read in this article and ensure that you conduct your own research to ensure any actions you may take are suitable for your circumstances. All contents are based on our understanding of HMRC and ATO legislation, which is subject to change.