The benefits of automating your personal finances

In today’s fast-paced world, where every minute counts, managing personal finances can feel like another tedious task. However, thanks to the rise of personal finance automation, managing these tasks, can now be handled with minimal effort on your part.

Whether you’re a professional, a business owner or someone who is busy and looking to streamline your personal financial life, it makes sense to automate.

Save time

One of the biggest advantages of automating your finances is the time it saves you. Instead of manually paying bills, tracking spending, or worrying about due dates, automation takes care of these tasks for you.

Prevent late payments and penalties – and mistakes!

One of the most common pitfalls of personal finance management is missing the due date of your bill payments. Whether it’s your rent, mortgage, or utility bills, setting up automatic payments ensures that deadlines are always met, and penalties or late fees are avoided.

Managing your finances manually can often lead to mistakes, whether it’s miscalculating a bill, forgetting to budget for a specific expense, or accidentally double paying an invoice. Automation helps eliminate human errors, ensuring that all your financial tasks are completed accurately.

Keep your finances on track

Automated tools can also track your spending habits, categorise your expenses, and provide insights into your financial behaviour. This can be particularly helpful for budgeting, allowing you to see where your money is going and make informed decisions about your spending habits and saving. 

Getting started

The good news is that personal finance automation doesn’t have to be complicated. Here are a few simple tips to help you get started:

Automate your bill payments

Start by setting up automatic payments for your regular bills; such as utilities, rent or mortgage and credit cards. Most service providers offer online payment portals where you can link your bank account, debit, or credit card and set up recurring payments. You can schedule them to occur on specific dates each month, ensuring that everything is paid on time.

You can also use apps like GetReminded to receive reminders when contracts are set to expire such as utility bills and insurance and some even enable comparisons with providers, making it easier to shop around.

Make it easier to get ahead

Budgeting apps like Mint, YNAB, or PocketGuard can enable you to create a spending plan. These apps automatically sync with your bank and credit card accounts, categorising your spending and tracking your progress against your financial goals. Once your budget is set, automate your savings by scheduling regular transfers to a savings account or investment portfolio.

Apps like Qapital or Digit can help you set up automated savings that round up your purchases or take a small percentage of your income and save it for you. Even saving just $20 a week automatically can add up over time, and you probably won’t even miss the money!

Set up alerts and track your progress

Most of the major banks also have apps that can be used for a variety of financial services. Use your banking app or personal finance tool to set up alerts for when your balance hits a certain threshold or when you exceed your budget for a specific financial category. This will keep you informed and allow you to adjust as needed. Additionally, tracking your progress over time will give you a clear sense of achievement and motivate you to stick to your financial goals.

Prepare for tax time

Of course, we are always about being as organised as possible for tax time and finance automation can be your friend when it comes to having to substantiate any tax claims.

The ATO app myDeductions can help you keep your tax records organised. It allows you capture information on the go, making tax time easier. The myDeductions app can record work-related expenses for your car travel, uniform, self-education, bank interest, and dividends. You can also email your records to us!

Personal finance automation is one of the easiest ways to simplify your financial life and give you more time to focus on what matters most to you. Start small, and before you know it, you’ll have a financial system that works for you, not the other way around. 

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How to financially ease into retirement

Deciding when to retire is a big decision and even more difficult if you are concerned about your retirement income.

The average age of Australia’s 4.2 million retirees is 56.9 years but many people leave it a little later to finish work with most intending to retire at just over 65 years.i

If you’re not quite ready to retire, a ‘transition to retirement’ (TTR) strategy might work for you. It allows you to ease into retirement by:

  • supplementing your income if you reduce your work hours, or
  • boosting your super and save on tax while you keep working full time

The strategy allows you to access your super without having to fully retire and it is available to anyone 60 years or over who is still working.

Working less for similar income

The strategy involves moving part of your super balance into a special super fund account that provides an income stream. From this account you can withdraw funds of up to 10 per cent of your balance each year.

As you will still be earning an income and making concessional (before-tax) contributions to your super, this approach allows you to maintain income during the transition to full retirement while still increasing your super balance, as long as the contributions continue.

Note that, generally speaking, you can’t take your super benefits as a lump sum cash payment while you’re still working, you must take super benefits as regular payments. Although, there are some exceptions for special circumstances.

Take the example of Alisha.ii Alisha has just turned 60 and currently earns $50,000 a year before tax. She decides to ease into retirement by reducing her work to three days a week.

This means her income will drop to $30,000. Alisha transfers $155,000 of her super to a transition to retirement pension and withdraws $9,000 each year, tax-free. This replaces some of her lost pay.

Income received from your super fund under a TTR strategy is tax-free but note that it may affect any government benefits received by your or your partner.

Also, check on any life insurance cover you have under with your super fund in case a TTR strategy reduces or stops it.

Give your super a boost

For those planning to continue working full-time beyond age 60, a TTR strategy can be used to increase your income or to give your super a boost.

To make it work, you could consider increasing salary sacrifice contributions into your super then using a TTR income stream out of your super fund to replace the cash you’re missing from salary sacrificing.

In another example, Kyle is 60 and earns $100,000 a year. He intends to keep working full-time for at least another five years. Kyle transfers $200,000 from his super to an account-based pension so he can start a TTR strategy then salary sacrifices into his super.

This will reduce his income tax, but also his take-home pay. So, he tops up his income by withdrawing up to 10 per cent of his TTR pension balance each year.iii

A TTR strategy tends to work better for those with a larger super balance, a higher marginal income tax rate and those who have not reached the cap on concessional contributions.

Nonetheless, it can still be useful for those with lower super balances and on lower incomes, but the benefits may not be as great.

Some things to think about

TTR won’t suit everyone. For example, be aware that you cannot withdraw more than 10 per cent of your super balance each year.

Also, if you start withdrawing your super early, you will have less money when you retire.

The rules for a TTR strategy can be complex, particularly if your employment situation changes or you have other complicated financial arrangements and investments. So, it’s important to seek professional advice to make sure it works for you and that you are making the most of its benefits.

If you would like to discuss your retirement income options, give us a call.

i Retirement and Retirement Intentions, Australia, 2022-23 financial year | Australian Bureau of Statistics
ii, iii Transition to retirement – Moneysmart.gov.au

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