Declaring War on Financial Waste

When was the last time you sat down and really reviewed your finances – I mean top to bottom?

What you will more than likely find is that you are losing money through unhealthy and unnecessary wastage. This wastage will take many forms, and will be more than likely occurring on both fronts - personal and business!

The personal

The Household Financial Waste Report, released in July 2019 estimates that Australians are wasting more than $4 billion each year paying unnecessary interest on their mortgages alone, simply because they have not switched to a lower home loan rate!

The report also highlighted the growth in unnecessary spending on common household expenses, the money of which could have been used to further pay down debt i.e. extra mortgage repayments.

What was astounding was the wastage that was uncovered surrounding the average Australian household. In summary - we love excess and we don’t often review the simply things.

We spent more than $1 billion each year powering appliances that are on standby mode, more than $9 billion worth of uneaten food ends up in the garbage; $621 million in extra interest payments by not switching from high to low interest credit cards; and $551 million in fees for late or overdrawn cards.

I mean, these are not small numbers.

Whilst losing money through unhealthy home loans or credit cards can be a relatively quick fix [i.e. change providers], the behaviour behind the excess spend may not be.

Our recommendation

• Get an easy win to begin – review your current home loan rate and compare it to the market. There are plenty of websites that will do all the heavy lifting for you.
• Next review your current credit card – focus on both fees and rates. Once again here plenty of websites out there to assist. Make sure you also consider the value of reward points – do you use them and do they have any value?
• Now time for the hard one – the personal budget. Get it on paper and set time and dates to check-in on the progress. Great apps out their again here to assist. Checkout pocketbook, its free and automatically tracks bank transactions and categories them for ease and simplicity!
• Conduct an annual financial health check – always great to celebrate an anniversary especially of you have achieved financial growth!

The Business

Business wastage takes many forms and can occur across every part of the business. Waste, in whatever form, will lead to reduction in business profits, adversely affect productivity and business efficiencies and affect the overall stability of the business.

Business owners today are faced with greater challenges than ever before. These challenges go well beyond the delivery of an amazing product or service. They need to be across finance, have the ability to manage their information, gain insights, whilst still having the ability to make quick, yet strategic decisions whilst managing business risk.

Sound a bit much? That’s ok – just keep it simple and work out what best works for you.

It may seem obvious here but have a conversation with your accountant. What are they seeing in you accounting file that may be able to be tweaked or improved upon. What are the focus areas for the business – where can you capture and retain identified wastage?

Our recommendation

• Start with the personal and relate it back to the business – we call this the why.
• Conduct an annual business health check or waste audit– work with your accountant on this and review everything.
• Review your systems and processors on an ongoing basis – its all about continuous improvement.
• Focus on a maximum of three areas or projects at any one time.
• Be consistent in your approach – set time aside to ensure that they are actionable.
• Engage with your accountant or professional advisor - regularly.