Disclaimer: Before I begin, I think it’s prudent to point out that this blog is written from the perspective of one family to another. I am not a financial advisor and do not consider myself an expert in this particular field aside from when it applies to my family finances.
Having said all of that, I would like to take the time today to share with you some of the things that I do to prepare my family finances for the financial year ahead. Some of these areas may apply to your family, some you may be totally across, but hopefully there are some valuable pieces of information here to help you get ready for the year ahead.
I like to get my ducks in a row early in the piece and lodge my tax return ASAP. This is mostly because once I’ve done that, I receive our Child Care Subsidy withholding. I’ve budgeted my tax return, my husband’s tax return and the Child Care Subsidy withholding into our family budget because we are on a debt free journey and this year is key in our plan.
In Australia, your tax return can be done very easily via the my.gov.au website however I would urge you that if you have a more complex return (you operate a small business or have investment properties, etc) that you consider taking your return to an expert. Even if you don’t have a complex return and aren’t confident in preparing your own return, the shopping centres usually have tax return booths from various companies available at this time of the year.
If you’re going to do your own tax return, make sure that you check everything that you’re eligible for. Things like Zone Offsets, Pensioner Offsets and your Medicare rebates are all personalised to your family situation and some of these things aren’t well documented or advertised. The ATO has great resources available to read up on all of the areas of a tax return, but even then you may need advice for your specific circumstances.
Most importantly, your tax refund can take up to three weeks to be processed and deposited into your account, so don’t bank of having the money too soon. Once you’ve lodged your tax return, other rebates may flow in, specifically Family Tax Benefit and Child Care Subsidy withholding so it definitely pays to put your tax return in every year as early as you can.
Don’t forget that as a family you and your partner both need to declare each other’s income. Even if you’re defacto. So make sure you have all of this information in correctly before you lodge your tax return.
Estimating your family income
Now this one varies for every family. Some families receive overtime, bonuses, experience periods of unexpected unemployment and other situations throughout the tax year. The best advice I can offer is to estimate your income for the highest amount that you’re expecting to receive. Review your family income estimate throughout the year and adjust the amount accordingly.
I would suggest setting a reminder at the end of every quarter (September 30, December 31, March 31) now so that you can go and check the family payslips and add up the YTD (year to date) figure to check that you’re on track for your family income estimate. If you realise that you’ve underestimated, or you receive a bigger than you estimated bonus, etc – go and update your details as soon as you know.
The benefit to staying on top of your family income estimate throughout the year is that you won’t end up with a debt at the end of the year for things that are income-assessed such as Family Tax Benefit and Child Care Subsidy. Worst case scenario, you overestimate and receive a bigger than expected refund at the end of the year.
The only exception to this rule is if your family is eligible for pensions or income-assessed benefits that you’d lose by over-estimating too far. In this case, I’d recommend estimating as close as you can and then re-assessing every quarter or whenever you have a bonus or windfall come in.
For detailed advise for your family, most definitely discuss your financial situation with a tax specialist.
Preparing your budget for the year ahead
For our family, budget and financial planning is vital to ensuring that we stay on track to become debt free as soon as possible. I operate a long-term budget that spans across the next 5 years and balance the budget forecasts weekly against actual spending. I can literally pull the data on how much we spent on each major expense group in the 2018/2019 financial year. My husband is an extremely private person though, so I will never disclose actual figures.
But my point here is to get yourself in a position where you are in charge of your finances and not the other way around. Living paycheck to paycheck is something a lot of people do at some stage in their lives, but it doesn’t have to be! By simply outlining your family’s estimated income and major expenses for the year ahead on a piece of paper, you could start your financial year one step ahead of the rest.
Here is a very simple template that is based on my spreadsheet:
My Income $XXX
Husband’s Income $XXX
Other Income $XXX (regular guaranteed income such as Family Tax Benefit, Child Support, etc)
My Mobile $XXX
Husband’s Mobile $XXX
Home Internet $XXX
My Car Insurance $XXX
Husband’s Car Insurance $XXX
Home and Contents Insurance $XXX
Roadside Assist $XXX
Health Insurance $XXX
Child Care $XXX
School Fees/Books/Uniforms $XXX
My Car Registration $XXX
Husband’s Car Registration $XXX
My Car Servicing $XXX
Husband’s Car Servicing $XXX
Swimming Lessons $XXX
Additional Loan Repayments $XXX
My Spending Money $XXX
Husband’s Spending Money $XXX
Multiply the income and expenses by the frequency (i.e. Weekly x 52, Fortnightly x 26, Monthly x 12) and then you’ll have a good idea of where you’re sitting for the year ahead.
There is a lot of complex information, apps and the like available to manage your budget, and if these work for you, then fabulous! However I put our family budget into an excel spreadsheet and run it from there.
Ways to guarantee a refund at the end of the year
There are a few ways to help your family get ahead for the financial year from the outset. Here are some suggestions for ways you can set yourself up for financial success without any major impacts on your family finances:
- Declaring that you have a student loan debt even if you don’t (but definitely if you do have a student debt ensure that the additional tax is being taken out of your income). The bonus is, if you don’t have a student debt or pay it off during the tax year, you receive a much bigger income.
- Overestimate your family income for Centrelink. This will directly impact the amount of Family Tax Benefit (it will decrease with each additional increase of income you record) you receive and the Child Care Subsidy (you will receive less and therefor pay more out of pocket for your child care) you are entitled to, however will ensure that you don’t have to repay a debt come the new financial year. And if you do overpay child care fees and receive less Family Tax Benefit, this is all balanced out at the end of the financial year and given back to you.
- Keep records of all deductions! Donations, kilometres (those airport drop offs really add up and count towards kilometres for the person travelling for work), uniforms, study related costs.
Again, these are just some things to look in to, they may not work for your family. Always seek financial advice if you want to ensure that the decision you’re making is right for your family. I love following #debtfreecommunity on Instagram. Dave Ramsey is a bit of a legend in my books and provides some great, free advice if you’re on a debt free journey. Go and look him up if you want some inspiration on achieving the debt free dream and financial freedom.
Finally, there is no right or wrong way to go about setting yourself up financially for the year ahead. There is only the way that works for your family and you. These are some things that have worked for our family over time. I’d love to hear some of your hints and tips.