Fresh goals for the year ahead
Now that we’re well into the new year, it’s a good time to appraise your financial progress and set fresh goals for the year ahead. There are some financial goals you should consider such as reducing your debt, making a budget and saving more, but what about your longer-term plans?
Get the basics in order
Spending, budgeting and saving
If you haven’t already written your budget for 2019, start by working out how much you currently spend. For one month, record your spending such as weekly expenses and then factor in your longer-term spending such as car registration, school fees and gifts. Many bank accounts and credit card accounts have online facilities that allow you to export your transactions to help you analyse and categorise your spending.
Once you’ve documented your spending – see how much you have left over. If there’s nothing left review each category of expenses and see where you may be able to reduce your spending. This document then becomes your ongoing budget for you to stick to. Continue to keep track of your spending to ensure you’re meeting your budget.
Our budget spreadsheet is a great tool that can help you make sense of your finances.
Once you have managed to reduce spending so you now have some extra money left over, you can use it to pay off debts and start to save for bigger, longer term purchases such as a car or holiday or to boost your retirement savings.
Pay down your credit card and high interest loans
If you have credit card debt or high interest loans, a good rule is to repay debt with the highest interest rate first. By increasing your re-payments you’ll pay them off sooner and reduce the amount of interest you pay overall. You may be able to use a balance transfer to take advantage of an interest-free period and/or a lower interest rate with a different credit provider.
Create a savings plan
Work out what you want to save for and write it down. Make sure your savings account is different to your everyday account so you’re not tempted to spend it frivolously. Then, set up an automatic transfer to continue to allocate the same amount to your savings account each time you get paid. That way, you’re less likely to notice it. A good time to start to do this is when you receive a pay rise.
Broaden your plan
Once you get your basic finances in order, the new year is a good time to do some further planning for the future and to plan how you can help others who are in need.
Sort out your super and your insurance
At least once a year you should log in to your super account and check your:
- Investment choice – is it still appropriate for your risk profile? If you’re not sure refer to our risk profiling tool and seek advice from a financial adviser. How your super is invested could change over time and may have a significant impact on your savings by the time you reach retirement.
- Insurance levels – what type and level of cover do you have? Would this be enough to support you or your family if you were unable to work due to injury, illness or if you died? Refer to the insurance calculator by logging into your account, going to the insurance tab and clicking on ‘insurance needs calculator’.
A financial adviser can also help you work out how much cover is appropriate for your circumstances.
- Beneficiaries – are they still the appropriate people to inherit your super and be paid out any insurance if you die? Make sure you update them if they’ve expired or if something has changed in your life. A financial adviser can help you work through your situation and decide if you need a more comprehensive estate plan.
- Balance – check your super balance and the contributions going into your account. Is this likely to be enough when you retire? If you’re not sure refer to our retirement gap calculator. Then consider making extra contributions to super – not only will you grow your retirement savings but you could save on tax.
Help your adult child with their super
If you have a relative such as an adult child who earns less than $52,697 a year they may be eligible to take advantage of the Government’s super co-contribution scheme. The scheme rewards people for making personal non-concessional (after tax) contributions to super.
For people who earn less than $37,697 pa, the maximum co-contribution is $500 based on 50c from the Government for every $1 you contribute. So, if they contribute $1,000, they will receive up to an additional $500 super contribution from the government. The amount reduces the more you earn - up to $52,697 pa.
If your adult child is not in a financial position to contribute some of their wages to super, you may want to gift them some money so they can. This will not only boost their super but it will also get them into the habit of contributing to their super so that, as they earn more, they’re more likely to continue to contribute themselves – ultimately securing their financial future.
Invest in your future
Once you have some savings, it’s important to invest it wisely. Your age and financial circumstances will determine what type of investments are most suitable.
Take the time to learn more about the world of investing so you understand the potential risks and rewards. Always make sure you fully understand what you’re investing in and seek financial advice before making any investment decisions.
Decide which charities to support
If you’re interested in supporting a charity, the new year is a good time to decide which ones to assist. The first step is to decide what is important to you. Are you interested in medical research, food aid, helping the environment or perhaps helping animals?
You then need to decide how you can help. Do you want to donate money, goods or your time and skills?
Once you’ve decided, you can research charitable causes on the internet to see which ones appeal to you.
And, don’t forget, any donation over $2 to a registered charity can be claimed as a tax deduction in your next tax return.
Seek financial advice
If you need help planning your financial future seek advice from your financial adviser. They can help you determine and document your goals, make sure you’re making the most of your money and keep you on track to achieve the lifestyle you want.
If you don’t have an adviser contact us and we can put you in touch with one.