There’s nothing like doing your taxes to make you take stock of how your finances are looking and where there may be room for improvement. It’s at this time of year that we can see more clearly where the gaps in our financial planning lie. As you assess your position from last year, ask yourself some key questions, make a list of what’s missing, and set goals to action these items sooner than later in this new financial year.
Take stock of your finances
“Pick one day and devote a couple of hours to sorting out the current status of your assets, debt, income and cash flow,” advises Jo. “Write a list or use Excel to keep all of your information in one spot. Is it time to re-evaluate your debt to asset ratio? Is it a good time to re-invest or pay off more debt?”
In order to improve your financial situation you need to understand the lay of the land. Financial goals aren’t static and are likely to change year-on-year. You may find an old investment is no longer serving your goals or that you want to take advantage of new opportunities and market conditions, such as the current low-interest rate environment.
Make an achievable budget
Seeing how your finances and expenses shaped up last year can also help you create a realistic budget that you can stick to this year. If you need help creating and tracking your spending, there are some great software solutions that can help. We’ve recently started using a terrific program called CashMaster Pro to help our clients master their money. It’s loaded with features that let us provide advanced financial coaching, cash flow monitoring and budgeting assistance. (Give us a call anytime on 8268 2900 if you’d like to chat more about how this could work for you.)
Sort out your super
A significant number of Australians are not likely to achieve adequate retirement incomes, even when all sources of savings are considered. Are you happy with where your superannuation is at for your age and plans in retirement? Do you need to be sacrificing more from your salary or making extra contributions if you are self-employed? Remember that super payments from your pre-tax salary reduce your assessable income, meaning that you pay less tax. We’ve been comparing superannuation platforms recently and have been able to provide some clients with up to 50% savings in fees.
Doug’s advice is: “Check your maximum contribution for your age for this year and pay an extra amount monthly so you are set up in years to come. A little bit of planning now can be worth a lot when you need it most at retirement.”
Get more organised
There’s nothing like trying to organise paperwork for tax time to show you if you have kept an efficient record-keeping system. If not, set up one now that you can easily stick to each week. Create a spreadsheet to record and add up your deductions and make folders in which you can store your receipts or scan and store them electronically (being sure to back up of course).
“I love a list, however, recently I moved into a new technology world and downloaded Xero and Dropbox on my iphone. I now have my accounts set up on these applications. It really helps me to stick to my plan and be organised,” says Jo.
Are you properly insured?
Not only are income protection insurance, health insurance and life insurance essential for protecting the long-term financial health of you and your family, but they also come with tax benefits. If you haven’t put in place these essentials it’s a good time to get advice on what you need most and some of the best options available for your circumstances.
IAS has an insurance comparator of all insurers. If you have had your insurance for a number of years, it’s time to evaluate cost and benefits and make sure you’re still got the best deal and coverage for your individual needs.
Have you reviewed your health insurance recently?
While we don’t provide advice on health insurance, we are constantly hearing from clients about how expensive health insurance is, alongside complaints that they never use it. AIA Vitality has recently launched myOwn, a health insurance brand with a difference. By combining with AIA Vitality, myOwn ensures clients are rewarded for their everyday health choices. With the AIA Vitality fee built into the price of the product, client’s immediately become AIA Vitality members and receive an upfront discount of 5%. We’d be happy to tell you more about this anytime too.
Do you have a savings buffer?
It’s easy to put savings last on the list but a financial life jacket is important. Six months worth of expenses in a separate savings account is what is generally recommended to protect yourself in the event of any unforeseen emergencies.
“Dad taught me years ago that there are two types of people in this world, those that “save first and spend second” and those that “spend first and save what’s left”,” says Jo. Which one do you think you are? Is your savings strategy working for you?
Are you happy with your investments?
Are you happy with how your investments performed this year and your medium and long-term goals? Or do you need to create a new long-term strategy? Always diversify your investments – don’t put all your eggs in one basket!
We’re always happy to talk to our clients about how we can help them meet their financial goals.
For more information or advice call us on (02) 8268 2900 for an obligation-free chat.