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New year's resolution: What can I do financially?
Reviewing financial plans and arrangements – such as budgets, loans, insurance and superannuation – can sound daunting but it’s important to make sure these arrangements are up to date and reflect current circumstances, and the start of a new year is a good time to freshen them up.
New year's resolution: What can I do financially?
Reviewing financial plans and arrangements – such as budgets, loans, insurance and superannuation – can sound daunting but it’s important to make sure these arrangements are up to date and reflect current circumstances, and the start of a new year is a good time to freshen them up.
Make the most of savings
The key to building wealth is how much is saved – not how much is earnt. Unfortunately the current low interest rate environment is making it tough for savers.
It’s worth shopping around to see if other financial institutions are offering better rates on savings accounts and term deposits than is currently being achieved.
It could also be a good idea to reconsider whether the cash is better placed elsewhere. For instance, if it’s currently in an ordinary savings account but isn’t going to be touched for some time, a term deposit may offer a better return.
Or it may even be worth thinking about other forms of investment, as long as it fits the long-term savings strategy and risk profile.
Renovate your home loan
The good news about the low interest rate environment is that home loans are much more competitive.
Have a look at the different lenders to see if there are lower rates around. However make sure that you are comparing apples with apples – if there are features of the current loan that you want to keep, such as a redraw facility, make sure that these are also available on any loans being considered.
It could also be worthwhile letting the current lender know you are thinking of switching or getting professional advice on which options are most competitive.
Review insurances
A person’s biggest asset is their ability to earn an income. Therefore, income protection insurance is a worthwhile investment. It may already be covered through superannuation so check the policy to see if this is the case.
Anyone who has received a pay rise should make sure their income protection policy covers this, as it doesn’t automatically increase.
Keep on top of super
It’s easy to forget about super, since for most people it is still many years until they will be able to access it. But keeping on top of it now could make a lot of difference upon retirement.
For example, topping up contributions now could add significantly to the bottom line in 20 or 30 years time. Likewise, choosing the right investment balance will have a big impact.
Those who are still a long way from retirement should consider a more aggressive strategy as they have time on their side to ride out market volatility.
But those closer to retirement may be better off with more conservative options that will protect their capital.
Having more than one superannuation account can also cause problems. Consolidating into one account saves fees and makes it easier to keep on top of investments.
Think about estate planning
Most people don’t like to think about their own mortality, but having up to date Wills to ensure that wishes are carried out upon death and the family does not inherit a problem, should be a crucial consideration.
Other key documents to review are Powers of Attorney regarding financial decisions and Powers of Guardianship regarding medical and lifestyle decisions.
We strongly recommend having a budget and the government’s MoneySmart website has a budget planner and apps to help track spending and goals.
Andrew Buchan, wealth management and superannuation, HLB Mann Judd Brisbane
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