Spring is a great time for starting afresh. The sun shines longer and in Canberra,
Floriade is just around the corner. It’s a good time for spring cleaning your finances – here’s a 10-point plan.
1. Fine tune your insurance
Twelve months is a long time and in that period plenty can change. There could be new financial concerns such as an
investment property, or new personal responsibilities such as a child, or grandkids. Whatever happens, it’s likely to alter
the balance of the amount of personal insurance you require.
Whether it’s life insurance, income protection insurance or preferably a balance of several types of insurance, be sure you’ve got what you need for your current situation.
2. Know your value
Sit down with pen and paper and figure out exactly what you’re worth. What do you owe, and what form does that debt take?
What do you own, and how liquid are those assets if funds should be required? How much have you put away so far for retirement and how is that tracking according to your plan?
Most importantly, how does where you’re at now compare to where you were at 12 months ago?
3. Reform bad habits
Throughout the year, since your last financial health check, it’s likely that a few bad habits might have developed in your spending. Go through your bank statements and do a rough calculation – it doesn’t need to be extremely accurate – of where your money goes. Those daily take-away coffees from the cafe outside work aren’t getting any cheaper, and if you cut them out you’ll save around $1000 annually. How else can you plug the leaks?
4. Balance your portfolio
In consultation with your financial adviser, re-visit your investment portfolio after making a fresh discussion about your current risk appetite and the constant changes in the market. Last year’s conservative stock may be this year’s risky business, so ensure your funds are where you want them to be.
5. How super is your super?
It’s no secret that super funds have had a challenging time of late, but that’s no reason to cover your eyes and hope for the best. Discuss your fund with your financial adviser and request that they make the fund’s mix of investments, and their pros and cons, clear to you. Your fund may already contain the perfect mix for this market, or it could be worth shifting the weight around. Also, if you have multiple funds, ask to see if it is better for them to be consolidated in order to avoid multiplying the fees.
6. Clean out your files
One of the greatest turn-offs when it comes to financial considerations is the mountain of paperwork that goes with every transaction and investment. Some paperwork must be kept, but much can be shredded and then recycled. Spend a few hours making your filing cabinet a less scary place and suddenly your entire financial situation will seem rosier.
7. Forward plan
What will you need this coming year? Cost it out in one list. Now make a second list of what you ‘want’ in this coming year (very different to what you ‘need’). You may actually need a new car, and you may also want a bathroom renovation, or a trip to Europe. Cost the lot, work out what is realistic and responsible and what is not, then speak with your financial adviser to put plans in place to make them happen.
8. Destroy bad debt
Unless it’s within an interest-free period, credit card debt can be a drain on your finances. Figure out where all of your ‘bad’ debt lies – the debt that is not tax-effective or working for you as an investment – then make a weekly plan to get rid of it as soon as possible.
9. Celebrate your victories
If things are tracking well in terms of the plans you agreed with your financial adviser, don’t be afraid to celebrate – just don’t go overboard. Reward yourself – this way you’ll be more likely to succeed again. Give your financial results a positive personal spin and it will encourage fabulous future habits.
10. Define your dreams
What does your dream retirement look like? What are its main ingredients? Develop a clear picture of this in your mind and, with the help of your financial adviser, ensure your financial plan contains the right elements for it to become reality.