RSM financial adviser Will Fernance says the new year is a good time to review your position and achievements, identify opportunities and plan to reach your goals. Photo: RSM.
The beginning of a new year is the ideal time to hit pause, reflect on your financial goals and set the stage for a prosperous new year.
Financial adviser for RSM in Canberra Will Fernance says with a few smart steps, you can close the year on a confident note when it comes to your financial health.
While budgeting seems an obvious starting point, an effective financial checklist is about taking stock of your position and achievements, identifying gaps and opportunities, and laying a solid foundation for the year to come.
“Begin by thinking about your goal not just over the next year, but also the next five and 10. It might seem like overkill to plan that far ahead, but certain decisions and actions today can have a ripple effect on your options down the line,” Will says.
“Are you saving to buy a house? Do you want to pay down debt? Figure out the destination, an ideal timeline and then, you can come up with a more intuitive budget.”
Not all financial factors are part of a conscious decision – some are the result of external forces. Put simply, life happens.
Will says the new year is also a good time to think about how your lifestyle, circumstances and needs have changed and how that may impact your financial health in the long run.
“Has your family changed? If you’ve had a child in that time, for example, your costs are going to go up,” he says.
“It’s a good idea to think about increasing your life insurance coverage, income protection insurance and so on. Your insurer generally won’t do that for you – you have to be proactive,” he says.
“The cost of things has gone up – do you need to review your cover? Or, perhaps it’s the other way around – you’ve paid down your debt significantly and could do with less cover, saving money on expensive premiums that serve no purpose.”
Debt prioritisation is a big piece.
Reserve Bank of Australia (RBA) rates are holding for the moment after two years of hikes with no solid indication of a reduction any time soon. So homeowners in particular should prioritise finding opportunities to save on interest where they can.
“If you don’t have a mortgage broker, perhaps you want to look into refinancing your loan, or getting in contact with one who might be able to help you find a better deal,” Will says.
“If you have credit card debt, prioritising paying that off could be a high-impact move. Always look to pay off debts with the highest interest first.
“The holidays are also a great time of year to find ways to increase your saving capacity. There may be insurers offering cheaper premiums for new customers, so it’s worthwhile taking the time to see what’s out there.
“Also, are there any lurking subscriptions or services you’re no longer using that you can ditch? It all adds up.”
While you’re budgeting, it’s a good time to start looking at the “R” word – and before the youngsters skim past, retirement is more and more a matter to consider during all stages of life.
The earlier you take steps to secure a comfortable retirement, the better off you’ll be. That’s how compounding interest works, as detailed in season two, episode 10 of RSM’s talkBIG 8 accountant secrets to manage high cost-of-living.
“With the cost of living going up, for young people it can be hard to justify losing out on money now for something that won’t impact you for decades to come. But it’s doable. It’s about making sure you prioritise needs rather than wants. Work out what’s left over after you have spent on your needs – and how much of that you can save,” Will says.
For those with assets, it’s also a great time of year to think about estate planning.
“Having a will and power of attorney in place to ensure your beneficiaries are taken care of is something we tend to put off and not think about,” Will says.
“The start of a new year is a good point to review so you can have peace of mind in the year to come.”
To find out more, visit RSM Australia.
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