Source : THE AGE NEWS
Just like you’d check your fuel and tyre pressure before hitting the highway, reviewing your finances ahead of the new year can help catch hidden issues before they’re a larger problem.
“Most Australians wouldn’t go years without a health check, but many haven’t reviewed their finances in just as long,” says Peter Hogg, general manager of advice at Aware Super.
Not only does the holiday season mark the end of the calendar year, it also signals the halfway point of the financial year.
“It’s the perfect time to check in because you’ve got six months of data to work with and six months left to course-correct before June 30,” says Stevie-Jade Turner, senior financial adviser at Verse Wealth.
You don’t need a lengthy audit, a few minutes is all you need to get started. Here’s what to cover:
Check where your money is going
When it comes to improving your financial future, trying to increase your cash flow by hundreds of dollars a week is rarely the answer. “Small actions, whether it’s reviewing your subscriptions, paying down debt or making an extra super contribution, can add up over time,” says Hogg.
It’s also a good idea to get a clear view of your money. Not only will it help identify potential leaks in your budget, it can also help re-align your spending with your values.
“Review the last six months’ of bank and credit-card transactions, and categorise everything,” Turner says.
“Most people are surprised by what they find when they actually look line by line.”
Review your emergency savings
You can’t predict when the washing machine will break or an unexpected bill will arrive, but according to Hogg, you can prepare for it.
“That’s what an emergency fund is for,” he says. “It’s less about chasing a magic number and more about creating a financial buffer that gives you confidence and flexibility when life doesn’t go to plan.”
For Turner, a common rule of thumb is aiming for three to six months of essential living expenses, like mortgage repayments, rent, utility bills, groceries and essential insurances.
Need to bump up those savings? Turner suggests automating regular transfers to a high-interest savings or mortgage offset account.
“Once you’ve hit your target, redirect those same contributions towards your next goal, whether that’s investing, extra debt repayments or super contributions, so the momentum doesn’t stop,” she adds.
Fine-tune your super
One of the simplest ways for people to streamline their super is by consolidating multiple accounts into one.
“Extra fees and insurance premiums across multiple accounts can eat into your retirement savings over time, so it’s worth making sure your super is organised and working efficiently,” says Hogg.
Before rolling funds over, however, always verify whether you hold valuable insurance coverage or defined benefits in an older fund that would be cancelled upon exit.
To maximise the tax and financial benefits of extra super contributions, Hogg says not to wait until June 30. “Making small contributions throughout the year can help you make the most of your caps without the pressure of finding a large lump sum at the last minute,” he explains.
According to Turner, it’s also worth checking if you have unused concessional cap amounts carried forward from the past five years. “If your super balance is under $500,000, you may be able to make catch-up contributions.”
Review your retirement plan
If you haven’t logged into your super account recently, Turner says to check your balance, your nominated beneficiaries and your current investment option to see whether the asset allocation matches your retirement timeframe.
If retirement is still decades away, some investors prefer a higher exposure to growth assets, she explains. If you’re closer to wrapping up work, it’s often a catalyst to re-evaluate whether your balance is protected from shorter-term market swings.
By assessing your retirement plans now, you’ll get a better sense of whether you’re on track or need to make adjustments.
“Retirement doesn’t happen overnight,” Hogg says. “The habits and decisions you make today can have a significant impact on your future lifestyle, which is why it’s important to review your super and retirement plans regularly rather than waiting until retirement is just around the corner.”
Review your insurance
The policies you took out last year may not suit the lifestyle you have now, so take a few minutes to update your details.
According to Hogg, insurance is one of those things many Australians set and forget, but the right coverage can save you money now and in the long run.
“Life changes quickly,” he says. “If you’ve bought a home, changed jobs, had children or paid down debt, it’s worth reviewing whether your cover still matches your needs.”
If you have insurance inside super, Turner says to consider whether you’re paying for coverage you no longer need, especially if you’re closer to retirement, are debt free or have adult children, as the fees chip away at your balance over time.
Hit the highway with clarity
You don’t need a marathon spreadsheet session to make an impact. Taking 15 minutes to run through your accounts, trim unnecessary costs and confirm your savings goals are automated gives you a fresh start for the year ahead.
Once the checklist is clear and your money is on autopilot, you can switch off the work notifications, pack your car and enjoy a summer break knowing your finances are running smoothly in the background.
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
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