With the rising cost of living top of mind for many Australians, the new year is an ideal time to get started on improving your financial health.
Research by CBA shows nine in ten Australians have a financial goal for the new year and reducing living expenses tops the list for about half of them. One in two Australians wants to spend less on non-essential items, while about four in ten want to increase savings and find ways to earn extra income.
To become financially well-organised, Shakespeare suggests that it may be more manageable to spread tasks throughout the year. Some ideas for 2023 are as follows:
January – March
1. Review your finances
The new year is a good time to check your portfolio balance and see if you’re still on track to reach your financial goals. Review how much of your salary you saved and invested last year.
2. Review your super
Reviewing your super is a small investment of time that can result in a large return. Simple steps like consolidating your super accounts (if you have more than one) and reviewing your insurance and asset allocation can greatly impact your retirement outcomes. Also consider whether a retail fund, industry fund, or self-managed super fund is most appropriate for you.
3. Review your investments
If you haven’t checked up on your investments for a while, undertake a portfolio review to check on your portfolio’s allocations to the major asset classes. Explore your investment options, such as shares, bonds, managed funds and property.
4. Find your best return on investment
Consider what will be your best return on investment. Capital allocation decisions will depend on factors such as life stage and the interest rates on debts versus the expected return on investments. Prioritising paying off high-interest debt, like credit cards, is likely to provide a better return for your money.
5. Avoid loyalty taxes
Home loans, private healthcare, car insurance, utilities etc, often have great deals that are offered to new customers. But rather than paying what’s known as the loyalty tax, compare your policies and loans through a comparison site or finance broker. Don’t be afraid to switch providers, as the difference could add up to thousands of dollars a year.
April – June
6. Increase your super contributions
Check on whether you’re making the most of superannuation contributions. If you’re not making the maximum allowable contributions to these accounts, seek advice as to whether you should be putting more in. Remember, there are limits to the amount of super you can contribute each year and funds contributed to super are generally “preserved” for your future retirement. Exceeding this limit may mean paying extra tax.
7. Automate your savings
Set up an automatic transfer of your nominated savings amount on your payday. Ideally, a goal would be to save 10-15% of your net income. An idea is to put your investment contributions on autopilot via automatic transfers.
8. Assess your emergency funds
Unexpected expenses can crop up no matter your life stage, making it essential to hold liquid reserves. Holding three to six months’ worth of living expenses in true cash instruments is a good starting point, though people who earn high salaries, have unpredictable earnings streams, or are primary earners may want to hold more. Aim to build at least three months of your income as an emergency fund in your savings.
9. Assess your liquid assets
Retired people may want to hold more cash, in case one of their income sources is disrupted for some reason. Interest rates also increased substantially over 2022 on cash and term deposits, so you should check your bank in providing you with a competitive interest rate.
10. Conduct a portfolio review
The end-of-financial year is a good time to give your portfolio a thorough check-up. If you have investments that have lost value, selling to generate a tax loss is a consideration.
July – September
11. Tax season
You can lodge your tax return from July 1, but the Australian Taxation Office advises waiting a few weeks. From late July, most information from employers, banks, government agencies and health funds will be automatically pre-filled into tax returns. Check the information and add anything that’s missing plus your eligible deductions. Get an early start on gathering tax documentation and checking in with your accounting team at Shakespeare.
12. Review your estate plan
A basic estate plan covering who will inherit your assets, a guardian for children, and who will make important decisions on your behalf if you cannot make them yourself, are critical for people at all life stages and wealth levels. Also, review your superannuation beneficiaries and long-term care plans should they be required.
October – December
13. Beat tax deadlines
Taxpayers need to either lodge their returns themselves or appoint a registered tax agent by October 31. Use tax time as a reminder to get financially well organised and sort out what old documents you need to keep or can shred. Old out-of-date statements can be thrown out, while consider storing very hard-to-replace documents, like birth and wedding certificates, in a safe-deposit box or fireproof box.
14. Go paperless
If you haven’t already, consider switching over to electronic delivery of your statements. Understand that each piece of financial documentation that passes through the mail puts you at greater risk of financial fraud. Plus, you’re likely paying extra fees for paper document delivery.
15. Create a finance document
Every household should have a primary master document outlining financial accounts, along with the provider’s name, account number, URL, and the names of any individuals they work with. You can create this with a simple spreadsheet or use a pre-printed template. Whatever you do, keep your document secure, and alert someone trusted of its existence.
16. Review your insurance
The end of the year is also a good time to check on your various insurance policies.
Contact the team at Shakespeare if you would like expert advice on becoming financially well-organised in 2023.
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