New Year's resolutions have a reputation for being set but then forgotten. So let’s agree up front that we won’t think of financial preparations for the New Year as “resolutions”. Instead, this is a great opportunity to set things in order, re-group and review to ensure things are on track, and of course to re-balance and plan for the year ahead.

Calculate your net-worth

Best practice around reviewing your finances for the New Year begins with a calculation of your net worth. Save this somewhere so it’s easily accessible next year, and you’ll have a simple and effective way to measure your progress against a set goal. Include all of your assets (property, cash etc.) and liabilities to calculate a final figure.

Choose the best strategy for your finances

Next, pick a couple of items from your financial portfolio, whether they be credit card or mortgage, superannuation accounts or insurance policies etc, and do some research to find out whether you’re getting the best possible deal. Interest rates, fees and risk profiles should be checked at least every few years for each of your accounts. Just as compound interest can be enormously effective over time, so too higher fees and costs can result in far less wealth at the end of your investment period.

Spend some time getting to know your investments. For example:

  • How much is in your super?
  • How is it invested?
  • Are you on target to achieve your final goal?
  • What difference could you make by re-balancing certain investments?

Ask questions and seek clear and relevant answers as if you’re looking after the world’s most important retirement nest egg …because you are!

Then, depending on your stage of life:

Up to 40 years old

  • Consider maximising the effects of compound interest and perhaps even saving a little tax by salary sacrificing a small amount – perhaps $20 to $50 a week – into your super. A little now adds up to a lot later. Be wary not to exceed contribution caps though.
  • Check that your investments are allocated correctly to match your risk profile and the fact that you have several decades to ride out any market turbulence.
  • Analyse your insurance needs and check you have the correct levels of cover. You possibly have people that rely on you to provide for them. Make sure you, and they, are suitably protected.

From 40 to 60 years old

  • It’s time to start knocking down that bad debt, so make that a priority for the next few years and track your success using your net worth document.
  • Insurance is vital at this stage of life as you’ll likely have dependants and major responsibilities, such as a mortgage. Check you are insured to the right level.
  • Consider what you can do at work, or outside of work, in order to improve your earning potential.
  • Analyse your superannuation and figure out whether you need to begin maximising contributions, but don’t exceed contribution caps as additional tax will then apply.
  • Depending on your comfort with risk and your time left in the market, your portfolio’s risk/growth exposure should be periodically fine-tuned.

Retirees

  • How long will your retirement wealth last? How are your investments performing? This is perhaps the most important period of life to ensure your portfolio and retirement income stream are suited to your lifestyle.
  • Is your estate protected? Organise a will and enduring power of attorney if you haven’t already done so.
  • Put some money aside to enjoy yourself whether it be for travel, a hobby, a course or simply a night out to dinner every so often. You have earned it.

Planning for the best

To revisit your financial plan and ensure you’re on track to achieving your goals, or to put new plans in place for the year ahead, speak to a financial planner

Try our retirement calculator

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Things you should know

The information on this web page contains general advice only. It does not take into account any of your objectives, your financial situation, or your needs. You should consider whether the information is appropriate for you, having regard to your objectives, financial situation and needs before you act on the information. Also, before you make any decision about whether to acquire a financial product you should read the relevant product disclosure statement.  You should also consider talking to a financial planner to assist you in this process.

The information on this web page has been prepared by Commonwealth Financial Planning Limited ABN 65 003 900 169 AFSL 231139 (Commonwealth Financial Planning), a wholly-owned non-guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124. Financial Planners are representatives of Commonwealth Financial Planning.

Commonwealth Financial Planning is registered with the Tax Practitioners Board as a Registered Tax (Financial) Adviser. However your Financial Planner is not a Registered Tax Agent. Consequently, tax considerations are general in nature and do not include an assessment of your overall tax position. You should seek tax advice from a Registered Tax Agent.

The information on this web page is based on current regulatory requirements and laws, which may be subject to change. While care has been taken in the preparation of this web page, no liability is accepted by Commonwealth Financial Planning, its related entities, agents and employees for any loss arising from reliance on this web page.