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Five-step checklist for the new financial year

Five-step checklist for the new financial year

The start of July and the new financial year can provide a timely reminder to check in on your financial wellbeing.

Here's a five-step checklist for the new financial year.

  • review your investment portfolio
  • revisit your financial goals
  • rethink risk
  • reassess insurance needs and coverage
  • review super contributions

1. Review your investment portfolio

Whether you have recently begun investing, or have been doing so for many years – revisiting your investment mix on a regular basis to refresh yourself on where your money is and how it has been performing can help you stay on track.

Nominating a time each year to review both goals and investments and ensure they are aligned can enforce a discipline to the way you invest, ensuring that any changes made are a result of a considered process, rather than a knee-jerk reaction to headlines and sentiment.

This review could cover your investment mix - which is your allocation to each of the common asset types of shares, international shares, cash, fixed interest and property - as well as looking at your holdings within each asset class, such as the mix of shares you have.

Some questions you might address are:

  • What investment mix did I have at the start of the year?
  • How have these different classes of investments performed?
  • Has that changed the portion of my wealth that is allocated to each investment type? (e.g. if shares did well last year – more of your wealth may now be tied up in shares)
  • Do you want to re-balance your portfolio back to your initial asset mix for the sake of keeping risk consistent? 
  • Are there any adjustments to be made within asset types according to how different sectors have performed in the past year?

2. Revisit wealth goals

Most people will have a mix of short-, medium- and long-term financial goals. This could be anything from taking an overseas holiday next year to buying a house or investment property, or saving for retirement.

Often these goals or time frames might be impacted by a major change in your life, such as marriage, the birth of a child, the purchase of a first home, or a sickness in the family which means your priorities change.

Checking in with how your circumstances have changed over the past 12 months can help make sure you have the right strategies in place to allow you to reach those goals within the timeframe you set.

3. Rethink risk

As circumstances change, so too might your capacity and comfort levels with respect to handling risk. For example, if you are early on in your career and get a significant raise, you may decide the time is right to try and maximise your investment returns by accepting more risk.

Alternatively, if something has occurred to make you more risk averse – say because your partner has had to give up work for some reason – then you may decide that it is better to reduce the level of risk in your overall portfolio.   

The important thing in assessing risk levels in the course of a regular review, however, is considering what changing the risk in your portfolio will be likely to do to your chances of achieving your goals in the timeframe you have set for them.

That is, understanding that changing risk levels may also necessitate a change in your goals or timeframe.

Beyond investment risk, it is also worthwhile thinking about whether any changes in your life over the past year have altered the amount and type of insurance that you are likely to need.

4. Reassess insurance needs and coverage

While you may just get into the habit of paying your insurance premiums when they arrive, the new financial year often brings changes in those premiums and can therefore be a good time to take stock of what insurances you have and make sure you are not under or over-insured. This goes for both your assets and your health and life.

5. Review super contributions

Weighing up ‘extra super contributions’ or ‘extra mortgage repayments’ is something that many people grapple with at various times.

There might be potential tax concessions in putting extra into your super via salary sacrifice, depending on your circumstances.

Although, you do need to remember there are caps on how much you can put into your super before tax and continue to receive the concessional rate. The Australian Taxation Office (ATO) website is the best place to view the most up-to-date information about these limits.

This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. As the advice on this page has been prepared without considering your objectives, financial situation or needs, you should, before acting on the advice, consider its appropriateness to your circumstances. Investors should consult a range of resources, and if necessary, seek professional advice, before making investment decisions in regard to their objectives, financial and taxation situations and needs because these have not been taken into account. Taxation considerations are general and based on present taxation laws and may be subject to change. You should seek independent, professional tax advice before making any decision based on this information. Commonwealth Bank is also not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and you should seek tax advice from a registered tax agent or a registered tax (financial) adviser if you intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law. Past performance is not indicative of future performance.