The below 9 step plan will help you improve your financial position in 2017:

1. Review your goals and objectives

The New Year is an opportunity to reflect on the year just passed and set (or re-set) our goals for the year ahead. Quite often New Year’s resolutions fail because they are unspecific or unrealistic. A goal to “repay debt” could be made more specific, for example “reduce my home loan by $20,000.” Once defined, a system can be put in place to achieve this.

2. Understand how you spend your money

I am reluctant to use the word “budget” as this quite often has people running for the hills. However, it’s extremely important and in fact a very simple concept. If you understand how you are spending your money you can create a budget and control it.

The following steps can help with your budget:

• Work out what you earn net of tax. For most people this is easy, as it is the net income that hits your bank account every pay cycle. If you are self-employed or earn lumpy income, this can be a little more difficult.
• Understand your spending. There are so many great tools that can help you understand how you spend. ASIC have developed a great website to help, in particular the Budget Planner.
• Now you know what you earn and what you spend, you can assess how much you can save. This will give you greater control.

3. Debt Reduction

If you have debt, I am sure you know what I am going to say next, make the repayment of non-deductible debt (bad debt) a priority. If you are constantly servicing bad debt, it will forever restrict your ability to put your savings towards wealth creation strategies.

If you have completed a budget in the above step, you will know how much you can direct towards debt and have a good idea of how quickly you can pay it off.

If you haven’t reviewed your loan in some time, take the time to do so, as you may be able to get a better deal on your interest rate.

4. Automation

Automation takes away the risk and temptation of not sicking to your goals. Once you’ve completed a budget and determined how much you can save, you can automate these savings to be directed automatically. Below are a few examples of how you can put this to work.

Debt – After completing a budget you determine that you could direct an additional $500 per week towards debt repayment. You set up an automatic direct debit to occur on the day you are paid to send the money automatically to your loan. This removes the temptation for these funds building up in your everyday bank account, and then being spent on unnecessary things.

Short term expenditure needs – If you are saving for a house deposit, renovations or a big overseas holiday and need access to these funds in the short term, automatically direct savings to a high interest bank account to fund these expenses. For example, if you need $10,000 for that holiday in 12 months, you could direct $200 per week ($10,400 per annum) to a high interest savings account specifically for your holiday.

Automation can also be set up for bill payments to save time.

5. Wealth Creation

If you’re in the favourable position of not having any debt, you could direct your saving capacity towards wealth creation strategies. Depending on your age and specific situation, this could include a regular contribution to a personal investment portfolio or superannuation.

The best time to invest is now. If you have the capacity to direct savings towards a wealth creation strategy, then take action. Many potential investors are put off by perceived volatility and fail to act.

6. Borrowing to Invest

Borrowing to invest involves using the bank’s money to invest and use leverage accelerate your rate of return. However, while there is the opportunity for greater return with this strategy, there is also the potential for greater risk. Therefore, talk to your adviser first.

7. Superannuation

There are a lot of changes to superannuation taking affect from 1 July 2017, as we have previously outlined. It is important that between now and 1 July 2017 you contact your adviser to discuss the specific changes relevant to you, and any changes that you need to make prior to 30 June.

8. Insurance

If you don’t have insurance, consider what type of cover you need. If you have insurance in place, you may need to adjust your level of cover up or down depending on what has changed since your last insurance review.

9. Estate Planning

Do you have Wills and Powers of Attorneys in place? If not, make 2017 the time to set these up. If your Wills are many years old and out of date, make this the year to review them.

If the above financial management strategies align with your financial goals and objectives for 2017, please contact Hewison Private Wealth.

From all of us at Hewison, we wish you all the best for a prosperous 2017.

The information provided above is general information only.  It does not consider your needs, financial situation or objectives. You should seek specialised advice from a qualified financial adviser.