Five financial steps for the new year

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The new year can often be a trigger point for many people to review their financial plans and strategies for the year ahead and beyond.

It makes sense, although the start of the calendar year is actually the halfway point of the current financial year.

So, in terms of financial strategies, there’s now less than six months left to implement any that relate specifically to the 2024-25 tax year.

That creates some degree of urgency, but there’s still a good amount of time left to focus on shorter-term strategies as well as longer-range ones that can potentially be maximised by taking advantage of opportunities available before the end of the current financial year.

1. Review your goals

Setting goals is a key part of the financial planning process, but they can change over time.

So the first step now is to take a look at your goals and make sure they still stack up. Do they still make sense, and are they realistic and achievable?

Spending some time now to reassess your short and long-term goals, and make adjustments to them if required, will ensure you remain on the right financial track.

2. Check your budget and spending

The second step is to recheck your budget and spending, because doing so will help you to fully understand your ability to achieve your financial goals.

If you don’t use a budgeting method, consider starting one that tracks both your income and expenses in detail on an ongoing basis.

Identifying where you could reduce expenses will allow you to calculate how much money you may be able redirect into savings and investments, including into your superannuation.

Part of this process should also include opportunities to reduce outstanding debts, prioritising high-interest debts such as credit cards, and taking advantage of loan products that provide debt payments relief such as mortgage offset accounts.

3. Examine your investments portfolio

One of the key principles of investing is having an investment strategy that’s aligned to your goals and one that’s well diversified across different types of assets to help spread risk.

Yet, because assets perform differently over time, either increasing or decreasing in value depending on market conditions, it’s important to keep an active eye on your investments portfolio to ensure it remains aligned to your risk profile.

For example, if you have a heavy investment exposure to shares, the strong gains on global share markets in 2024 may have increased the overall amount of money you now have invested in shares.

If having a large amount invested in shares is not aligned to your investment strategy, it may be prudent to consider rebalancing the assets in your portfolio so the total dollar values in each asset class you’re invested in reflect your preferred percentage weightings.

4. Consider your superannuation options

Given we’re already over six months into this financial year it’s worth evaluating whether you’re making the most of all your superannuation options.

On 1 July last year the annual limit on concessional contributions, which are only taxed at 15%, was lifted from $27,500 to $30,000. Separately, the annual limit on non-concessional (after-tax) contributions was lifted from $110,000 to $120,000.

Options could include starting a salary sacrifice plan, or increasing an existing one, taking advantage of unused concessional contributions, and using the proceeds from non-superannuation asset sales.

Read our recent article, It’s super hump month. Make the most of it, to find our six ways you could get more money into your superannuation before the end of this financial year.

5. Prepare you estate

Estate planning is a vital component of good financial planning, however it’s often put on the back burner or completely overlooked.

Among other things, estate planning should involve having a legally valid will that specifically documents how you want your assets to be managed and divided between your nominated beneficiaries after your death.

Dying without a will (intestate) can result in your assets not being distributed to your surviving family members in the way you would have preferred.

Residential real estate and superannuation, which combined make up more than three quarters of total household assets, are the largest components of most financial legacies.

Estate planning can be complex. Consulting a licensed financial adviser to help you and your intended beneficiaries map out an inheritance framework that also identifies issues such as potential tax liabilities is a prudent step.

Tony Kaye
22 JAN 2025
vanguard.com.au