Regardless of your financial standing or the stage of life you’re in, conducting regular financial health checks is a smart way of fine-tuning your life goals and creating wealth – and there is no better time than the end of the financial year to do it. Reviewing your finances with the help of your Financial Adviser can give you clarity on all your money matters, while also helping to identify any specific areas you should focus on in the next 12 months. Here is a list of checks that can set you on the path to a smoother financial year ahead.
Reset your goals
Things change in life and work – and your financial plans need to reflect this. Perhaps you want to ramp up your savings, change your investment strategy or pay particular attention to cutting your debt this financial year. Start your health check by rethinking your short and long-term goals. Make them specific, but realistic – and write them down so you have extra motivation to see them become a reality. Work closely with your Financial Adviser during this process to get the best outcomes for your lifestyle and financial circumstances
Redraft your budget
Perhaps you bought a new car, some new shares or will start to pay higher costs for child care in the coming year. These types of triggers can have an impact on your finances and they need to be factored in to ensure your budget works well for you. It’s obvious, but make sure you update your budget to reflect all your income, including any investment dividends or pensions, and outline all your regular payments. Use this opportunity to review your bills and spending, identifying any non-essential costs that you could cut down on.
Get your debts down
It is important to get a handle on exactly which debts you are currently facing, and those that you know will arise in the coming year. To do this, write down a complete list of where you owe money. This could include any personal loans, credit cards and home loans – and make sure you detail exactly how much you owe, the minimum repayments and the interest you are paying. Anything that incurs a high interest should be tackled first, which normally covers credit cards and personal loans. By consolidating these debts you may be able to get a lower interest rate, or even take advantage of an interest-free period. Always prioritise paying off any non-tax deductible debt that you have.
Maintain good records
Keeping a close eye on all your financial records will not only make the tax office happy – it also helps you understand your spending habits and any possible deductions. As well as keeping all relevant receipts, another way to do this is to apply for a credit card (with a low rate, of course) that you use strictly to pay for things that could be deductible at tax time so you will be well prepared for next year.
Examine your investment objectives
A sound financial health check should always include a reassessment of your investment objectives. With the help of your Financial Adviser, you need to determine your short and long-term goals so an investment strategy can be devised to achieve each aim. Positions can shift quickly for a range of reasons, so review your investment portfolio with your Financial Adviser.
Focus on your tax
It is crucial for you to review any tax deductions while ensuring, where possible, that the deduction can be claimed in the financial year when it has the most impact. This may mean incurring deductible expenses by June 30 this year to reduce your tax payable. Some of the deductible expenses you may wish to bring forward include repairs and other ongoing expenses relating to an investment property, ongoing expenses incurred in running a business; and any eligible self-education expenses. You may have other ongoing expenses which are tax deductible, such as interest on an investment loan or income protection insurance premiums. Or, if your marginal tax rate is expected to be higher next financial year, it may be worth delaying deductible expenses until after June 30.
Take control of your super
Whatever age you are, understanding your superannuation outlook can help you plan ahead. If possible, you could consider making contributions to boost your super. Salary sacrificing some of your pre-tax salary into your super fund can be one of the most tax-efficient ways to invest for retirement.
Your Financial Adviser is best placed to help you, so discuss some of the following considerations with them too:
The concessional contribution cap is $30,000 for anyone under age 50, or $35,000 for anyone 50 or over. These caps apply for the 2015–16 and 2016–17 financial years
- The caps operate on a use-it-or-lose-it basis; if you wish to boost your super balance, but have not yet fully utilised your concessional cap, consider doing so prior to July 1 to avoid missing out on a potentially valuable tax saving. Note, the Government has proposed reducing the concessional contribution cap to $25,000 from 1 July 2017, so it is even more important to take advantage of the higher caps while they are still available. Make sure you speak to your Financial Adviser before making any concessional contributions.
- If you are considering making personal non-concessional contributions (using after tax money), the current non-concessional contributions cap is $180,000 per year or $540,000 every 3 years under the bring forward rule. However you need to be aware that in the 2016 Federal Budget the Government has proposed a change to the non-concessional contributions cap with the introduction of a lifetime non-concessional cap of $500,000, which is proposed to take effect from 3 May 2016. Under this proposal, prior contributions made since 1 July 2007 count towards this cap. Due to the complexity of these rules, it’s important that you discuss the implications with your Financial Adviser before making any contributions.
Start planning for social security changes
Upcoming assets test changes will apply from 1 January 2017. For many people this could lead to a cut in pension entitlements, which means that strategies to reduce assessable assets under the assets test will be more important than ever. Possible actions could include boosting the super balance of the younger member of a couple, if one is under the age pension age, buying long-term annuities with a depleting asset value, and making principal home improvements. Stay on top of the area that is relevant to you. As mentioned in the important reminder on page one, if you are over, or close to, 65 years of age, it is important that you contact your Financial Adviser soon to discuss how the age pension asset test impacts your financial situation.
Contact your Financial Adviser
Any changes you make to improve your financial position can help put you on the path to a more positive future. The start of a new financial year is the perfect time to give yourself the gift of a better financial future. Set aside some time and focus on these important financial checks – and once you’ve taken stock, take advantage of the expertise your Financial Adviser provides. They are here to help you.