Five resolutions to support your financial future
Posted by Northadvisory on January 28, 2020
A new year, a new decade… the perfect time to embrace some new resolutions that can help set you on the right path for a secure financial future. Making small behavioural changes today can create a massive difference to your financial position in years to come.
We spoke with Martin van der Saag, North Advisory Founder and Strategic Advisor, about his top five resolution recommendations for 2020.
Commit to being disciplined
Many of us make New Year’s Resolutions on the 1st of January every year… and very often, by the 15th, those resolutions have already fallen by the wayside. We know it’s hard to create new habits, but if you commit to yourself today, your future self will thank you for it. Martin says,
“Being disciplined isn’t always easy, so do one thing at a time. If you try to take on 10 different changes at once, you can become overwhelmed. Make a list of what you’d like to achieve… tackle them one by one and make sure you can maintain the change once you’ve applied it to your day to day.”
Live a healthy lifestyle
Committing to ‘being healthier’ is a typical resolution to make… but it’s an important one. Building your wealth in your twenties, thirties and forties means nothing if you aren’t fit and healthy to enjoy it later in life. Getting a health check now can flag any possible issues before they become problems. We are lucky to have a very advanced healthcare system in Australia, but as you get older medical treatments can become costly… so visit your GP sooner rather than later.
“Of course, we aren’t doctors or nutritionists here at North Advisory, but we understand the benefit of good health. There’s a tendency not to go to the doctor unless you are sick… but if you go now, you can get tips on how to stay well! We’ve all heard things like move more, eat less, drink less… well I’m sure we could all benefit from occasionally taking the stairs rather than the lift.”
Take a razor to your spending
If your bank account is flush and you already have full control of your spending habits then you can probably skip ahead to the next point… but if not, this resolution could be helpful.
The Christmas New Year period can really hit our bank accounts hard, so now’s the time to trim the expenditure! What tends to happen is the more you earn, the more you spend, but reducing your spending by just 10% and allocating that money to another area of your finances can really impact your overall financial position in a short few years. Martin gives us some examples…
“You could use the extra cash to reduce your credit card balance because the interest you pay on those accounts is exorbitant. Or if you have a mortgage, consider making one or two extra repayments every month; it all reduces interest in the long run.
Or if you don’t have any credit cards or a mortgage, you could simply save that money and watch it grow… then you could consider investing, or better still, add it to your superannuation so that it can be there in your retirement when you need it most!”
There’s also an element of sustainability in spending less money… most of us already have a lot of ‘things’. The earth can only support us so much… so perhaps not buying another plastic-wrapped, mass-produced, non-essential item is a good decision for the planet as well as your pocket!
Make sure you have a ‘what-if?’ plan
We’ve seen bushfires, floods, drought and storms wreak havoc across the country recently so having a ‘what-if?’ plan is essential for each and every one of us. If something went wrong that was completely out of our control, how would we manage? If you got sick, if you lost your job, or if your business lost a major client… what then?
A ‘what-if?’ plan should be a long-lasting document that evolves as your life changes and includes information like details of your insurances – life insurance, income protection insurance, total and permanent disability insurance, plus any general insurance such as home and contents. If you have business insurance make sure it is documented as well.
Along with insurance you should also have a clear estate plan. Martin says,
“If you haven’t done it already, you should speak to a lawyer about your estate plan… because the reality is – everyone dies. You want to make sure your will is up to date according to your current situation… your dependants, spouse and any other beneficiaries.”
It is also worth considering putting together an advance care plan that lays out how you wish to be treated should you no longer be able to speak for yourself. The My Health Record website explains,
‘Advance care plans typically cover:
- Your wishes – the medical treatment and care you would or would not like to have.
- Your voice – the identity of who you trust to speak on your behalf if a decision about your medical treatment and care must be made.’
Be sure to consult with your loved ones about this plan as they will need to be involved should anything ever happen. Remember that a ‘what-if?’ plan is a back-up… it certainly doesn’t mean it will ever have to be used, but it’s better to be there just in case.
Know what’s in your superannuation
Our final resolution for 2020 is to fully review the status of your superannuation. Check your balance and recent returns because most industry funds have returned between 8% and 9% over the last ten years. If your fund isn’t performing this well, you should consider changing.
Compare the fees you pay and the type of portfolio you hold as you could make changes to help boost your balance into the future. Martin notes,
“Holding your portfolio in high growth shares might be suitable for someone at 21, but for someone at 64 they need to be in something less risky, like capital stable. Checking your risk profile is definitely a worthwhile exercise.”
It’s also worthwhile checking the types of insurance you have within your super account and making sure you don’t have any duplicate policies outside of super. You don’t want to be paying double premiums for the same type of cover.
Plus, a quick check that your super beneficiary information is appropriate, especially if your personal relationships have changed.