With a new year just around the corner, it’s a good time to check the status of your personal finances, says Jonathan Philpot, partner at HLB Mann Judd Sydney.
“Most people will have a bit more time during the Christmas and New Year period to reflect on their financial situation and check whether their current budget and plans are still the most appropriate.
“Since it’s also the half-way point of the financial year, it’s also a good time to make sure everything is on track to make end of year tax time easier,” he said.
1. Check out MySuper
There have been a number of change to the superannuation system over the last 12 months and this will continue in 2013 with the introduction of “MySuper” in July.
Mr Philpot says that he is encouraging clients to check out exactly how this will affect their own super arrangements, particularly whether the default fund being offered is one that will best suit their needs.
2. Review super plan
The new year is also a good time to revaluate your superannuation contributions, says Mr Philpot.
“Investors should take the time to look at how much they are contributing to super and check that it is within the $25,000 concessional contribution limit.
“It is also a good opportunity to see whether other strategies, such as co-contribution on behalf of a spouse, might be worthwhile.”
3. Put more into super
Research suggests that most people won’t have enough money for a comfortable lifestyle when they retire. Mr Philpot says that while no-one can control investment markets, investors are in control of how much they put into super.
“Making additional contributions to super now can have a big impact in the long run and should be considered wherever possible. Investors should be mindful, however, that when making additional contributions they don’t go over the contribution caps,” he said.
4. Update investments
“With interest rates coming down, investors should consider moving away from the comforts of term deposits and rebalance back into other asset classes which have a higher potential for growth,” Mr Philpot said.
“2013 is looking like it could be a good year for investment markets, while interest rates from term deposits could continue coming down, or at least stay at current low levels.
“Investors should think about whether they want to buy back into markets before they start to rise.”
5. Check out insurance
As part of the MySuper system, members will automatically have a life insurance policy through their funds; however, Mr Philpot suggests looking more broadly at all types of insurance.
“It’s a good idea to review what would happen if the main breadwinner in the family fell ill or had a serious accident.
“Income protection insurance and trauma and personal disability insurance are worth considering, particularly for anyone with young children.”
6. Pay off the mortgage
Mortgage debt is non-deductible for tax purposes, so Mr Philpot suggests making paying off the mortgage a priority.
“It makes sense to pay the mortgage down as quickly as possible, so that attention can be turned to other areas such as building up superannuation.
“As interest rates come down, a good strategy is to simply keep paying the previous, higher, instalments on the mortgage,” he said.
7. Have an estate plan
Having an estate plan, not just a Will, should be something investors could consider as a new year’s resolution for 2013, says Mr Philpot.
“An estate plan, unlike a Will, takes into account all financial and personal matters in the event of death. This is essential for anyone with young children who may need to have a guardian appointed and an income provided to them.
“Also consider appointing a power of attorney who can look after any legal, financial or medical needs in the event of incapacity,” he said.
8. Check super nomination
“While looking at estate planning, people should check whether the person nominated as the beneficiary of their superannuation is still the right person.
“They should also check whether the nomination is still valid – with some funds, it automatically expires after three years.
“Finally, keep in mind that divorce does not automatically make this nomination defunct,” Mr Philpot said.
9. Make a budget
A budget shows exactly where money goes and where savings are possible, says Mr Philpot.
“People who don’t have a budget are often surprised when they learn how much money they fritter away.
“A monthly budget is usually best, but make sure to include quarterly or annual expenditure items, such as car insurance or council rates.”
10. Get professional help
With increasingly complex superannuation and ever-changing tax rules and regulation, Mr Philpot recommends considering some form of financial advice.
“Financial advice doesn’t necessarily mean investment advice but, more importantly, advice on the full financial situation. This includes tax considerations, retirement planning and superannuation as well as estate planning and family assistance or insurance,” he said.
HLB Mann Judd Sydney is a firm of accountants and business and financial advisers, and part of the HLB Mann Judd Australasian Association.
For more information please contact:
Jonathan Philpot – Phone: 02 9020 4196
3 December 2012