There are two key things this year to watch out for that might create some financial opportunities.
Firstly, it’s likely the Federal election will be in May and I’m certain that tax will be a key policy platform (I expect the Liberals will announce some income tax cuts). Secondly, the Royal Commissions final report is due in 22 days and its recommendations might have a substantial impact on the financial landscape.
That said, external changes are never-ending, and they should almost never deter you from completing your own financial planning. With that in mind, I have outlined 3 important questions below to consider when thinking about the year ahead.
Question one: What didn’t work well in 2018?
When planning, a good place to start is to ask yourself what were the one or two things that didn’t work well in 2018. Maybe you planned to sort out your super and didn’t get around to it? Or maybe you didn’t have a good enough handle on expenses (spending)? The idea is to identify one or two big things that didn’t turn out how you had hoped and develop a plan for rectifying them this year. Here’s two tips:
1. Often, it’s not a what, but who question. The best way to find a solution to a problem is not by asking “what steps do I need to take” but “who has solved this problem previously that can help me”. Seeking advice or experience from someone that has been in the same situation you will save a lot of time and help you avoid repeating common mistakes. People such as family, friends, colleagues or an independent advisor could help.
2. Who’s going to hold you accountable? Creating some sort of accountability has a massive impact on the likelihood of someone achieving a goal. When you set a goal, you must set a deadline and then have someone hold you accountable for achieving that deadline. That could be your spouse, friend, accountant or an independent advisor.
Question Two: What are the one or two things you need to achieve in 2019?
All of my financial advisory clients have a very clear understanding of the one or two priorities that they need to focus on/achieve this year in order to achieve their longer-term goals. This could include reducing/offsetting debt by a predetermined amount (through good cash flow management assisted with software), investing a certain amount in super, making regular share investments, investing in property or similar.
The key question to ask yourself now is “what can I do this year that will have the largest impact on my financial position by 2030?” This will force you to take a long-term view and not be distracted by short-term worries or noise. Don’t try and take on too many goals in 2019 – you really only what one to three goals. And if you are struggling to develop a long-term plan then grab a copy of Investopoly and follow the 8 rules outlined therein.
Question Three: Are you safe and secure?
It is very important that you periodically consider the things that are in place to protect your wealth and family and the start of a year is a perfect time to do that:
- Are your wills up-to-date? Are your executors still wiling and able to preform their role? Have any beneficiaries changed? Do you have current medical and financial powers of attorney? Should/does your will include a testamentary trust?
- Are your personal risk insurances (Life, TPD and income protection) up-to-date and still appropriate? Are they structured is a way that you are getting the best value for money i.e. deepest, quality cover for the lowest cost?
- Have you reviewed your mortgage interest rates? Should you convert loan repayments to principal and interest (to reduce the interest rate ≈ 0.50% p.a.)? Should you lock in access to equity now? Should you fix any interest rates (3-year fixed rates can be lower than variable rates)?
- Is your super invested in the correct investment option? If you have multiple super accounts, should you consolidate them? Have you looked at your super fund’s long term (10 year) performance compared to the leading industry funds (see here – refer to Chart 2)?
- Are your tax structures effective? Have you had a review of your taxation affairs?
One hour of planning could be the best investment you make this year
Many of the above questions and items really don’t take a lot of time to answer or address. As I say in my book (Investopoly), investing and building wealth is very, very simple – people (and finance professionals) often make it way more complex than it needs to be. So, keep it simple. Spending one hour thinking about the above could reveal some valuable opportunities and help kick start 2019. Of course, if you need any help or referral please don’t hesitate to reach out to us.